UPDATE 1-Mercado Libre's quarterly profit slips, while free shipping and fintech boost revenue

Brazil's unique buyers rose 32% year-on-year, the fastest pace in five years, while sold items rose 56% year-on-year. STRONG CREDIT CARD GROWTH Alongside the ⁠reduced free shipping threshold, Cuccioli lauded the company's investment in its fintech arm Mercado Pago and its rapid credit card expansion as drivers of growth. Mercado Pago's monthly ​active users reached 83 million, up 29% year-on-year, and net revenue from Mercado Pago hit $4 billion in the first quarter, up 51% ⁠compared to a year prior.

Mercado Libre on Thursday posted ​a first quarter net profit of $417 million, a 15.6% drop compared ​to a year earlier and below analyst expectations as ‌the ​Latin American e-commerce and fintech company poured money into logistics, credit expansion and free shipping. The company, which runs an online shopping platform and financial tech arm Mercado Pago, reported a 49% jump in revenues to $8.8 billion ‌for the January-to-March quarter, surpassing analysts' $8.3 billion projections. The company said the fall in profits, its second consecutive quarter in decline, reflected its decision to press ahead with investments aimed at long-term market share gains. Investors have kept a close eye on Mercado Pago and its rapidly expanding credit book after shares fell earlier ‌this year on concerns over credit risk and rising investment costs.

"We are willing to sacrifice these short term profits because we think that the ‌opportunity is worth it," Mercado Libre's senior vice president of investor relations, Leandro Cuccioli, said in an interview. Despite lower than expected profits, Mercado Libre's revenue reflected the company's fastest rate of growth since the second quarter of 2022, it said.

The surge was driven by Brazil, Mercado Libre's top market, where a decision last year to lower the free shipping threshold pushed results ⁠beyond ​expectations, the company said in its earnings ⁠report. The move is "here to stay," Cuccioli added. Brazil's unique buyers rose 32% year-on-year, the fastest pace in five years, while sold items rose 56% year-on-year.

STRONG CREDIT CARD GROWTH Alongside the ⁠reduced free shipping threshold, Cuccioli lauded the company's investment in its fintech arm Mercado Pago and its rapid credit card expansion as drivers of growth.

Mercado Pago's monthly ​active users reached 83 million, up 29% year-on-year, and net revenue from Mercado Pago hit $4 billion in the first quarter, up 51% ⁠compared to a year prior. Assets under management at Mercado Pago grew 77% to nearly $20 billion.

The company's credit portfolio grew 87% year-on-year to $14.6 billion in the quarter, its largest quarterly increase ⁠in nominal ​terms. The credit card book alone more than doubled to $6.6 billion year-on-year, as Mercado Libre issued 2.7 million new cards.

Chief Executive Ariel Szarfsztejn, who took over in January from co-founder Marcos Galperin, recently told Reuters that selling part of Mercado Libre's loan book could allow the company to support ⁠Mercado Pago's regional growth. Cuccioli said he felt confident about room to expand the business, while staying cautious.

"If we see that there is opportunity ⁠to extend to more cards, we will," ⁠he said. "From a point of view of the potential of our credit card business, it can be 30, 40, 50 times larger." The company is not considering filing an IPO for Mercado Pago, Cuccioli said.

Overall, Mercado Libre's Gross ‌Merchandise Value (GMV), the total value ‌of merchandise sold on the platform, reached $19 billion, up 42%.