Dingdong Maicai (DDL.US), which has emerged from a period of adjustment, seems to be entering a new stage of strong and benign growth.

On the evening of August 7, Dingdong Maicai released its second-quarter report for 2024. The report shows that Dingdong Maicai achieved revenue of 5.6 billion yuan during Q2 period, a year-on-year increase of 15.7%, and achieved year-on-year growth for two consecutive quarters. During the same period, the net income of the company under the Non-GAAP standard was 1.03 billion yuan, a year-on-year increase of nearly 13 times; and under the GAAP standard, the company has also achieved profitability for two consecutive quarters.

According to the Zhitong Finance APP, at the time when offline hypermarkets were shrinking and major competitors were changing direction, Dingdong Maicai still ran up a steep data curve, which not only indicates that the company's strategy of "focusing on efficiency and scale" continues to be effective, but also indicates that Dingdong Maicai is expected to re-enter the expansion track on the basis of stable profitability, and the company's future growth momentum may continue to be released in an orderly manner.

Embrace the challenge and lean growth.

For the retail industry, the recent period of time is obviously not calm. According to public information, nearly 70% of listed companies in the supermarket category experienced a decline in revenue last year. Under the increasingly heavy operating pressure, the closure of offline retail stores has been occurring one after another. Similarly, with the tightening of macro liquidity and the reduction of consumer budgets, players on the fresh retail track have also begun to adjust their business models and shrink their business scales, and the industry pattern has quietly changed.

Although the market environment is full of challenges, from a different perspective, the stress test during the industry adjustment period may be the best touchstone for evaluating enterprise development.

Take Dingdong Maicai as an example. In the face of the big changes in the fresh retail industry, the company timely adjusted its strategy from "scale priority" to "efficiency priority", focusing its strategy on Shanghai and surrounding areas such as Jiangsu and Zhejiang provinces with high consumption potential, and Targeted the density of front warehouse network. In the first half of this year, Dingdong Maicai has opened nearly 40 front warehouses, and the daily average single volume of the new warehouses has exceeded 800. The company expects to open up to 80 new warehouses throughout the year.

At the same time as the company resumed its active expansion strategy, Dingdong Maicai continued to rely on strong product power and supply chain capabilities to expand consumer buying scenarios, improve the richness and price-to-value ratio of products, and strive to convert traffic into "sticky traffic". For example, in order to meet the diversified dietary needs of users, since last year, Dingdong Maicai has started to extend from the dining table scene to the coffee table scene, and focused on leisure food. As of the second quarter, Dingdong Maicai's average daily SKU in Jiangsu, Zhejiang and Shanghai has increased by about 20% compared with the same period last year.

Combining with the financial report data, the series of reform measures taken by Dingdong Maicai have indeed received positive feedback from the market. The data shows that the average monthly order of Dingdong Maicai in the second quarter was 7.3 million users, a year-on-year increase of 11.7% on a comparable basis; the monthly income per user increased by 6% year-on-year, of which the monthly income from members reached more than 500 yuan.

Dingdong Maicai, which has won the recognition of users, has also reached a new level in terms of platform scale. During Q2 period, Dingdong Maicai's GMV increased by 16.8% year-on-year to 6.22 billion yuan. The daily average order volume of the front warehouse exceeded 1,000 units, with a year-on-year increase of 29.4%. Among them, the GMV growth rates of Dingdong Maicai in Shanghai and Jiangsu and Zhejiang provinces were about 16.5% and 30%, respectively, maintaining a good growth trend.

"Cultivate inner strength" and prepare for new growth.

Dingdong Maicai's operations are entering a good phase, and what is even more noteworthy is that the company's latest financial report may once again confirm that it is on the right development track.

After gradually reducing the poorly performing regions and front warehouses in the past few years, the number of front warehouses of Dingdong Maicai once shrank to about 1,000. After lying dormant and accumulating strength, Dingdong Maicai restarted the opening of warehouses this year, and the new warehouses are concentrated in Jiangsu, Zhejiang and Shanghai areas, indicating that the company has a more targeted approach to development strategies and a clear preference for efficiency.

In the view of the Zhitong Finance APP, Jiangsu, Zhejiang and Shanghai as Dingdong Maicai's advantageous markets, the company has already cultivated strong user mindsets and brand reputation in this region, which makes the new warehouses able to climb the order volume in a short period of time; at the same time, the intensive layout of advantageous areas can better share the cost of large warehouses, and the company's profitability can be maximized under the scale effect.

In terms of market space, Dingdong currently has just over 100 front-end warehouses in Hangzhou, while cities such as Suzhou, Nanjing, and Wuxi have around 50, compared to the density of 300 in a single city in Shanghai. There is still room for significant increase in density in Jiangsu and Zhejiang. According to the analyst at China Merchants Securities, if Dingdong's warehouse numbers in Jiangsu and Zhejiang reach 600+, and the daily order volume remains stable at the current level of 1000 orders/warehouse/day, plus moderate encryption of Shanghai warehouses and moderate increase in single warehouse volume, the company's scale in the Jiangsu, Zhejiang, and Shanghai markets is expected to reach 30 billion yuan.

With broad market space and increasingly strong fundamentals, Dingdong is well-equipped for future expansion. According to the company's Q2 report, Dingdong achieved a net inflow of operating cash flow of 0.25 billion yuan, and its self-generated cash flow ability continued to strengthen. As of the end of the quarter, the company had a balance of 4.16 billion yuan in cash and cash equivalents, short-term restricted funds, and short-term investments, providing sufficient reserves to support the continuous encryption of its front-end warehouse network.

Returning to the Jiangsu, Zhejiang, and Shanghai markets for continuous and healthy growth, Dingdong's successful experience in operation and product strategies can also be replicated in other high-quality domestic and overseas markets when the time is right. As a result, Dingdong, with its significant growth potential, is likely to be welcomed by investors in the secondary market.