Meituan Losses Narrow as It Fends Off Alibaba in Food and Travel

(Bloomberg) --

Meituan Dianping posted a narrower-than-anticipated loss after the Chinese internet services giant managed to keep Alibaba Group Holding Ltd. at bay and expand rapidly in food delivery and travel.

The fast-growing company backed by WeChat-operator Tencent Holdings Ltd. posted a loss of 1.43 billion yuan ($207 million) in the March quarter compared with the 2.7 billion yuan loss that analysts projected. Revenue jumped 70% to a better-than-projected 19.2 billion yuan as it deepened forays into newer arenas from online travel to ride-hailing.

Billionaire founder Wang Xing held his ground in a cash-burning battle with Alibaba’s Ele.me and Fliggy for on-demand services. The Beijing-based company managed to lift its food delivery market share by 2.1 percentage points to 63.4% in the first quarter compared with the previous three months, according to researcher Trustdata.

Its results offer battered investors hope after a share price that’s tanked 16% since listing in September. Wang has pledged to keep a control on costs with Meituan this year kicking off a restructuring that will see loss-making bike-rental arm Mobike pull out from most of its overseas markets. It also shifted to a platform strategy for ride-hailing, allowing users to book cars from other services.

Longer term, the company intends to focus on core initiatives such as restaurant management services. Its hotel bookings business, which goes up against Alibaba’s Fliggy, has been profitable, Wang said in March.

“Meituan’s focus on curtailing its new initiatives such as ride-hailing and bike-sharing will likely reduce its losses,” Vey-Sern Ling and Tiffany Tam, analysts with Bloomberg Intelligence, wrote before the results.

• Food delivery revenue rose 52% to 10.7 billion yuan
• In-store, hotel booking and travel business revenue rose 43% to 4.5 billion yuan
• Gross margin fell to 26.4% versus 28.5% a year earlier
• Gross transaction volumes shot up 28% to 138.4 billion yuan with the number of transacting users reaching 412 million
• Unlike Alibaba, which is expanding its Freshippo grocery chain, Meituan said it’s scaling back its own footprint and closed Ella supermarkets in lower-tier cities and will focus on its remaining two stores in Beijing.

©2019 Bloomberg L.P.