Tencent-backed Meituan's losses balloon in duel with Alibaba

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Meituan Dianping is reaping the benefits of scale in its core food delivery division as it feels the pain of competition from arch-foe Alibaba Group Holding Ltd. in smaller businesses such as hotel bookings.

While revenue almost doubled in the December quarter, its net loss widened 57 percent to 3.4 billion yuan ($508 million) as profitability shrank in travel and bike-sharing.

Backed by WeChat-operator Tencent Holdings Ltd., Meituan is spending heavily to wage a pitched battle with Alibaba’s Ele.me and Fliggy in a cut-throat arena for on-demand services. That’s taken a toll on its bottom line and share price, which is down 15 percent since the company raised $4.2 billion in a 2018 initial public offering.

“New initiatives dragged down overall margins because of gross losses incurred in car-hailing, bike-sharing, and restaurant management,” said Vey-Sern Ling, an analyst with Bloomberg Intelligence. “That could be due to competitive pressures, which required Meituan’s response in higher subsidies.”

Revenue climbed to 19.8 billion yuan in the fourth quarter from 10.5 billion yuan a year earlier. Hotel booking and travel business revenue rose 48 percent to 4.59 billion yuan Gross margin fell to 22.6 percent versus 32 percent a year earlier Gross transaction volumes across the board have slowed substantially compared with the third quarter Food delivery revenue was 11 billion yuan versus 6.6 billion yuan a year earlier It shares rose 3.6 percent in Hong Kong on Monday.

Bloomberg News