Background on Mercado Libre
Mercado Libre, a leading e-commerce company based in Uruguay and the most valuable firm in Latin America by market capitalization, reported its Q3 earnings on Wednesday. The company operates an e-commerce platform in Latin America and a fintech service called Mercado Pago.
Q3 Earnings Report
Mercado Libre reported a net income of $421 million for the July-September period, a 6% increase from the same time last year. However, this fell short of analyst expectations, which were for $481 million according to a survey by LSEG.
Revenue Growth
The company’s total revenue grew by 39% to $7.4 billion, surpassing analyst forecasts of $7.2 billion. This growth was driven by a 35% increase in Value of Merchandise Sold (VBM) on a constant currency basis.
Key Factors Impacting Earnings
Martín de los Santos, Mercado Libre’s Chief Financial Officer, explained to Reuters that the company’s investments in Brazil are starting to pay off. The lowering of free shipping thresholds in Brazil, Mercado Libre’s largest market, led to a 34% increase in VBM and the highest growth of unique buyers since early 2021. However, this strategy negatively affected profitability, with operating margins (EBIT margins) dropping to 9.8%, the lowest since Q4 2023.
The slowdown in Argentina’s sales since the first half of the year also contributed to margin contraction due to economic instability and reduced demand. On the other hand, Mexican operations saw increased margins.
Mercado Pago Performance
Mercado Libre’s fintech arm, Mercado Pago, saw its loan portfolio grow by 83% year-over-year to $11 billion, primarily driven by credit card loans. The delinquency rate for 15 to 90 days fell from 7.8% to 6.8%. The total volume of payments from Mercado Pago’s acquisition operations grew by 32% to reach $47.7 billion.
Key Questions and Answers
- What were Mercado Libre’s Q3 earnings? The company reported a net income of $421 million, which was 6% more than the same period last year but fell short of analyst expectations of $481 million.
- How did Mercado Libre’s revenue perform in Q3? Total revenue grew by 39% to $7.4 billion, surpassing analyst forecasts of $7.2 billion.
- What factors impacted Mercado Libre’s earnings? Investments in Brazil contributed positively, while Argentina’s sales slowdown and economic instability negatively affected profitability. Mercado Pago’s loan portfolio grew significantly, with a lower delinquency rate and increased payment volumes.
