Meituan Dianping forecasts net loss in first quarter

Lifestyle services platform Meituan Dianping expects to record a net loss in the first quarter after returning to profit in the fourth quarter last year, due to “severe disruptions” to restaurants and offline merchants amid the coronavirus pandemic.

The company's operating profit in the fourth quarter reached 1.5 billion yuan (US$211 million) thanks to a 42 percent annual increase in revenue to 28 billion yuan.

“Business segments such as food delivery and in-store, hotel and travel are all facing significant challenges on the demand and supply sides,” the company said in an earnings release statement.

Hong Kong-listed Meituan Dianping opened up 10 percent and closed 6.53 percent higher at HK$93.75 (US$12.08) on Tuesday amid early signs of recovery, although it said the impact to its travel and ride-sharing businesses remain uncertain in 2020, adding that it's still early to determine the epidemic's impact on this year's business situation. 

Operating profit for 2019 also turned positive for the first time at 2.7 billion yuan, with revenues surging 49 percent to 97.5 billion yuan.

BoCom International said in a research note that it expects a 16 percent revenue decline in the first quarter to 16 billion yuan, with in-store and hotel businesses suffering the greatest hit with a 35 percent decline.

It will take time to build consumption confidence especially for discretionary spending, according to Meituan Chief Financial Officer Chen Shaohui.

“Although we have seen gradual recovery from March especially for food delivery business, the active merchants in our in-store service category remain at a very low level as of late March," Chen noted at the earnings conference call.

Tencent-backed Meituan Dianping has gained a strong foothold in food delivery service and also extended to other offline merchants, confronting Alibaba's lifestyle affiliates Alipay and Koubei.

But its business also relies on offline merchants, hotels and leisure activity providers whose operations have been put under restrictions over the past two months.

It will continue investing in new initiatives such as bike rental and grocery delivery, as demand for online shopping boomed after the pandemic.

The company added that the pandemic further encouraged consumers to use online platforms to satisfy their daily needs.