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Meituan Lowers Business Prospects After ¥3.4B Fine

Chinese company Meituan spreads weak outlook for meal delivery business after fine incurred

China’s Meituan Co. reported weaker-than-expected prospects for its main meal delivery business next year after it paid a 3.4 billion yuan ($532.24 million) fine for posting its biggest quarterly loss in three years.

Tencent-backed Mituan Group said last month that it was fined 3% of its domestic sales by Chinese regulators in 2020 for abusing its dominant market power, ending an investigation that began in April. Read more [Meituan Shares Up 10% After CEO Addresses Antitrust Concerns].

Mituan, whose services include restaurant evaluation and bike sharing, has also struggled with slowing spending in the world’s second-largest economy, affecting other Chinese companies. Read more [Alibaba Shares Tumble After Lowering Its Aspirations].

The company’s core business of meal delivery witnessed a slowdown in the growth of total trading volume to 29.5% during the July-September quarter, compared to the previous quarters, and the CEO of the Chinese company, Wang Qing, justified this decline because of the quarantine and closures related to the epidemic, in addition to the floods and slowing growth in the restaurant industry in the country.

The company posted a loss of 10 billion yuan ($1.57 billion) in the July-September quarter, compared to a profit of 6.3 billion yuan a year earlier. This quarter was the company’s worst performing quarter since the third quarter of 2018, but the revenue grew 37.9% during the quarter from last year to 48.8 billion yuan, exceeding analysts’ estimates of 48.6 billion yuan.

It is noteworthy that Meituan has been working to significantly expand its business within the hotel reservations and group purchasing sector, to compete with Alibaba and Bindudo, and has also updated its strategy to expand from meals to retail business by forming a specialized team of experts to focus on retail strategies.

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