South Korean eCommerce company Coupang, known as the Korean Mazon, reported worse than expected earnings Wednesday. CPNG reported mixed results with another revenue miss but on a narrower loss than expected. In a huge milestone CPNG finally achieved positive adjusted EBITDA, a necessary step for the e-commerce firm. Total Active Customers continued to grow., up 21 percent year over year to 16 million.
Earnings
Coupang narrowed losses in Q2 but another sales miss in a top-line miss in Q2, Coupang. Adjusted EPS expanded to lower losses of $(0.04) from $(0.13) in the year-ago period, showing healthy progress toward operating profitably.
Highlights
- Total gross profit was $1.2 billion, an increase of 75% YoY or 41% excluding the impact of the FC fire in 2021, and gross profit margin improved over 250 bps QoQ.
- Net loss improved $134 million QoQ to $75 million in Q2.
- Total net revenues were $5 billion, up 12% year over year (YoY), and up 27% YoY and 3% quarter over quarter (QoQ) on a constant currency basis.
- CPNG missed total sales growth, revenues gained just 27% yr/yr on a constant currency basis to $5.04 bln.
- Developing Offerings’ lighter-than-expected sales growth was the laggard for the business. Developing Offerings recorded an adjusted EBITDA loss of $32 million, an improvement of $128 million over the last two quarters.
- Product Commerce gross margins expanded 380 bps yr/yr and 150 bps sequentially. Revenue in this segment jumped 27% yr/yr and 3% sequentially on a constant currency basis to $4.88 bln.
- CPNG’s share of product e-commerce growth has improved every quarter since going public, driven by increasing customer adoption and engagement across additional offerings.
- CPNG’s grocery delivery service, Fresh, has an annual run rate of nearly $3 bln in just three years since launching. CPNG also noted that most of its active customers did not make a grocery purchase in Q2, creating plenty of further upside.
Right through the IPO and the conference calls that followed CPNG repeatedly mentions sales growth is not its primary focus. The company is focused on improving operational efficiency, optimizing its supply chain, and scaling merchant services. Its narrowing losses and first quarter reaching positive adjusted EBITDA show the strategy is working in very difficult circumstances.
Founder Bom Suk Kim has said in the past “Coupang was founded with a mission to make customers wonder ‘How did I ever live without Coupang?’—a vision that forced us to reexamine the tradeoffs in commerce and to build hard things to tackle them,”
CPNG finally achieving positive adjusted EBITDA in Q2 is an excellent step for the e-commerce firm. It also follows CPNG reaching adjusted EBITDA profitability in its Product Commerce segment for the first time as a public company last quarter.
CPNG’s Eats business dragging
The laggard for the company in Q2 was Developing Offerings, which houses CPNG’s Eats business. Revenues did improve 24% yr/yr (in constant currency) to $160.3 mln. However this still represented a sequential decline of 7%.
CPNG attributed the sliding sales growth qtr/qtr to its Eats offering, which is facing a post-COVID slowdown in Korea’s online food delivery business. The return of COVID effectively shuttered the improvement that was starting to happen.
Developing Offerings’ lighter-than-expected sales growth saw CPNG miss on total sales growth in the quarter, seeing revs gain just 27% yr/yr on a constant currency basis to $5.04 bln.
Increasing customer adoption and engagement across more offerings is accelerating our flywheel. Nowhere is that more evident than in our fresh offering. After just three full years of operation, fresh annual run rate stands at nearly $3 billion on the back of what we believe is the best value proposition for an online fresh offering in any market. We believe we provide the largest fresh selection of any retailer in the market, and we’re the only online grocer that offers free shipping for orders above just $11.
Bom Suk Kim — Co-Founder and Chief Executive Officer
Outlook
CPNG expects to achieve positive total company adjusted EBITDA for FY22, a huge upgrade from its prior guidance of negative $400 mln. CPNG’s Q2 results continued Q1’s positive traction toward profitability. For perspective since its IPO Coupang has only beaten revenue expectations twice.
The company appears to have eaten the cost of its new logistics network and hiring additional drivers which required steep upfront costs. Since the pandemic it is fair to say grocery and food delivery is the right move for CPNG as the 2020 trends have turned into habits with online adoption. A sensible development, though probably enforced by the COVID 19 travel restrictions, CPNG is staying focused on South Korea and not moving out to other countries too quickly. This is holding back new network costs and risk.
One thing is to not get ahead of yourself and expect CPNG to be Amazon overnight. The company is not expected to be profitable until 2024.
Coupang IPO
The firm’s IPO raised $4.55 billion and received a market valuation near $60 billion. That made Coupang the largest foreign IPO on the U.S. market since Alibaba’s in September 2014. The stock has mostly been under pressure since its debut. The IPO priced at $35 and opened at $63.50 on March 11. It popped higher the first day but has been in a downward trend since then. Coupang saw the global pandemic, which has prompted shoppers to turn to online purchases en masse, as the right time to go public.
About Coupang
Coupang operates an e-commerce site in South Korea, similar to Amazon (AMZN) in the US and Alibaba (BABA) in China. The company offers free same-day or next-day delivery on many products through its Rocket Wow membership (similar to Amazon Prime). In addition, the company delivers groceries under its Coupang Fresh segment and food under its Coupang Eats segment. SoftBank (OTCMKTS:SFTBY) owns 35.1% of CPNG through the telecom and tech giant’s Vision Fund. However, in the recent Q2 2022 earnings Softbank reported Vision Fund losses included 293.4 billion yen for Coupang.
From The TradersCommunity News Desk