Coupang Inc., the South Korean e-commerce giant backed by SoftBank Group Corp., reported better-than-expected revenue growth after spending to expand and lock in customer demand during an online shopping slowdown.
Revenue rose 13% to $5.8 billion in the quarter ended March, the US-listed company said in a statement. That beat analysts’ estimates for $5.6 billion. Coupang posted a $106.8 million operating profit, while active customers grew 5% to 19 million.
“Our sustained focus on operational excellence allowed us to achieve this milestone even as we continue to invest hundreds of millions of dollars in capex and hundreds of millions more in developing offering over the past year,” Bom Kim, founder and chief executive officer at Coupang, said on a call with analysts. “Because we take the long view, we don’t expect every initiative to bear fruit immediately or evenly every quarter.”
Coupang shares were little changed in late US trading, after the results. They had climbed about 18% this year through Wednesday’s close.
The company said it’s still at a single digit market share of the overall retail market including offline that’s projected to grow to $550 billion in the next three years. Coupang is growing “at a multiple the market,” Kim said, vowing to continue to add more customers.
Coupang’s core delivery business grew exponentially during the pandemic as people bought everything from eggs and masks to home appliances through apps. While e-commerce has decelerated, Coupang has sustained growth thanks in part to a fast delivery service supported by a growing network of automated fulfillment centers, which helps retain customers and merchants.
“Coupang’s logistics business will help the company report profits throughout this year,” said Kim Myoungjoo, an analyst at Korea Investment & Securities. A strong platform should allow the company to gain market share to 24.4% this year and 27.2% in 2024, Kim estimates.
Despite tepid growth as well as fierce competition locally, Coupang has managed to report quarterly profits thanks to economies of scale through highly automated fulfillment centers. Its Taiwan business is still in an early stage but Coupang is seeing “signs of transformative potential,” Kim said. Kim confirmed the company has shuttered its operations in Japan, where returns from the business were below their expectations.
Although Coupang’s delivery business - famous for its promise of dawn delivery - has stabilized and become profitable, the company is grappling with increasing costs of new businesses such as food delivery and streaming services. In April, Coupang Eats started to roll out a 5% to 10% of discounts on all orders in most of Seoul areas and the regions of the coverage will continue to be expanded in coming months in the rest of the country, said Kim. Coupang’s seeking to increase market share for the meals business through promotional discounts, according to Citigroup.
Regarding the adoption of generative artificial intelligence, Bom said Coupang has been working with machine learning models across all aspects of the company’s business.
“I think generative AI is exciting,” Kim said. “Like all these new technologies, we will continue to invest and look at all the tools that we can harness to deliver a better customer experience and to drive operational excellence.”
(Updates with CEO comments on earnings call from third paragraph)