Is the "Storm in a Teacup" Over? Coupang Withstands Earnings Amid Personal Information Leak

Transaction Volume Reaches 66 Trillion Won, 24.6 Million Active Customers
Active Customers Down by 100,000 from Previous Quarter
Wow Membership Base Remains Stable, Sales Growth Continues
"First-Quarter Growth Expected at 5?10%"

Despite facing the negative impact of a massive personal data breach, Coupang is being evaluated as having maintained a stronger-than-expected performance in the fourth quarter of last year. Although news of the breach of personal information for more than 33 million customers surfaced ahead of the peak year-end shopping season-raising concerns about damaged trust in the platform-the data indicate that the shock was limited. While a short-term adjustment was inevitable, there is a growing view that Coupang maintained its fundamental strength.

According to Coupang on February 27, the number of active customers in the product commerce segment for the fourth quarter of last year-meaning customers who made at least one purchase during the quarter-stood at 24.6 million, an increase of 8% compared to the same period the previous year (22.8 million). Although this was a decrease of 100,000 compared to the preceding third quarter (24.7 million), the scale of the decline is considered limited given that it took place during the quarter of the large-scale personal data breach. While a quarterly decrease in active customers is unusual, the year-on-year increase shows that the customer base continued to expand.

Sales also continued their growth trend. Fourth-quarter product commerce sales rose by 8% in dollar terms and 12% on a constant currency basis. Although the growth rate was somewhat lower than the previous quarter (18% on a constant currency basis), the fact that double-digit growth was maintained is seen as evidence of the company's fundamental strength. Gaurav Anand, Coupang's Chief Financial Officer (CFO), stated, "The personal data incident was the main cause of the slowdown in growth in December, and the timing difference of the Lunar New Year holidays this year and last year also had some impact."

The growth rate for January, adjusted for the difference in timing of the Lunar New Year holidays, was approximately 4%, and signs of improvement have appeared since February. The company forecasts that first-quarter product commerce sales will grow by 5-10% on a constant currency basis. CFO Anand said, "We will provide annual growth guidance when we have enough visibility on the recovery trend."

The foundation of the Wow membership base also remained stable. Most Wow members maintained their membership in the fourth quarter, and their spending increased by double digits compared to the same period last year. However, due to a rise in the churn rate in December, the total number of Wow members in the fourth quarter saw a slight year-on-year decrease. The company explained that the churn of existing members and new sign-ups have recently returned to normal levels.

However, profitability was partially adjusted due to increased investment in growth businesses. Operating profit in the fourth quarter was $8 million, a decrease from the previous year. CFO Anand explained, "The year-on-year decrease was due to expanded investment in growth businesses during the quarter and the aforementioned short-term impacts." He further stated that the net loss for the fourth quarter was "mainly due to an increase in the effective tax rate, resulting from expanded losses in growth businesses, including Taiwan."

Cash flow also faced temporary burdens. Fourth-quarter operating cash flow was $1.8 billion, and free cash flow was $527 million, representing a decrease of about 50% in free cash flow compared to the same period last year. CFO Anand said, "The personal data incident affected working capital."

Industry observers note that Coupang has weathered the aftermath of the data breach relatively smoothly, but caution that future cost factors should be monitored. The cost of compensation coupons issued after the breach will be reflected in the first quarter’s results this year, and the size of the fine from the Personal Information Protection Commission has yet to be determined.

The number of users and the daily average payment amount are also on a downward trend. According to mobile index analysis by IGAWorks, the monthly daily average payment amount dropped from KRW 148.6 billion in November last year to KRW 140 billion in December, and further to KRW 139.2 billion last month.

External factors are also at play. As the government and the ruling party move to ease regulations to allow large supermarkets to offer dawn delivery, the market-where Coupang has effectively enjoyed a monopoly-may soon see new competitors entering in earnest. For Coupang, which has grown by leveraging its logistics infrastructure and delivery speed, it will be inevitable to realign its differentiation strategy.

CFO Anand said, "Looking ahead to this year, we expect growth and profitability to remain subdued over the next few months." He added, "The impact of the personal data incident is expected to gradually subside throughout the year as we go through a transition period and continue to deliver experiences that meet customer expectations."

Meanwhile, the trend of Coupang's stock price reversed as Kim Bumseok, Chairman of Coupang Inc., issued his first public apology in person. Immediately following the earnings announcement after the close of the U.S. stock market, Coupang shares closed at $18.71 per share, falling by about 3.8% in after-hours trading. However, at 7:30 a.m. Korean time, as Chairman Kim delivered an apology to customers in his first official appearance three months after the data breach incident, the decline quickly narrowed. As of 9 a.m., the after-hours drop had shrunk to around 0.8%.

Chairman Kim emphasized, "I once again sincerely apologize for the concern and inconvenience caused to our customers by the personal data incident. Customers are the only reason we exist, and we strive every day to earn their trust. Nothing is more serious than failing to meet customer expectations. We are committed to showing you a better Coupang."

This content was produced with the assistance of AI translation services.