Shopee-owner Sea's high spending powers revenue beat, but weighs on profits
Sea Ltd reported a sharp rise in sales and marketing expenses during the third quarter, boosting revenue but weighing on profits, as it looks to defend market share in the competitive Southeast Asian e-commerce industry.
U.S.-listed shares of the Singaporean conglomerate were down 2 per cent on Tuesday, after falling as much as 6 per cent in premarket trading.
Sea has spent heavily on marketing, advertising and user acquisition to fend off rivals such as TikTok Shop and Alibaba.
Sea's e-commerce platform, Shopee, has rolled out financial incentives such as cashbacks, buy-now-pay-later schemes and loyalty currencies to attract consumers who are cautious amid economic uncertainty.
Sea reported earnings per share of 59 cents in the quarter, missing analysts' estimate of 76 cents, according to data compiled by LSEG.
"Sea isn't trying to chase short-term earnings, but defending and consolidating its market share. The trade-off may look uncomfortable now, but if executed correctly, it could be the key to keeping its platform relevant," said eToro market analyst Zavier Wong.
Growth in Sea's core e-commerce, digital entertainment and financial services segments has remained strong, signaling that the higher spending has found some success in reaching consumers.
The company reported total quarterly revenue of $5.99 billion, beating estimates of $5.65 billion.
Sea is trying to improve the delivery business by investing in shipping logistics and fulfillment, company executives said in a post-earnings conference call.
It expects Shopee's annual gross merchandise value — a measure of the total value of products sold on the platform — to grow more than 25 per cent.
Overall quarterly operating expenses rose 28 per cent to $2.12 billion, compared with $1.66 billion a year ago. Sales and marketing expenses also climbed 31 per cent.
Revenue for Sea's e-commerce unit came in at $4.3 billion, compared with estimates of $3.99 billion.
