Coupang's Cumulative Loss Nears '2 Trillion Won' This Year... Three Years of Profits 'Wiped Out' (2nd Update)

Cumulative Operating Loss Reaches 1.8318 Trillion Won This Year
Effectively Wipes Out Three Years of Operating Profit
288.3 Billion Won Loss Even Excluding Fire Costs; Core Business Earnings Down 45%
Kim Beomseok: "Profitability to Recover Next Year"; Stock Down by Half in a Year

Coupang Inc., the parent company of Coupang, has already set a record for its largest annual operating loss after just the first three quarters of this year. Its cumulative operating loss reached 1.8318 trillion won, surpassing its previous record annual loss, set in 2021. Even excluding one-off costs from a fire at its Incheon logistics center, its third-quarter operating loss was the largest since the fourth quarter of 2021. Coupang Inc. Chairman Kim Beomseok said he did not view the situation as a structural problem and expressed confidence in a recovery next year, but the stock fell in after-hours trading.

According to Coupang Inc.'s consolidated third-quarter earnings report filed with the U.S. Securities and Exchange Commission (SEC) on Nov. 4 (Korea time), cumulative revenue for the first three quarters of this year rose 10.1% year over year to 39.9813 trillion won. Operating losses, however, were 354.5 billion won in the first quarter, 835 billion won in the second quarter and 642.3 billion won in the third, bringing the cumulative loss to 1.8318 trillion won.

Speaking on an investor conference call that day, Chairman Kim cited the burden of fixed costs from facilities built to meet demand before supply chain disruptions and the personal information incident, as well as increased marketing investment to bring back customers who had left, as reasons for the deterioration in profitability.

Losses in Three Quarters Nearly Match Operating Profit Earned Over Three Years

This year's cumulative operating loss has exceeded the 1.7088 trillion won annual loss recorded in 2021, the previous record. Although the fourth quarter is still to come, the company has accumulated a larger loss in just three quarters than it did in all of that previous year.

Coupang Inc. posted its first annual operating profit in 2023 and remained profitable for three consecutive years through last year. Operating profit totaled 1.8987 trillion won: 617.4 billion won in 2023, 602.3 billion won in 2024 and 679 billion won last year. This year's cumulative operating loss amounts to 96.5% of that total. Net losses also approached 2 trillion won. The net loss for the first three quarters of this year was 1.9608 trillion won, exceeding the previous annual record of 1.764 trillion won set in 2021. That is nearly double the 1.004 trillion won in combined net profit over the past three years.

Third-quarter revenue rose 7% year over year to $9.962 billion. On a constant-currency basis, revenue increased 11%, exceeding the company's forecast of 8% to 9%. At the average quarterly exchange rate of 1,427.52 won per dollar, revenue was 14.2209 trillion won. Operating results, however, swung from a profit of 224.5 billion won ($162 million) in the third quarter of last year to a loss of 642.3 billion won ($450 million) this year. The loss narrowed from the previous quarter, but it was the second-largest quarterly operating loss since the company went public in 2021, following the second quarter of this year. The quarterly loss nearly matched last year's annual operating profit of 679 billion won. The third-quarter net loss was 715.1 billion won ($501 million).

Coupang Inc. said that 354 billion won ($248 million) in losses from the fire at its Incheon logistics center in July was reflected in its third-quarter results. Inventory losses and other costs of 135.6 billion won ($95 million) were recorded in cost of revenue, while 218.4 billion won ($153 million) in impairment losses on property and equipment and other costs were recorded in selling, general and administrative expenses. The company said, "Excluding the fire-related costs, our third-quarter operating loss would have been $202 million (288.3 billion won), and our net loss would have been $321 million (458.2 billion won)." This was the largest quarterly operating loss excluding one-off costs since the fourth quarter of 2021, when the company posted a loss of 469.2 billion won.

Performance in the core business also showed a divergence between revenue growth and profitability. Revenue in the Product Commerce segment, which includes Rocket Delivery, Rocket Fresh, Rocket Growth and the Marketplace, rose 5% in dollar terms to 11.954 trillion won ($8.374 billion). Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, fell 45% to 549.5 billion won. The decline widened from 35% in the first quarter and 42% in the second. The adjusted EBITDA margin fell by 4.24 percentage points to 4.6%.

Promotional spending to win back customers who left after the personal information incident also weighed on results. In the third quarter, Coupang held discount events including Wow Members Day and Mega Beauty Show. Chief Financial Officer Gaurav Anand said expanded promotions and marketing to restore customer spending, along with fixed-cost burdens, had reduced profitability. Cost of revenue rose to 74.3% of revenue, up 3.7 percentage points from a year earlier. Selling, general and administrative expenses increased 17.7% to $3.011 billion. Consolidated adjusted EBITDA fell 72% to $116 million.

Kim Says "Customers Are Returning," but Results Fall Short of Wall Street Expectations

Chairman Kim emphasized that the customer base was recovering. He said the number of Wow membership subscribers reached a record high, increasing both year over year and from the previous quarter. Product Commerce active customers totaled 25.2 million, up 500,000 from a year earlier. Revenue per customer also rose 6% to 473,930 won.

However, he said, "The impact remains from a small group of customers who left after the personal information incident and have yet to return." New members are filling the gap left by departing members, but it will take time for their spending to reach the levels of existing customers, he said. The company forecast fourth-quarter consolidated revenue growth of 13% to 14% on a constant-currency basis and an improvement of 0.5 to 1.5 percentage points in the consolidated adjusted EBITDA margin from the third quarter.

Coupang will expand its investment in Taiwan. Revenue in its Developing Offerings segment, which includes Rocket Delivery in Taiwan, Farfetch and Coupang Eats, increased 23% year over year to 2.2669 trillion won. The segment's adjusted EBITDA loss narrowed from a year earlier to about 384 billion won, but the company said it would raise the upper end of its annual loss forecast for the segment by $50 million to $100 million from the previous $1 billion, as it expands investment in Taiwan's infrastructure.

Third-quarter revenue exceeded Wall Street's forecast, but profitability fell short of expectations. Bloomberg's consensus revenue estimate was 13.8712 trillion won ($9.717 billion). The actual operating loss of 642.3 billion won ($450 million) was more than double the estimate of about 277.2 billion won ($194.2 million). The loss per share was also greater than expected, at $0.28 compared with the forecast of $0.12.

Immediately after the earnings announcement, Coupang Inc.'s share price fell to $14.54. As of 6:30 a.m. that day, the stock was trading at about $14.70 in after-hours trading, down roughly 3%. That was about 52% below the $30.22 share price immediately after the company's third-quarter earnings announcement last year. The stock fell to $19.08 immediately after the fourth-quarter earnings announcement last year, then continued its decline, reaching $17.91 after the first quarter and $16 after the second quarter this year.

Whether the Korea Fair Trade Commission will impose further sanctions also remains a factor that could affect results. The commission is reviewing allegations that Coupang demanded preferential treatment from delivery app businesses and engaged in illegal tying through its Wow membership. In connection with the preferential-treatment case, Coupang Eats proposed a 60 billion won support program for small businesses over four years and applied for a consent decree, but the application was rejected in June. If an additional fine is recorded as an expense this year and fourth-quarter results do not improve sufficiently, the annual operating loss could exceed 2 trillion won.

Lee Eunhee, an emeritus professor in the Department of Consumer Science at Inha University, said, "Large fines imposed by regulators are often later canceled or adjusted. In particular, consumer-facing companies that rely on customer trust can suffer a devastating stigma as soon as a penalty is announced. Even if a ruling is later overturned through litigation, it can be difficult to recover the damage to brand value and other tangible and intangible losses. Regulators should therefore proceed with caution."

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