Temu Parent’s Profits Tumble Nearly 50 Percent Amid ‘External’ Pressures, US Tariffs

PDD’s American depositary shares fell by more than 13 percent on the Nasdaq.

A mobile phone displays the app of cross-border e-commerce platform Temu in Shenzhen, China, on Oct. 28, 2022. CFOTO/Future Publishing via Getty Images

PDD Holdings Inc., the Shanghai-based parent company of the retail and shopping platform Temu, saw a significant decline in first-quarter profits and sales as the Chinese e-commerce industry faces growing challenges at home and abroad, while the United States ramps up trade talks with Beijing.

In its first-quarter report released ahead of premarket trading in New York City and London, PDD stated that its net income sank by 47 percent to 14.74 billion yuan ($2 billion) from 27.9 billion yuan ($3.8 billion) a year earlier. Revenue was 95.67 billion yuan ($13.2 billion), up by 10 percent, from 86.8 billion yuan ($12 billion) in the first quarter of 2024.

On an adjusted basis, PDD reported earnings of 5.19 yuan per share, or $0.72 per share, well below Wall Street expectations of $2.63 per share on sales of 103.06 billion yuan ($14.3 billion), according to FactSet. One yuan is equal to $0.14.

Those disappointing results sent PDD’s American depositary receipts (ADRs) tumbling. The ADR fell by 13.64 percent on the Nasdaq Stock Exchange to close at $102.98. In London, the company’s shares were holding at $118.15 ahead of the opening bell. The Chinese multinational began trading in London and New York City after moving its corporate offices to Dublin in early 2023, just months after launching its online U.S. marketplace and expanding operations in Europe.

During the company’s conference call with analysts that was translated from Chinese, Lei Chen, PDD chairman and co-CEO, blamed the dismal first-quarter results on multibillion-dollar investments in the company’s online platform to support e-commerce merchants and consumers who buy and sell Temu’s low-priced products. He said those investments weighed heavily on short-term profitability.

“Starting at the beginning of this year, we made substantial investments in our platform ecosystem and made a rapid shift in external environment,” Chen said. “On one hand, the program is designed to further lower fees for our merchants, improving the business environment of our platform.

“On the other hand, we will also invest more to drive sales for our merchants and to help them better adapt to new challenges. In the first quarter, our revenues were [$13.2 billion], which slowed down notably amid rapid change in external environment, at the same time due to the mismatch between the business investment and return cycles.”

The external factors Chen mentioned include the U.S. de minimis policy and reciprocal tariffs on China, which President Donald Trump temporarily halted for 90 days in early April to allow trade talks between the two countries to move forward. Under the most recent agreement, the United States lowered its tariff rate on Chinese imports to 30 percent from a peak of 145 percent. In return, the Chinese government reduced its import levy on U.S. goods to 10 percent from 125 percent.

In addition, Trump in early April signed an executive order ending the de minimis or “duty-free” exemption for Chinese and Hong Kong imports. That affects nearly all Chinese goods, including small e-commerce shipments valued at less than $800 and postal deliveries, which now have either a tax of 120 percent of item value or a flat per-item charge of $100 to $200.

However, a new executive order issued by Trump on May 12 reduced the duty rate on de minimis shipments from China and Hong Kong to 54 percent from 120 percent, effective May 14.

According to retail industry experts, Chinese e-commerce giants such as Shein and Temu take advantage of the de minimis exemption by directly shipping low-value packages to U.S. customers. Temu and the Shein Group, the Chinese e-commerce platform that specializes in inexpensive clothing and fashion items, account for nearly half of all de minimis shipments to the United States from China, according to a 2023 U.S. House Select Committee report.

Bank of America analyst Curtis Nagle said in a recent research report sent to The Epoch Times that U.S. tariffs and additional levies on Chinese goods could ease the competition that U.S. e-commerce companies face from online vendors such as Temu and Shein, which recently announced a new round of price hikes and reduced U.S. ad spending amid the ongoing U.S.–China trade war.

PDD’s profits increased rapidly after it launched its Temu online app in the United States in late 2022, with operating profit rising by 93 percent in 2023 and 85 percent in 2024, benefiting from its ability to send low-cost, Chinese-produced goods directly to American consumers without paying tariffs.

Looking ahead, however, PDD Holdings’ top financial officer warned during the conference call that the Temu parent expects to continue to see a slowdown in sales growth.

“As communicated previously, a slowdown in growth rate is expected as our business scales and challenges emerge,“ said Jun Liu, PDD’s vice president of finance. ”This trend has been further accelerated by the changes in the external environment in the first quarter.”