(provided by Coupang)

Kim Beom-seok emphasized ‘surplus’ 3 times in Concall… Coupang, is it possible to ‘turn to profit’ after ‘surprising results’ in 1Q?

(provided by Coupang)

The retail industry is excited as Coupang announces its earnings surprise in the first quarter. However, there are also one-off factors such as the Omicron pandemic.

Coupang announced that in the first quarter of this year, it recorded sales of 5,116.68 million dollars (about 6.52 trillion won) and an operating loss of 205.7 million dollars (about 262.1 billion won). It is the largest quarterly sales in history, and it also increased by 21.6% compared to the same period last year ($4.26 billion, about 5.36 trillion won). On the other hand, losses decreased by 23% during the same period. This is thanks to Coupang’s adjusted EBITDA (net profit before interest, tax, and depreciation) in the product commerce sector, such as rocket delivery, which is Coupang’s core business, recording a profit of $2.87 million (about KRW 3.6 billion) for the first time.

The market cheered. On May 12 (US time), Coupang finished trading at $11.46 on the New York Stock Exchange, up 18.51% from the previous day. Considering that the global stock market has weakened due to interest rate hikes, this is a significant increase. In response, Coupang’s Board of Directors Chairman Kim Beom-seok repeated the word ‘surplus’ three times during the conference call, expressing his strong will to turn to the black. Chairman Kim said, “Coupang Eats will continue to improve profitability and reduce losses.

However, some in the industry are skeptical that it is still too early to be relieved. First of all, Coupang’s current share price is only a third of its IPO price, which is very low. The deficit is still large. Coupang emphasized that it turned to the black on an EBITDA basis that does not reflect interest, tax and depreciation. However, Coupang, which has a lot of tangible assets and liabilities, such as logistics centers, changes significantly when depreciation is reflected. Also, in the first quarter of this year, Omicron was on fire and non-face-to-face consumption surged. It is necessary to check the report card for 2Q and after, when the growth rate of the e-commerce industry slowed due to the pandemic.

An industry official said, “Coupang’s sales soared in 2019 and its operating loss decreased, so expectations for a turnaround were high. However, the following year, the loss increased again and the deficit continued. This is the reason why it is difficult to evaluate based on quarterly performance alone. It remains to be seen whether Coupang can continue to perform well in the future amid changes in the business environment such as interest rate hikes and endemics.”

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