Chinese food delivery giant, Meituan, saw its shares drop by 5% on Friday following CEO Wang Xing’s warning of a slowdown in food delivery volume in the third quarter. During the firm’s latest earnings call, Wang stated that while the volume of food delivery is expected to decrease in Q3, it will still be more resilient than other sectors related to consumption. Wang attributed the slowdown to short-term headwinds stemming from the macro economy and extreme weather conditions, such as the widespread flooding caused by heavy rain and the impact of Typhoon Doksuri.
Despite the warning, Meituan reported strong second-quarter results, with revenue reaching 67.96 billion Chinese yuan ($9.33 billion), a 33.4% increase from the previous year. Additionally, the company swung to a profit of 4.69 billion Chinese yuan during the quarter, compared to a loss of 1.11 billion Chinese yuan in the same period last year.
Wang acknowledged the challenges brought by extreme weather, as many merchants were forced to suspend their businesses, leading consumers to opt for packaged food instead of fresh food delivery. In some cities, food delivery services were even suspended for safety reasons. However, Meituan remains confident in the long-term growth of its food delivery business, as offline traffic and travel demand continue to recover rapidly.
Meituan currently holds almost 70% of the food delivery market share in mainland China, according to a report. In addition to food delivery, the tech firm operates various other services, including ride-hailing, on-demand delivery, hotel and travel booking, movie ticketing, entertainment, and lifestyle services.
Xiaolin Chen, head of international at KraneShares, expressed optimism regarding Meituan, noting the company’s significant market share gains during the pandemic. Chen’s investment firm has set a price target of 205 Hong Kong dollars ($26.14) on Meituan’s stock, representing a 35.2% upside from the current price.
Looking ahead, Meituan plans to leverage artificial intelligence and autonomous delivery technologies to improve costs and services for clients. The company is currently deploying autonomous delivery vehicles, and it recently partnered with Chinese self-driving car firm Pony.ai to develop unmanned vehicles for food delivery services.
Despite the temporary slowdown in food delivery volume, Meituan remains focused on capturing demand and stimulating recovery through its product and operational strategy. The CEO also expressed his confidence in the long-term growth potential of the company’s food delivery business.