Coupang Inc. reported its highest-ever quarterly revenue of 11.9763 trillion won ($8.524 billion) in the second quarter of this year, a 19% increase compared to the same period last year. However, the operating profit margin fell due to large-scale investments.
Bom Kim, chairman of Coupang Inc., noted during a conference call on the 6th at 6:30 a.m. (Korean time) regarding the consolidated performance for the second quarter, "Excluding the impact of exchange rates, we recorded a revenue of 11.9763 trillion won ($8.524 billion), a 19% increase compared to the same period last year." He added, "We achieved significant results in terms of revenue. Particularly, in the product commerce segment (including Rocket Delivery and Rocket Fresh), the gross margin increased by about 2.3 percentage points to 32.6%."
◇ Expansion of products and existing business drove revenue growth… AI automation strengthened
The product commerce business led the revenue increase. The effects of expanding product offerings and enhancing existing services like same-day delivery contributed to this growth. The chairman said, "In the second quarter, we added 500,000 new products to Rocket Delivery, and orders for same-day and early morning delivery increased by more than 40% compared to the same period last year," and added, "Investments in customer experience have increased customer engagement, maintaining a higher revenue growth rate compared to the stagnant Korean retail market."
He remarked, "In the second quarter, the increase in new active customers accelerated, and expenditures per active customer also rose," adding, "The revenue increase this quarter was driven by existing customers, with all customer groups, including the most mature segments, showing solid double-digit expenditure growth rates." This resulted from an expanded range of product options tailored to customer preferences, leading them to purchase from a wider array of categories.
The fresh food category also led the high growth. In the second quarter, fresh food revenue increased by 25% compared to the same period last year. The chairman stated that revenue and expenditure from fresh food customers increased significantly due to a major expansion of agricultural products, meats, and seafood. He said, "The increase in the diversity of product offerings has resulted in quick and positive responses from customers across multiple categories, with fresh food being a prime example."
Rocket Growth (FLC), which supports the growth of small and medium-sized enterprises (SMEs), also showed a growth trend. The chairman noted, "Rocket Growth is growing several times faster than the overall product commerce, with over 70% of the small and medium-sized enterprises operating outside of Seoul," and added, "It is becoming a driving force for revitalization of the economy in Korea's underprivileged areas." He further stated, "We are continuing large-scale investments to improve our services based on Coupang's leading fulfillment infrastructure and information technology capabilities."
Coupang is strengthening investments in artificial intelligence (AI) and automation. The chairman mentioned, "AI has become a core part of Coupang's operations over the years, applied to all processes including inventory forecasting, personalized recommendations, and route optimization to enhance customer experience," and said, "Coupang sees AI as a long-term driving force for revenue growth and margin expansion." He added, "In software development, immediate effects are being observed, with up to 50% of the newly developed codes in the initial implementation phase being written with AI," and noted, "We expect AI to bring transformative impacts to Coupang operations, including automation and strengthening humanoid robots."
◇ New business in Taiwan and others also on growth trajectory… Decline in operating profit margin due to increased investment is a challenge
The growth of global new business is also notable. The chairman remarked, "The Rocket Delivery business in Taiwan is a prime example of success," and indicated, "This year, our top priority is to expand our product offerings and improve inventory availability. With the expansion of collaborations with hundreds of brands, Taiwan's revenue in the second quarter increased by 54% compared to the previous quarter and recorded a three-digit growth rate compared to the same period last year."
He added, "The Taiwan business is following a growth curve very similar to that of the early stages of commerce in Korea. Growth has accelerated among both new and repeat customers."
Behind this acceleration of growth are large-scale investments and the resulting increase in expenses. Ghalap Anand, Chief Financial Officer (CFO), stated, "The adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) loss for the growth business in the second quarter increased to 330.1 billion won ($235 million). This is due to increased investments driven by the growth of our global business including Taiwan." He noted, "We have revised upwards our forecast for the growth business loss this year to a maximum of $950 million (1.3 trillion won). This reflects increased confidence in our long-term growth potential."
CFO Anand mentioned, "Taiwan accounted for most of the increased investment among our growth businesses. It's a similar investment curve to when we expanded our product commerce business in Korea, but we have significant confidence in future revenue and margin improvements. We will focus on balancing investments, capital allocation, and operational excellence."
New businesses such as Coupang Eats and Coupang Play are also on a growth trajectory. The chairman stated, "Coupang Eats continues to maintain strong momentum in product diversity, pricing, and delivery stability, while Coupang Play is broadening its market opportunities by introducing new content such as sports passes and advertising-supported free plans in the second quarter."
However, due to aggressive investments and the expansion of new businesses, the operating profit margin fell to 1.7%, a decrease of 0.3 percentage points from the previous quarter (2.0%). The net profit margin also decreased to 0.4%. CFO Anand stated, "The primary reasons for the decline in operating profit margin are new investments, infrastructure expenditures, and restructuring costs for Papechi," adding, "While profitability may be adjusted in the short term, we plan to focus on margin improvement through technological investment, innovation, and process enhancements in the long term."
The accumulated operating cash flow for the past 12 months is $1.9 billion (2.63 trillion won), and the free cash flow is $784 million (1.08 trillion won). CFO Anand remarked, "In the short term, cash flow may temporarily worsen due to the expansion of growth businesses, but this is similar to the early growth phase in Korea, and it will normalize over time."