Poshmark powers Naver earnings; HyperCLOVA X the next booster

South Korea’s online giant Naver Corp. reported better-than-expected quarterly earnings thanks to strong sales of Poshmark Inc. in the US. It acquired Poshmark last year while aiming to boost profits with HyperCLOVA X, an updated version of its AI platform.

Naver’s share price hit a two-month high on Thursday as the company unveiled shareholder return policies for the next three years including dividends and share cancellations.

The platform behemoth said its operating profit rose 9.5% to 330.5 billion won ($249.4 million) on a consolidated basis in the first quarter from a year earlier, with sales up 23.6% to 2.3 trillion won. Both profit and sales beat analysts’ forecasts.

Sales in its e-commerce unit posted a 45.5% rise led by the strong performance of Poshmark, a social e-commerce marketplace for new and secondhand styles. Poshmark, which Naver took over late last year, accounted for some 20% of the e-commerce unit’s total revenue.

“Poshmark expanded its business by increasing customer repurchases, even though most US C2C platforms shrank,” said Naver CEO Choi Soo-yeon, referring to customer-to-customer, a business model that lets customers trade with each other.

“Assuming that transaction levels last month are maintained throughout the year, annual transaction value is expected to reach some 1 trillion won.”

Poshmark introduced live commerce, the act of selling products online through live video while shoppers interact with the brand in real time, to further boost growth, Choi added.

Naver aims to upgrade Poshmark’s service further with its technology such as AI and search engine.

Other units, such as fintech and the search platform, also reported higher sales. The fintech unit logged 15.8% on-year growth in the January-March period and the search platform, which makes up the largest portion of the company’s total revenue, saw a 0.2% rise.

HYPERCLOVA X

Naver, however, said its operating profit margin fell to 14.5% in the first quarter from 16.4% a year earlier. The margin has fallen for six consecutive quarters.

The tech juggernaut plans to bolster the margin with its AI business. In July it is set to launch HyperCLOVA X, which it said better understands and more accurately responds to prompts in the Korean language than ChatGPT, a global-hit chatbot developed by Microsoft Corp.-backed OpenAI and based on generative AI technology.

Naver is poised to apply HyperCLOVA X to its overall services while utilizing the AI platform for the B2B sectors.

“HyperCLOVA X’s operating costs are just one quarter of competitors' despite the better performance,” Choi said. “It will provide answers using various functions such as calculators and maps while also understanding images and voices.”

Meanwhile, Naver said it will spend 15%-30% of its average free cash flow in the previous two years to pay cash dividends over the next three years. In addition, the company decided to cancel a 3% stake out of the 8% it currently holds as treasury shares by retiring 1% each year over the next three years. 

Naver's share price rose as much as 3.6% to 214,500 won on Thursday morning, its highest since March 7, in Korea's main stock exchange. 

Write to Ji-Eun Jeong at jeong@hankyung.com
 
Jongwoo Cheon edited this article.