Meituan tries to size up how big of a hit Covid-19 will deliver
One of China's biggest delivery services is taking a hit from the pandemic as Didi launches a competing service
Meituan Dianping projected losses and a revenue fall this quarter but warned of uncertainty over the course of 2020, joining fellow tech giants around the world now struggling to come to grips with the economic and logistical shocks from Covid-19.
Backed by Tencent Holdings Ltd., the food delivery and internet services giant is one of the most exposed of China’s major tech corporations to the spread of Covid-19. Many restaurants in its home country either shut or reduced their operating hours during the outbreak, while widespread travel restrictions also crippled its hotel-booking and ride-sharing businesses. The company’s outlook is further clouded by China’s worsening economy, which may contract this quarter for the first time since 1989, denting consumer spending.
Meituan joins sector bellwethers from Sony Corp. to Apple Inc. and Twitter Inc. that have emphasized the difficulty of parsing an unprecedented black-swan event like the coronavirus pandemic. The Chinese company projected revenue will decline year-over-year in the March quarter but said it couldn’t fully determine the extent to which the coronavirus pandemic will hurt its operations in 2020.
“The pandemic has already caused severe disruptions to the daily operations of our merchants, including restaurants, local services merchants and hotels, which in turn resulted in downward pressure on our own operations for the first quarter of 2020,” Meituan said in its filing. “Due to the high uncertainty of the evolving situation, we are unable to fully ascertain the expected impact on full year 2020 at this stage.”
That’s after the internet services giant posted a solid set of numbers for the December quarter. Meituan reported a better-than-expected 42% jump in revenue to 28.2 billion yuan ($4 billion) in the three months ended December, compared with the 26.5 billion-yuan average of analysts’ estimates. It booked a profit for the quarter of almost 1.5 billion yuan, versus expectations for a loss.
The coronavirus is dealing an as-yet unquantifiable blow to a company that, before the outbreak erupted in January, was on track to take its place among the country’s most influential technology corporations.
Meituan had been diversifying from its core takeout delivery business and investing in other online services including travel, competing directly against Alibaba Group Holding Ltd. But others are elbowing their way into Meituan’s turf. Ride-hailing giant Didi recently launched a delivery service similar to Uber Eats across major Chinese cities.
Shares of Meituan slid 1.5% in Hong Kong before earnings were announced. While they’ve dropped since mid-January when Covid-19 spread across China, Meituan’s stock rally last year helped secure its place as China’s largest publicly traded internet firm after Alibaba and Tencent.
(Abacus is a unit of the South China Morning Post, which is owned by Alibaba.)