Coupang Reports Operating Loss of 34.2 Billion KRW in Q2... First Deficit in 8 Quarters (Update)

Sales Surpass 10 Trillion Won for the First Time Ever
Reflecting 163 Billion Won Fair Trade Commission Fine, Recording Net Loss for the Period

Coupang surpassed 10 trillion won in sales for the first time in the second quarter of this year. However, operating profit turned negative for the first time in eight quarters due to factors such as operating losses from the luxury platform Farfetch.

[Image source=Yonhap News]

According to Coupang Inc., a New York-listed company in the United States, operating loss in the second quarter of this year was $25 million (342 billion won, based on the quarterly average exchange rate of 1,370.44), marking a return to the red. This is the first time Coupang has recorded an operating loss since posting an operating profit in the third quarter of 2022, ending a streak of eight consecutive quarters. Coupang had posted operating profits for seven consecutive quarters from Q3 2022 through Q1 this year, with operating profit in Q2 last year reaching 194 billion won ($147.64 million). The operating loss in Q2 this year was due to the inclusion of Farfetch’s operating loss. The adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) loss from growth businesses was $200 million (274 billion won), which included a $31 million loss from Farfetch.

There was also an impact from reflecting an estimated fine of 163 billion won, which the Korea Fair Trade Commission is expected to impose, in the selling and administrative expenses in advance. Coupang is expected to receive a corrective order and fine from the Fair Trade Commission this month for allegedly manipulating search ranking algorithms to unfairly favor its private brand (PB) products. Industry insiders expect the fine to be around 160 billion won. Net loss for the period was $105 million (143.8 billion won), turning to a deficit.

Coupang stated, "Excluding the losses from Farfetch and the estimated fine from the Fair Trade Commission, the net income attributable to controlling shareholders in Q2 could have been approximately $124 million (169.9 billion won)."

Revenue was $7.323 billion (10.0357 trillion won), a 30% increase compared to $5.837 billion in the previous year. This is the first time quarterly sales have exceeded 10 trillion won. Even excluding Farfetch’s Q2 revenue of $460 million (630.4 billion won), which was first reflected from Q1, Coupang’s revenue reached 9.4053 trillion won, representing a growth rate of nearly 23% compared to the same period last year.

The increase in sales was driven by growth industries such as Taiwan, Coupang Eats, and Farfetch. Revenue from these sectors reached $892 million (1.2224 trillion won), showing a steep growth rate of 483% year-over-year in Korean won terms, which is six times higher than the previous year. Even when looking only at the Taiwan and Coupang Eats segments, the growth rate in revenue for growth industries approaches 188%.

Despite the news of a paid membership fee increase, the number of active customers actually increased. Coupang announced in April that the monthly fee for its paid membership Wow service would increase from the current 4,990 won to 7,890 won starting in August. However, the number of active customers using Coupang actively increased. The number of active customers in Q2 was 21.7 million, a 12% increase compared to the same period last year, and customer spending increased by 5% during the same period to $309 (423,400 won). Accordingly, the Coupang Product Commerce segment (Rocket Delivery, Rocket Fresh, Rocket Growth, Marketplace) posted Q2 revenue of $6.431 billion (8.31 trillion won), an 18% increase compared to the same period.

Gaurav Anand, Coupang CFO, said, “Thanks to our relentless efforts to provide a higher level of product selection, service, and cost reduction, customer engagement increased this quarter. We are leveraging investments in infrastructure, technology, and automation to drive continuous improvements in overall operations while focusing on creating ‘Wow’ moments for customers every day.”