Singapore Sea Improves Prospects After Repelling TikTok, Lazada Attack

SINGAPORE – Sea has raised forecasts for its main online retail arm, a sign that Southeast Asia’s e-commerce leader is indeed facing stiff competition from the likes of TikTok and Lazada.

The value of goods sold by the Shopee division will grow in the “mid 20 percent” range this year, Sea said Tuesday, rather than the “high teens” pace it predicted in March. Singapore-based Sea also reported second-quarter profit and sales that topped analyst estimates.

The forecast eases some concerns about Shopee’s prospects as it tries to fend off competition from ByteDance’s TikTok and Alibaba Group Holding’s Lazada. Investors are closely watching whether Shopee’s higher merchant fees can boost its margins without eroding its advantage over wealthy tech conglomerates. Newer competitors like Shein and Temu PDD Holdings Inc. are also targeting Southeast Asia, a region of about 675 million people where more shoppers are moving online.

In a show of dominance, Shopee has raised the commissions it charges sellers in many of its major marketplaces by about a third since the start of the year. The hikes, which put Shopee’s fees well above those of its rivals, show that Sea feels confident in its efforts to become a key partner for sellers, helped by the e-commerce pioneer’s broad user base and well-established delivery services.

Sea shares fell less than 1 percent in pre-market trading as stock futures broadly pared gains ahead of new U.S. consumer price data. After falling over the past two years, Sea shares are up about 65 percent in 2024 as investors assess its chances in the face of stiff competition. They still remain well below their all-time highs.

Sea returned to the black in the three months to June with net income of about US$80 million (S$105 million), after losses in the previous three quarters. Analysts had estimated an average of US$60 million. Sales rose 23 percent to US$3.8 billion.

Shopee’s total merchandise value, or the value of goods sold, rose 29 percent, beating estimates, to $23.3 billion in the second quarter. Sea also said it expects Shopee to post earnings before interest, taxes, depreciation, and amortization in the third quarter of this year — Shopee had previously been expected to hit that milestone in the second half of the year. The company as a whole is aiming for its second consecutive annual profit this year.

Investors also focused on Sea’s efforts to improve profitability in a cutthroat market after the company cut thousands of jobs in recent years as part of a brutal cost-cutting drive. Sales and marketing expenses rose to $774.8 million in the second quarter, and the company also boosted research and development spending to add live streaming and artificial intelligence features.

Garena’s gaming unit, known for its hit Free Fire, helped Sea’s profit margins. But the company has struggled to come up with new titles that will boost sales. Revenue at the unit fell 18 percent to $435.6 million, missing estimates. Bookings, which measure the amount of products and services sold during the period, rose 21 percent to $536.8 million.

Sea’s digital banking unit has become a key pillar of its expansion. Revenue at its financial services unit rose 21 percent as the company battles both established players in the region and new entrants, including Trust Bank Standard Chartered and a Grab Holdings and Singapore Telecommunications venture called GXS Bank. Last month, the company named a new chief to lead its growing bank in Singapore. BLOOMBERG