Coupang Losses Widen on Soaring Costs to Fend Off Rivals

(Bloomberg) -- Coupang Inc., South Korea's leading e-commerce company, reported a wider loss in the fourth quarter as the company continued to aggressively spend on infrastructure and services in the face of intensifying competition.

Operating losses increased to $396.6 million for the quarter ended in Dec. 31, compared with $130.9 million a year earlier, according to a statement. Sales rose 34% to $5.1 billion, while the number of active clients increased 21%. The net loss was $405 million in the period. The U.S.-traded shares rose about 0.6% in extended trading.

During the pandemic, Coupang's growth accelerated as people spent more time at home, ordering more products and food through the company's rapid-delivery network. In order to support that growth and to compete against local e-commerce rivals, the Seoul-based company spent more than one trillion won last year on distribution centers, according to Coupang.

In addition to capacity expansion, the company said costs rose in the fourth quarter to add labor and Covid-related cleaning and social distancing measures. Infections in South Korea soared to new highs in the period.

“We've seen improvements and we don't think at this moment this is a structural or permanent constraint,” Chief Executive Officer Bom Kim said during a conference call after the earnings were released.

Coupang, backed by Japan's SoftBank Group Corp., pulled off a blockbuster initial public offering in New York a year ago, with shares soaring more than 40% in a matter of days. But its stock has plummeted since then as investors grew concerned about its ability to improve profitability in the near term.

“We expect to grow significantly faster than the e-commerce segment as we have in the last several years,” said Kim. “The overall market opportunity appears to only be getting bigger.”

As part of its effort to boost earnings, Coupang increased the monthly cost of its Wow subscription for new members to 4,990 won ($4.15). Although the hike only applies to customers who join from this year, analysts expect it will eventually also be levied on current members.

The company said on Thursday that it had about 9 million paid Wow members at the end of last year. If Coupang expands the membership fee hike to about 5 million members, it may contribute around 125 billion won to sales and profits, Park Sang-joon, analyst at Kiwoon Securities said in a note on Dec. 30, when Coupang announced the membership price increase. Still, it may not be sufficient to lead to a profit turnaround, he added.