Q4 2023 Earnings Summary
- Coupang has significant room for growth in its core markets, as it currently holds only a single-digit percentage share of the projected $560 billion retail market in Korea, presenting a massive opportunity to expand its market presence.
- The company's active customer base is growing rapidly, with active customers increasing by 16% year-over-year in Q4, reaching a record 21 million. Newer customer cohorts are joining at higher levels of spend and increasing spend faster than previous cohorts, indicating strong future growth potential as their spending converges with that of older cohorts.
- Coupang is witnessing strong momentum in Taiwan, where its Rocket service, launched in October 2022, has seen active customers and revenues double over the last two quarters, outpacing the growth experienced in Korea at a similar stage. The company is leveraging its existing technology and operational expertise to scale faster and expects to reach profitability in Taiwan more quickly than it did in Korea.
- The acquisition of Farfetch introduces uncertainty and potential financial risk, as management is unable to provide detailed guidance on accounting treatment, integration strategy, or the potential impact on financials. Furthermore, the $650 million guidance for Developing Offerings losses in 2024 excludes Farfetch, implying potential additional losses associated with this acquisition.
- Coupang plans to invest significantly in Developing Offerings, with anticipated adjusted EBITDA losses of approximately $650 million in 2024, primarily due to investments in Taiwan. These substantial investments may pressure margins and profitability, and there is uncertainty about when these losses will stabilize or decline, which could weigh on overall financial performance if these initiatives do not deliver expected returns.
- Heightened competition from Chinese cross-border e-commerce platforms may impact Coupang's user attrition and basket size among cohorts. While management acknowledges the competitive environment, they did not provide concrete strategies to mitigate these risks, which could lead to slower growth or margin compression.
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Farfetch Acquisition
Q: What attracted you to acquire Farfetch, and plans for capital allocation?
A: We saw Farfetch as an opportunistic purchase in the large, untapped luxury market that hasn't been meaningfully captured by e-commerce players yet. With our focus on customer experience and operational excellence, we believe Farfetch could create possibly billions of dollars of equity value. However, it's too early for a more in-depth discussion, and our core strategy remains organic growth. -
Margin Outlook
Q: Will increasing selection affect margins in 2024?
A: While expanding our selection impacts margins to a degree, we're enhancing margins through logistics improvements and greater use of automation and AI. In 2023, we generated $1.1 billion in adjusted EBITDA, increasing margins by 250 basis points. Product Commerce adjusted EBITDA margin improved nearly 200 basis points to 7.1%. Margins may be uneven quarter-to-quarter, but we expect them to continue rising annually, excluding Farfetch. -
Developing Offerings Loss Guidance
Q: Does the $650 million loss guidance include Farfetch?
A: The $650 million does not include Farfetch. We anticipate that the majority of increased investments will be in Taiwan. Even with these investments, we expect to continue expanding our EBITDA margin on a consolidated basis, excluding Farfetch, in 2024. -
Share Buybacks
Q: Any plans to address share supply overhang, like share buybacks?
A: We've been working closely with our investors to find optimal solutions for all shareholders. While we have nothing specific to announce now, with our company's growth looking good and profitability improving, we're excited about future investment opportunities, which we believe will address this over time. -
Taiwan Market Progress
Q: What gives you confidence to invest more in Taiwan?
A: We're seeing strong momentum in Taiwan, with active customers and revenues doubling in just the last two quarters. Growth there has been faster than in Korea. Leveraging our decade-long experience from Korea, including logistics and technology, we're scaling faster and expect to reach profitability sooner. -
Competition Impact
Q: Has competition from Chinese e-commerce platforms affected user attrition or basket size?
A: Our success depends on improving customer experience and operational excellence. We still have a single-digit share of a massive $560 billion retail market. The market is large enough for many winners, and we focus on creating new moments of WOW for our customers to earn their loyalty. -
Farfetch Accounting
Q: How will you account for Farfetch in your financials?
A: We recently finalized the deal and are working through the details. Broadly, we'll consolidate it into our financials for a couple of months. We may take a one-time restructuring charge in Q1 and will provide more details in the next call. -
FLC Growth Drivers
Q: What drives the accelerating growth of your FLC business?
A: Our growth reflects customer adoption of our long-term investments in providing the best experience at the lowest price across the broadest assortment. Being at an early stage with a single-digit share of a $560 billion retail market, we're excited about the potential ahead.