Chinese food delivery giant Meituan slumps on weak demand outlook

  • Stock Market News
Chinese food delivery giant Meituan slumps on weak demand outlook
Credit: © Reuters. Hong Kong-listed shares of Chinese food delivery giant Meituan (HK: 3690 ) slumped on Wednesday after the firm warned of softer fourth-quarter revenue due to weak consumer spending in its biggest market. 

Shares slumped 11.6% in afternoon trade to an over three-year low of HK$91.10. They were also the worst performers on the Hang Seng index, which was dragged nearly 2% lower by losses in Meituan. 

The firm, which acts as a one-stop shopping platform, warned on Tuesday that revenue from its core food delivery business will see annual and quarter-on-quarter declines in the December quarter, and that deliveries will also drop. 

Meituan said that earnings from its non-food delivery service will also decline, citing increased consumer caution over spending, as well as warmer weather this winter, which encourages people to eat outside instead of ordering in.

The firm plans to increase its marketing spend over the coming months to help stimulate demand, which has otherwise declined steadily this year as a post-COVID economic rebound in China failed to materialize. 

Goldman Sachs (NYSE: GS ) cut its target price on Meituan, but retained its buy rating of the stock, stating that the firm’s third-quarter results were largely in line with expectations. 

Meituan, which is China’s biggest food delivery firm, clocked a 22.1% rise in third quarter revenue to 76.47 billion yuan ($10.7 billion), clocking a profit of 3.59 billion yuan, up nearly 200% from last year. 

The company said it planned to buy back $1 billion worth of shares, and that an expansion plan into Southeast Asia was still underway. 

But Meituan’s weak outlook highlighted a growing trend among consumer-oriented Chinese firms, as discretionary spending slowed drastically this year amid worsening economic conditions.

E-commerce giant Alibaba Group Holdings (NYSE: BABA ), which competes with Meituan through its unit, also recently flagged slowing earnings growth due to weakness in its biggest market.

China slipped into disinflation territory in October, even as Beijing kept up its liquidity injections to shore up spending.

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