(Yicai) Feb. 28 -- Following a report that Dingdong Maicai had shut 38 distribution centers in Guangzhou and Shenzhen, the online grocery platform said the closure of some depots in the two Chinese first-tier cities was intended to boost operating efficiency and would have a limited impact on its overall business layout.

Nearly 90 percent of Dingdong’s service scope in southern China was unaffected by the adjustment, the Shanghai-based firm told Yicai yesterday. The company is developing its business steadily and plans to add depots in the area and other regions this year while continuing to adjust and optimize existing sites, it added. 

On Feb. 26, Southern Metropolis Daily reported that Dingdong closed 27 distribution centers in Guangzhou and 11 in Shenzhen at the end of last month. The closures were a routine move to consolidate Dingdong's businesses based on operating conditions at different sites, a manager said in the report, without disclosing the number of depots still operating in the two cities. 

In New York yesterday, Dingdong’s shares [NYSE: DDL] jumped 9.1 percent to end at USD1.20 apiece. The stock is still down more than 70 percent from a year ago.

Dingdong expanded quickly during the Covid-19 pandemic, when online shopping surged. But as the pandemic abated, business began to contract and last May the firm said it would stop serving Chengdu and Chongqing, two major cities in the southwest, so as to cut costs.

Dingdong has left most lower-tier cities to focus on doing business in first and second-tier cities, which has improved its financial results. The company mainly covers 25 cities, including Shanghai and Beijing, with most in eastern China, according to its app. 

Net profit at Dingdong was CNY2.1 million (USD291,700) in the third quarter last year, versus a net loss of CNY344.9 million (USD47.9 million) a year earlier, the firm said in its latest earnings report. Revenue fell 13.5 percent to CNY5.1 billion (USD708.5 million). 

Editors: Dou Shicong, Martin Kadiev