Temu Parent PDD’s Warning Highlights Growing Strain on China Consumer Firms

From Sangmi Cha and Abhishek Vishnoi, published at Tue Aug 27 2024

The prospects for Chinese consumer firms are looking increasingly bleak after PDD Holdings Inc. cautioned that its revenue growth will slow as competition continues to heat up.

PDD said its current trajectory wasn’t sustainable, reinforcing concerns fueled by Alibaba Group Holding Ltd.’s anemic revenue growth after its Chinese commerce business shrank for the first time in at least a year. The shares of Temu’s owner slumped by the most on record on Monday following the warning.

The e-commerce giant’s woes strike at the heart of worries about China’s consumer sector and indicate that its troubles go beyond weak domestic consumption. Analysts say that if PDD isn’t immune to the industry’s troubles, there’s little chance that its peers will be able withstand the pressure.

Shares of Alibaba and JD.com Inc. slid as much as 5% in early trade Tuesday.

Here’s a look at what strategists are saying:

Robert Lea, Bloomberg Intelligence analyst:

Joshua Crabb, head of Asia Pacific equities at Robeco Hong Kong Ltd.:

Sonija Li, an analyst at MIB Securities Hong Kong Ltd.: