Lo0go techturning.com

Shopee-owner Sea signals growth over profits after weak Q2 performance

Shopee-owner Sea signals growth over profits after weak Q2 performance

On August 15th, according to a Reuters report, technology company Sea Ltd (SE.N) has indicated its intention to increase investments in its primary e-commerce sector, even if it means experiencing losses in certain quarters. This shift in strategy comes after a period of cost-cutting measures and lackluster performance during the second quarter.

This change in direction has had a notable impact on the company’s stock value, with its U.S.-listed shares dropping by more than 21% during early trading sessions.

Sea Ltd, the largest publicly listed technology company in Southeast Asia, embarked on a significant restructuring initiative in the previous year. This initiative included a 10% reduction in its workforce and a decrease in marketing expenditures. These actions led to Sea’s historic achievement of its first-ever quarterly net profit in December.

However, the exponential growth in digital services witnessed during the peak of the pandemic has gradually diminished. This is evident in Sea’s top-line growth, which has transitioned from triple-digit percentages in certain quarters of 2021 to single-digit figures over the past three quarters.

Forrest Li, Chairman and Group CEO at Sea, commented on the company’s future plans, stating, “We have initiated and will continue to accelerate our investments in expanding the e-commerce business across all of our markets. These investments will inevitably impact our bottom-line figures and may lead to periodic losses for our e-commerce platform Shopee, as well as our entire corporate group.”

The recent financial results released by Sea for the three-month period ending on June 30th present a mixed picture. The company faced challenges due to restrained consumer spending attributed to a less optimistic macroeconomic environment. These challenges influenced its e-commerce division and caused a considerable drop in performance within its mobile gaming segment.

Although the revenue managed to grow by 5.2% compared to the same period the previous year, reaching $3.10 billion, it fell short of Refinitiv’s projections of $3.20 billion. Despite this, per-share earnings surpassed expectations, registering at 54 cents – 12 cents higher than anticipated. This suggests that gains from the earlier implemented cost-cutting measures were indeed evident.

Shopee, the e-commerce arm responsible for about two-thirds of Sea’s total revenue, experienced growth of nearly 21%, reaching $2.1 billion. However, this figure fell short of the consensus estimate of $2.25 billion. Despite Sea’s efforts, which included a 10% increase in active buyers during the second quarter and a prior increase in platform commissions, the performance was not in line with market predictions.

Contrastingly, Sea’s digital entertainment division, which encompasses its gaming platform Garena, saw a decline of over 41%, marking the fifth consecutive quarter of decrease. In contrast, the financial services sector reported an increase of over 53% in sales during the same period.

Sea Ltd’s strategic pivot towards enhancing its e-commerce sector has become evident through a series of recent announcements and financial results. While this shift may lead to losses in some quarters, the company’s commitment to expansion and the dynamic nature of its investments could shape its future growth trajectory in the evolving digital landscape.


Related Articles