MercadoLibre Still the King of
Latin American E-Commerce
The past three months have been
tumultuous ones for MercadoLibre, Inc. (NASDAQ: MELI). The company reported
fabulous results for its second quarter, and the stock promptly fell 10% on the
devaluation of the Venezuelan currency, the bolivar. This currency move
resulted in a $25 million hit to MercadoLibre's net income for the quarter. In
addition, a report that online juggernaut Amazon.com (NASDAQ: AMZN) was
preparing to expand its operations in Brazil sent MercadoLibre's stock plunging
last month.
(Latin America Business). When the Latin American
e-commerce leader reported its financial results earlier this month, investors
were looking for reassurance that these exterior forces hadn't derailed
MercadoLibre from its growth in the region and that the company could still
thrive in a challenging environment. Shareholders weren't disappointed, and the
stock jumped 13% on the results.
MercadoLibre reported net revenue
that grew to $370.7 million, up 61% year over year in U.S. dollars (USD), and
up 79% in local currencies. This result soared past consensus estimates of $348
million. Net income fell to $36.7 million, down 30% from the prior-year period,
producing earnings per share of $0.63, which was still better than analyst
expectations of $0.62.
Operationally, the results
continued to shine. Total confirmed registered users grew to 191 million, up
21% year over year, while items sold increased to 74.2 million, up 56% over the
prior-year period. Payment transactions continued to drive results, up 69.4%
year over year to 62.3 million. These three metrics tend to strip out the
effect of changes in exchange rates and show that the company's growth is still
robust.
Gross merchandise volume of $3.08
billion jumped 50.7% in USD, and a staggering 93.8% in local currencies. Total
payment volume also impressed, growing to $3.67 billion, up 73.5% in USD
compared with the prior-year quarter and up 86% in local currencies.
Gross profit of $175.8 million
resulted in gross margin of 47.4%, far below the 63.1% achieved in the
prior-year quarter. Company executives explained that the margin compression
was the result of free shipping, which MercadoLibre has been rolling out across
its largest markets. The company believes that offering this perk on select
purchases while sharing the cost with merchants, will result in important
market-share gains as the platform becomes the default choice for many shoppers
in the region.
MercadoLibre continues to offer
consumers a unique value proposition, with a growing number of products, a
localized payment solution in MercadoPago, an integrated shipping choice in
MercadoEnvios, and consumer financing all in one place. The company has found
that customers who use more than one of its services have higher customer
satisfaction and tend to be repeat shoppers, with increased monetization rates,
and better lifetime value metrics
Merchants are also eager to join
the platform, which offers not only the largest collection of buyers in Latin
America, but also helpful services they can't find anywhere else. MercadoLibre
offers working capital loans and cash advances to small- and medium-sized
businesses for amounts equaling up to two months of sales, which the company
collects back from ongoing business. MercadoLibre has detailed data that goes
back years in many cases, which offers the company unique insight into a
merchant's ability to repay the loans. These funds can then be used for to
increase business, like to stock up on inventory for busy periods such as
holidays. MercadoLibre believes it is only "scratching the surface in
filling the void in the traditional retail banking environment." The
company has reported that merchants who use Mercado Credito tend to experience
higher sales and unit volumes, which results in an ever-improving relationship.
The company's payment solution, MercadoPago,
continues to attract off-platform merchants and is becoming a de facto payment
solution in the region. Payment transactions by sellers not using
MercadoLibre's platform grew 84% year over year, and rising demand by consumers
is resulting in a groundswell of adoption by other online sellers and
brick-and-mortar retailers.
Latin America Business News - misancosa@gmail.com