Sea Ltd. raised the outlook for its main online retailing arm, signalling the Southeast Asia e-commerce leader is effectively encountering intense competition from the likes of TikTok and Lazada.
The value of goods sold by the Shopee division will rise in the âmid-20 percentâ range this year, Sea said Tuesday, rather than the âhigh teensâ pace predicted in March. Singapore-based Sea also posted second-quarter profit and sales that topped analystsâ estimates.
The forecast alleviates some concerns about the prospects for Shopee, which is trying to fend off competition from ByteDance Ltd.âs TikTok and Alibaba Group Holding Ltd.âs Lazada. Investors are watching closely if Shopeeâs higher merchant fees can boost its margins without hurting its lead against the deep-pocketed tech conglomerates. Newer contenders like Shein and PDD Holdings Inc.âs Temu are also targeting Southeast Asia, a region of about 675 million people where more shoppers are moving online.
In a show of its dominance, Shopee has raised the commissions it charges merchants in many core markets by about a third since the start of the year. The hikes, which bring Shopeeâs fees far above its rivals, show that Sea feels secure in its own efforts to become a crucial partner to merchants, helped by the e-commerce pioneerâs broad user base and well established delivery services.
Shares of Sea fell less than 1 percent in trading before US markets opened, as stock futures more broadly pared gains before fresh US consumer price data. After plunging in the past two years, Sea shares have advanced about 65% in 2024 as investors have assessed its chances against the tough competition. They remain far below their historic highs though.
Sea swung back into the black in the three months through June with a net income of about $80 million, after losses in the preceding three quarters. Analysts estimated $60 million on average. Sales rose 23 percent to $3.8 billion.
Shopeeâs gross merchandise volume, or the value of goods sold, climbed a higher-than-estimated 29 percent to $23.3 billion in the second quarter. Sea also said it expects Shopee to post earnings before interest, taxes, depreciation and amortisation in the third quarter of this year â it previously expected Shopee to reach that milestone within the second half. The company as a whole is targeting its second straight annual profit this year.
Investors have also focused on Seaâs efforts to improve its profitability in the cut-throat market, after it slashed thousands of jobs in a brutal cost-cutting drive in recent years. Second-quarter sales and marketing expense rose to $774.8 million, and the company has also boosted research and development spending to add live-streaming and artificial intelligence features.
The companyâs gaming arm Garena, known for its hit Free Fire, has helped Seaâs profit margins. Yet it has struggled to come up with new titles to increase sales. Revenue at the unit fell 18 percent to $435.6 million, missing estimates. Bookings, which measure the amount of products and services sold during the period, climbed 21 percent to $536.8 million.
Seaâs digital banking division has become one of its key pillars of expansion. Revenue at its financial services arm grew 21 percent, as it battles the regionâs incumbents as well as new entrants including Standard Chartered Plcâs Trust Bank and a venture owned by Grab Holdings Ltd. and Singapore Telecommunications Ltd. called GXS Bank. Last month, it appointed a new chief to steer its budding Singapore bank.
By Olivia Poh
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