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1Q26 Update.
Coupang reported 1Q26 and Product Commerce revenues were +5% y/y on constant currency.
Gross profits were up less though at +2% y/y. Segment adjusted EBITDA margin was down 302bps y/y to 5%.
This was the second quarter where the data scandal impacted their results. Active customers fell for the second consecutive quarter from to 23.9mn from 24.7mn at peak.
They noted last quarter that January was the worst month that was impacted by customers leaving in response to the data scandal, and results had trended positive since. Last quarter, they guided consolidated constant currency at 5-10% versus their reported results of 8%. So, despite the weak growth this quarter, it seems to have generally been in line as expected.
While this wasn’t a good quarter financially, the behavior management described from users was very compelling. Of the WOW Members that left, the majority have already returned and resumed levels of spend where they were before the incident. As of the end of April they had recovered 80% of the lost members already.
Also interesting was that once they returned, they started increasing their purchases as they had in the past. Bom Kim also emphasized that they are not seeing that members that left are splitting their purchases elsewhere, which suggest that recent Chinese ecommerce players have not had an impact on them.
This all makes sense if we think about why a consumer shops at Coupang: convivence, trust, selection, and low prices. No one else in Korea is offering that to the Korean consumer at the scale Coupang is.
They called for just 9-10% growth next quarter though. This is in part because despite users who left returning to the platform, they have missed out on several months where users “compound” their spending. These lost months of spending compounding are lost. And so for a full year, until we lap the data scandal impacts, growth will be facing a headwind. (For example, a customer in June would have usually been increasing their spend for 6 months of the year, but if they left for 2 months at the beginning of the year, that spend has only been growing for 4 months).
The gross margin hit was explained by one-time vouchers to existing customers as a sort of apology and retention tool. Then there was also the factor that they built out their logistics operation with a set cadence of expected demand growth and the demand shortfall lead to underutilization. This isn’t a structural issue, it simply means they are a quarter or two overbuilt, which can be rationalized over time.
Their big growth lever in Korea is simple: selection.
“Selection remains the primary lever for unlocking the underlying growth potential in our Product Commerce segment. A meaningful portion of what customers want to buy is still not available on Rocket.”
I have said before that this is a relatively “high confidence” growth lever as consumers will likely react to more selection as they have in the past—by buying more stuff. I would expect their growth to reaccelerate once the data scandal impacts are lapsed. (And management called for growth to accelerate towards the back half of the year but didn’t give figures.)
They also commented that Taiwan is going well and seem encouraged by Rocket Now in Japan (which is food delivery). However, they were sparse of comments for both.
In the quarter they repurchased $391mn of stock and the board of directors approved $1bn to be added to their stock repurchase program. This is their largest repurchase so far and their largest authorization.
In terms of valuation, we use a 10% EBIT margin at maturity, which translates to a ~12% adjusted EBITDA margin (they only guide to 10% currently, but the Product Commerce segment was already around 8% before this quarter).
Just taking their Product Commerce revenue of $29.9bn, yields us ~$2.25bn in NOPAT. At their after-hours price of $19.50, that is an enterprise value of ~$33.6bn, which yields us a mature margin multiple of 16x. This does not attribute any value directly to their Developing Offerings.
In order to invest in Coupang, an investors needs to understand their value prop and the core Korea ecommerce opportunity, which we cover extensively in our report below.
Check it out here: Coupang Extensive Research Report here.
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*At the time of this writing, one or more contributors to this report has a position in Coupang. Furthermore, accounts one or more contributors advise on may also have a position in Coupang. This may change without notice.
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