Credit：Visual China

In the quarter ended September 30, Meituan’s sales surged 22.1% year-over-year (YoY) to RMB76.47 billion (US$10.7 billion), beating analysts’ projected RMB76.01 billion. Profit that quarter almost tripled to RMB3.59 billion but dropped 23.4% from the second quarter, still topping the estimated RMB2.92 billion. Adjusted EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, rose 28.9% YoY to RMB6.19 billion, falling short of the projection of RMB7.13 billion.

Meituan’s mainstay business maintained solid with double-digit growth, reflecting ongoing recovery of offline consumption. Its local-commerce segment, which includes food delivery and the in-store, hotel and travel businesses, as well as non-food delivery service Meituan Instashopping, brought RMNB57.69 billion with a 24.5% YoY increase for the third quarter, compared with the growth of 39.2% a quarter ago. Operating Profit gained 8.3% YoY to RMB10.1 billion and margin stood at 17.5%, decreasing 2.6 percentage points from a year ago and down 4.3 points from the previous quarter. The solid growth of food delivery operating profit was partially offset by the decline of in-store, hotel & travel operating profit on yearly basis.

Meituan mainly attributed the increase in operating profit to revenue growth, the higher unit economics driven by abundant courier supply for our food delivery and Meituan Instashopping businesses. It noted the operating profit was partially offset by the higher incentives and the decrease in operating margin was mainly attributable to a higher incentive ratio.

During the third quarter, the number of on-demand delivery transactions increased 23.0% YoY, and daily order volume of food delivery set a new high of 78 million, doubling from three years ago. The scale of medium-and-high-frequency user base along with their purchase frequency continued to grow rapidly. Meituan iterated its membership program and offered different sizes of coupon packages to boost transaction frequency. Meituan Instashopping showcased another stellar growth as the daily order volume peaked at over 13 million in August.  The in-store, hotel & travel business continued to grow robustly, with a 90% YoY increase in GTV, or gross transaction volume, during the third quarter. GTV of the in-store business set a monthly record in August.

Revenue from the New Initiatives segment increased 15.3% YoY to RMB18.8 billion, missing analysts’ expected RMB19.23 billion. Operating loss for the segment decreased 24.5% YoY to RMB5.1 billion, and operating margin improved 14.4 percentage points sequentially to negative 27.2%, down from negative 41.6% a year earlier. The increase in sales was mainly due to the seasonality and growth of goods retail businesses and other new initiatives, which was partially offset by scaling down of the ride-hailing service. Meituan said macro headwind and consumption behavior changes continued to weigh on Meituan Select, and the business incurred significant operating losses in the third quarter.

Looking forward the fourth quarter, Meituan management cautioned revenue from food delivery will slow down compared with the September quarter, given a relatively high  average order value (AOV) the last quarter last year amid the Covid-19 pandemic, though they felt optimistic about growth of the order volume. The Covid restrictions curbed customers’ movement so they inclined to place larger orders over longer distances last year. Executives said the order volume for the last quarter of the year is likely to be affected by the same headwinds like the previous three quarters, including the macroeconomic woes and consumers’ returning to offline consumption this summer and autumn. In addition, the atypically warm weather in November isn’t helpful for increasing delivery orders in the winter. Meituan Chief Financial Officer Chen Shaohui expected Meituan Instashopping will witness the smilar slowdown trend. He said his company is ramping up marketing efforts to stimulate demand in the consumption environment, such as offering higher subsidies.

At an earnings conference call, Meituan CEO Wang Xing told analysts the company’s board authorized a repurchase up to US$1 billion. But he added the buyback would depend on Meituan’s cash position as new initiatives are required more investments, and the company is exploring overseas opportunities.   

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