Coupang's "2 Trillion Won Range" Operating Loss: Why? ... Bom Kim: "Room for Growth Remains"

Incheon fulfillment center fire costs of 354 billion won included
Marketing and fixed-cost burdens amid fallout from personal data incident
Fourth-quarter growth forecast at 13%-14%

Analysts say the combined effects of a warehouse fire and customer recovery costs following a personal data incident contributed to Coupang posting an operating loss in the 600 billion won range in the third quarter, despite revenue of more than 14 trillion won. Coupang stressed that the deterioration in profitability was temporary and set a target of restoring profitability to pre-incident levels by the middle of next year.

According to Coupang, Inc.'s third-quarter earnings announcement and conference call on Nov. 4 (Korea time), the company said it included $248 million (approximately 354 billion won) in third-quarter results for the fire at its Incheon fulfillment center in July. It recognized $95 million in cost of revenue and $153 million in selling, general and administrative expenses.

Yonhap News Agency

As a result, Coupang, Inc. posted an operating loss of $450 million (642.3 billion won) in the third quarter. Even excluding fire-related costs, however, its operating loss reached $202 million (approximately 288.4 billion won). This indicates that restoring the profitability of its core business remains a challenge, apart from the fire.

Profitability in Product Commerce, Coupang's core business, deteriorated despite revenue growth. Third-quarter revenue was $8.4 billion, up 5% year over year, or 8% on a constant-currency basis. By contrast, its adjusted EBITDA margin was 4.6%, down 4.2 percentage points from a year earlier. Excluding fire-related costs, its gross margin was also 29.5%, down approximately 2.6 percentage points year over year.

Coupang cited supply chain imbalances following customer attrition after the personal data incident and increased marketing expenses as the main causes of the decline in profitability. The explanation is that costs have grown faster than revenue.

Bom Kim, chairman of Coupang, Inc., explained, "Three factors - disruptions in the supply chain, fixed-cost burdens from facilities built to meet the demand curve before the incident, and increased marketing investment to accelerate the return of customers who left - are being reflected in the income statement in line with our expected trajectory."

The explanation is that logistics facilities built in anticipation of pre-incident demand and their fixed costs remain in place, while lower-than-expected shipment volumes due to some customers leaving have hurt profitability. On top of that, increased promotional and marketing expenses to win back those customers have added a further burden.

Coupang stressed, however, that customers' purchasing activity is gradually returning to normal. Chairman Kim said, "We do not view any of these factors as structural issues," adding, "Our confidence that the Product Commerce margin will recover to near its pre-incident level next year remains unchanged."

The company also pointed to the potential for improvement in its fourth-quarter results. Gaurav Anand, Coupang's chief financial officer (CFO), forecast, "We expect consolidated revenue in the fourth quarter to grow 13% to 14% year over year on a constant-currency basis." This would be higher than the third-quarter growth rate of 11%.

Coupang is also expanding its investment in logistics automation. Chairman Kim said that in the third quarter, the company introduced artificial intelligence (AI) cameras to replace manual scanning in the packing process and linked them to equipment that automatically adjusts package sizes for each order, reducing processing time and packaging waste.

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