Dingdong (Cayman) Limited (DDL) Q2 2025 Earnings Call August 21, 2025 08:00 AM ET Speaker0Good day, and welcome to the Dingdong Limited Second Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Nicky Xing, Director of Investor Relations.Please go ahead. Thank you. Hello, Welcome to Dingdong's sec ...

Core Insights - Pupu Supermarket is reshaping the competitive landscape of instant retail with a three-pronged approach of "capital + business + technology" by 2025, focusing on explosive growth and comprehensive upgrades to maintain its leading position in the market [1][13] Capital Strategy - Pupu Supermarket plans to restart its IPO process in Hong Kong after pausing due to market conditions, aiming for annual profitability in 2024 with projected revenue of 30 billion yuan and a gross margin of 22.5% [3] - The successful IPO will provide substantial funding to support business expansion and enhance brand influence [3] Business Expansion - The company is actively entering new markets, having opened its first store in Quanzhou with 25 front warehouses, achieving full city coverage and significant order volumes on opening days [4] - Pupu is also expanding its presence in Fuzhou, increasing its delivery range and opening new stores to enhance market share in the Fujian region [4] Private Label Development - Pupu Supermarket has upgraded its private label offerings, launching the "Gold Medal Wow Value" series with discounts up to 40%, significantly enhancing price competitiveness [6] - The number of SKUs in the private label "Youshi" series is set to increase from 750 in 2024 to nearly 1000 in 2025, with a sales target of 6 billion yuan [6] Market Collaboration - The company is promoting integration of domestic and foreign trade by opening cooperation channels for quality foreign trade enterprises and establishing a "green channel" for rapid approval [7] - Collaborations with brands like "Rooster Master" for high-quality cleaning products aim to expand market share through brand synergy [7] Product Innovation - Pupu is focusing on health-oriented products and seasonal offerings, introducing a variety of healthy rice dumplings for the Dragon Boat Festival and premium ingredients for the Spring Festival [8] Regional Focus - In its home base of Fujian, Pupu employs a "large warehouse high-density" strategy, achieving over 10 billion yuan in annual sales in Fuzhou and Xiamen with a market penetration rate exceeding 70% [10] - The company is enhancing its competitive strength against rivals like Yonghui by optimizing its delivery network and private label offerings [10]

Core Viewpoints - The article discusses four main themes regarding Meituan: market competition, instant retail, internationalization, and AI. Despite a solid quarterly financial report, market sentiment remains low due to management's inability to provide guidance and ongoing competition in the food delivery sector. However, Meituan's stock has shown resilience, aided by share buybacks and potential macroeconomic benefits [2][4]. Group 1: Market Competition - Meituan has adjusted its fee structure for merchants, separating commission, delivery fees, and advertising fees to enhance transparency [3]. - The company is expanding its rider insurance program nationwide and has initiated social security subsidies for riders in select cities, with plans for broader implementation [3]. - Meituan's competitive strategies include various promotional models to attract consumers, such as special benefits for high-tier members and innovative delivery services [3][15]. Group 2: Instant Retail - Instant retail is identified as Meituan's largest growth opportunity in the next five years, with two main platforms: Flash Purchase and Little Elephant, catering to different market needs [22][23]. - Flash Purchase is seen as a potential essential service, while Little Elephant focuses on fresh produce and is expanding into other categories [24][27]. - The penetration rate for instant retail is currently low, with significant growth potential as consumer habits evolve [28]. Group 3: Internationalization - Meituan's international expansion is compared to peers like Kuaishou and Didi, with a focus on non-mainstream markets such as South America and the Middle East [32][39]. - The company possesses strong technical capabilities in food delivery, which could provide a competitive edge in international markets [39]. - The article highlights the challenges and opportunities in the Brazilian market, where competition is fierce but presents significant potential for growth [38][39]. Group 4: AI - AI is viewed as a transformative force that will enhance efficiency and productivity across various sectors, including Meituan's operations [43][50]. - The integration of AI into business processes is expected to reshape consumer interactions and operational models, leading to new opportunities and risks [63]. - The article suggests that the future of local consumption may see the emergence of a "super AI" that could dominate the market, with Meituan positioned as a potential leader [65].

Financial Data and Key Metrics Changes - Dingdong reported a GMV of RMB5.96 billion, a 7.9% increase year on year, and revenue of RMB5.48 billion, reflecting a 9.1% year on year rise [7][30] - Non GAAP net profit was RMB30 million with a non GAAP net profit margin of 0.6%, while GAAP net profit was RMB8 million with a GAAP net profit margin of 0.1% [7][30] - Operating net cash inflow reached RMB85 million, indicating positive cash flow alongside profitability [30][36] Business Line Data and Key Metrics Changes - The order volume increased by 12.1% year on year, with average active user count surpassing 2 million, a 4.5% increase year on year [9][11] - Average daily transaction users exceeded 830,000, an 11.1% year on year increase, reflecting effective user acquisition strategies [10] - The 2B business showed solid growth with a revenue increase of 64.6% year on year [32] Market Data and Key Metrics Changes - Jiangsu, Zhejiang, and Shanghai regions remained primary growth drivers, with Shanghai's GMV rising by 5% year on year, while Zhejiang and Jiangsu saw increases of 17% and 13.9% respectively [12] - Cities like Wenzhou, Wuzhou, Nantong, and Jinhua reported over 50% growth year on year [12][32] Company Strategy and Development Direction - The company is implementing a "four gs strategy" focusing on good users, good products, good services, and good mindshare, which has led to significant adjustments in objectives and organizational structure [8][26] - The strategy aims to create competitive barriers and secure long-term growth opportunities by differentiating from competitors and maximizing supply chain advantages [42][46] - Dingdong emphasizes quality over low prices, aiming to enhance product quality and user satisfaction [45][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining year on year growth and achieving non GAAP profitability for Q2 2025, despite being in a transitional phase [28] - The company anticipates significant growth in performance scale and profit margins by the end of the year [28] - Management highlighted the importance of adapting to competition and the need for a robust supply chain to sustain profitability [17][20] Other Important Information - The company has established 14 new frontline fulfillment stations to enhance operational efficiency [13] - Dingdong's cash reserves stood at RMB2.89 billion after accounting for short-term loans, indicating a healthy financial position [31][36] - The company has formed strategic partnerships with various retail groups and agricultural institutions to enhance its supply chain capabilities [21][22] Q&A Session Summary Question: Can you elaborate on the four gs strategy and its long-term advantages? - Management explained that the four gs strategy focuses on good users, good products, good services, and good mindshare, aiming to create genuine competitive barriers and secure long-term growth opportunities [39][42] - The strategy emphasizes quality over price, with a commitment to enhancing product quality and user satisfaction [45][46] Question: Can you provide an overview of the current business situation of Guiyu Food Group? - Management highlighted Guiyu's strategic positioning, rapid scale growth, and focus on quality product development, with significant revenue growth and plans for future expansion [51][53][55]

Financial Data and Key Metrics Changes - Dingdong reported a GMV of RMB5.96 billion, a 7.9% increase year on year, and revenue of RMB5.48 billion, reflecting a 9.1% year on year growth [6][29] - Non GAAP net profit was RMB30 million with a non GAAP net profit margin of 0.6%, while GAAP net profit was RMB8 million with a GAAP net profit margin of 0.1% [6][35] - Operating net cash inflow reached RMB85 million, indicating positive cash flow alongside profitability [29] Business Line Data and Key Metrics Changes - The order volume increased by 12.1% year on year, with the average active user count surpassing 2,000,000, a 4.5% increase year on year [8] - Average daily transaction users exceeded 830,000, an 11.1% year on year increase, reflecting effective user acquisition strategies [8] - The 2B business showed solid growth with a revenue increase of 64.6% year on year [31] Market Data and Key Metrics Changes - Jiangsu, Zhejiang, and Shanghai regions remained primary growth drivers, with Shanghai's GMV rising by 5% year on year, while Zhejiang and Jiangsu saw increases of 17% and 13.9% respectively [10] - Cities like Wenzhou, Wuzhou, Nantong, and Jinhua reported over 50% growth year on year [10][31] Company Strategy and Development Direction - The company is implementing a "four gs strategy" focusing on good users, good products, good services, and good mindshare, which has led to significant adjustments in objectives and organizational structure [7][24] - The strategy aims to enhance product quality and user satisfaction, moving away from a focus on low prices to prioritize quality and service [41][46] - The company is also expanding its supply chain capabilities and forming strategic partnerships to enhance its competitive position [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining year on year growth and achieving non GAAP profitability for Q2 2025, despite transitional challenges [27] - The company anticipates that its strategic adjustments will lead to substantial enhancements in sales volume and profit margins over time [27][48] Other Important Information - The average turnover days improved to 11.7 days, indicating increased efficiency [33] - The company has established 14 new frontline stations to optimize its fulfillment network [11] - Guiyu Food Group, a strategic business unit, has shown rapid growth with a GMV of approximately RMB5 billion in 2024, accounting for about 20% of Dingdong's sales [53][54] Q&A Session Summary Question: Can you elaborate about the four gs strategy? - The four gs strategy focuses on good users, good products, good services, and good mindshare, aiming to create competitive barriers and secure long-term growth opportunities [38][41] Question: Can you give an overview of the current business situation of Guiyu Food Group? - Guiyu has achieved vertical integration of the supply chain, with a GMV of approximately RMB5 billion in 2024 and plans to increase export revenues significantly [52][54]

Core Insights - The competition in the food delivery market has intensified since JD.com entered the sector in February, leading to aggressive strategies from both JD.com and Meituan, including significant subsidies for consumers [1][4] - Taobao's "Xiaoshida" has been upgraded to "Taobao Flash Purchase," supported by Ele.me, focusing on consumer benefits and substantial subsidies, achieving over 10 million orders within six days of launch [1][4] - The ongoing battle is not just about food delivery but is expanding into the broader instant retail market, indicating a shift in strategic focus among major players [1][12] Company Strategies - JD.com has implemented a "100 billion subsidy" program to attract consumers, which has resulted in increased orders and revenue for participating merchants, although it also imposes significant costs on the platform [5][10] - Merchants have reported mixed experiences with JD.com's platform, appreciating the subsidy but facing challenges with system usability and operational difficulties [9][10] - Meituan has launched its "Flash Purchase" brand, aiming to enhance delivery efficiency and expand its product offerings, indicating a strategic move to compete directly with JD.com in the instant retail space [12][14] Merchant Experiences - Merchants have noted that while JD.com's subsidies have increased order volumes, the platform's operational challenges, such as slow price adjustment processes and system instability, remain significant issues [8][9] - Some merchants have found that participating in subsidy programs is almost mandatory to gain visibility and traffic on the platforms, despite the voluntary nature of these programs [10][11] - The profitability of merchants is being affected as subsidy policies evolve, with some reporting that their earnings are stabilizing as competition intensifies [11][12] Market Dynamics - The food delivery market is experiencing a "three-way battle" among JD.com, Meituan, and Ele.me, with each platform vying for market share through aggressive subsidy strategies [4][12] - Analysts suggest that while subsidies can drive short-term order growth, long-term success will depend on factors such as delivery efficiency, supply chain capabilities, and customer retention [17] - The expansion into instant retail signifies a strategic pivot for these companies, as they seek to redefine their market positions beyond traditional food delivery services [12][17]

Group 1 - Ele.me officially launched a "super 100 billion subsidy" campaign, offering significant discounts on various food items, with some meal subsidies reaching up to 36 yuan [1][2] - The campaign includes substantial discounts on popular items, such as a 奈雪的茶珍珠奶茶 priced at 7.9 yuan after subsidy and a 海底捞套餐 with a subsidy of 25.5 yuan, bringing the final price to 19.9 yuan [2][5] - The competition in the food delivery sector is intensifying, with Ele.me's strategy to leverage its partnership with Taobao to expand into the larger instant retail market [1][7] Group 2 - Taobao's instant retail service "小时达" has been rebranded to "淘宝闪购," featuring a dedicated entry point on the homepage and expanding to 50 cities initially, with plans for nationwide rollout [1][5] - The upgraded 淘宝闪购 will collaborate with Ele.me to enhance subsidies and provide various consumer benefits, including free delivery and significant discounts [5][6] - Ele.me aims to open 100,000 official flagship stores in the next three years, targeting the trillion-yuan instant retail market, indicating a strategic shift towards broader e-commerce integration [7][8] Group 3 - The instant retail market in China reached 650 billion yuan in 2023, growing by 28.89% year-on-year, and is projected to exceed 2 trillion yuan by 2030 [8] - Major players like Meituan and JD.com are also increasing their presence in the instant retail space, with Meituan's flash purchase orders growing by 40% in 2023 [8]