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Meituan Sales Increase Following New Business Balances China Slowdown

Meituan’s quarterly sales increased by 25% as a result of the Chinese food delivery giant surviving the financial effects of lockdowns caused by the coronavirus in areas like Shanghai.

In the three months that ended in March, sales increased to 46.3 billion yuan ($6.9 billion), driven by a 47% increase in revenue from the division that includes innovative operations like ride-hailing and community commerce. Although revenues were higher than the 45.3 billion yuan average analyst projection, this was the company’s slowest rate of growth in nearly two years.

About The Meituan

Meituan, situated in Beijing, is one of the few Chinese digital companies that seems to have kept up its momentum despite a difficult macroeconomic situation. Retail sales in China fell 11.1% in April compared to the same month last year, highlighting the negative effects of the Covid Zero policy, which has hampered the nation’s supply chains and lowered consumer confidence.

The company, which is led by well-known billionaire Wang Xing, is also under investigation for how it treats its delivery personnel and the commissions it charges restaurants.

Tackling The Situation After Corona Virus Outbreak

China has declared victory over the coronavirus outbreak in Shanghai as the country reported the fewest new cases in more than three months, despite the growing economic costs of the Covid Zero policy. However, uncertainty still exists due to the government’s anticipated willingness to crack down on any upcoming breakouts, which may have unintended repercussions.

The government’s extensive crackdown, which has slowed the once-frenzied rate of sector expansion, is another challenge facing China’s internet companies. The e-commerce behemoth Alibaba Group Holding Ltd. the weakest rate of revenue growth since its 2014 initial public offering (IPO), while gaming behemoth Tencent Holdings Ltd. reported almost no revenue increase for the March quarter.

Opinions on China’s internet industry have wildly shifted in recent weeks. Investors initially saw Liu He, the economic tsarpledge ,’s to expand the digital industry as a sign that the government’s war on Big Tech would be easing, if not ceasing altogether.

On recent earnings calls, Chinese tech executives, including Martin Lau, the president of Tencent, told analysts that it would take some time for regulators to put such broad recommendations into practise.

Increased Revenue Of Meituan

Meituan’s core food delivery company reported quarterly sales that were in line with analyst expectations. Its entire revenue climbed by 17% to 24.2 billion yuan, despite its in-travel, store, hotel, and division posting sales of 7.6 billion yuan, up 16%. Compared to the market projection of a 6 billion yuan loss, its net loss increased to 5.7 billion yuan.

Prior to the release of the results report, Meituan’s shares decreased 1.3% in Hong Kong. This year, its share price has decreased by nearly 20%.

Impact Of Covid 19 Virus On The Working

In March and April, China saw an increase in COVID-19 cases, which led to lockdowns in various cities, including the commercial center Shanghai, disrupting supply lines and businesses and lowering consumer spending.

Meituan’s delivery services were impacted by the curbs, which also drove numerous vendors to close.

Nevertheless, revenue increased to 50.94 billion yuan ($7.42 billion) for the quarter that ended in June, exceeding the 48.59 billion yuan average expectation of 14 analysts, according to data from Refinitiv Eikon.

Meituan and other firms claim that their operations began to pick up in June as COVID limits relaxed; nevertheless, while outbreaks continue, especially in Sanya, a well-known beach tourist town that may produce significant levels of business, the possibility of additional lockdowns looms.

Services Provided By Meituan

Meituan, whose services now include bike-sharing and movie tickets, reported that its quarterly deficit decreased from 3.36 billion yuan to 1.12 billion yuan.

Sales from new projects, such as Meituan Select, a community e-commerce business, increased by 40.7% annually to 14.16 billion yuan.

Core local commerce revenue, which comprises in-store, hotel, and travel industries as well as food delivery and in-store revenue, increased 9.2% to 36.78 billion yuan.

Conclusion

According to analysts, Meituan’s offline in-store and hotel activities will take longer to recover as a result of China’s policy to eliminate all coronavirus transmission chains. As evidenced by their dismal results for the months of April and June, China’s internet companies are struggling due to the country’s slowing economy and Beijing’s regulatory crackdown.

Reuters reported that Tencent, a major gaming company and a shareholder in Meituan, intended to sell all or the majority of its $24 billion stake in Meituan. Tencent criticized the report as untrue.

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