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Dangdang (NYSE:DANG) reports Q3 results on November 15th.

The Street expects:

  • Revenue: $200.5 million
  • EPS: $0.26 per share loss
  • Q4 revenue guide: $259 million

Heading into the earnings, investors can expect slower sales growth due to continued competition from 360Buy and Taobao. As a result, margins, active customers and total orders could experience headwind in the near-term and well into Q4.

Q3 will likely be ugly as the Chinese ecommerce giants, such as 360Buy, Suning, and Dangdang went into another round of price wars to gain market share from one another.

Based on the Q2 results, I do not believe that Dangdang can emerge as a winner, given that the intense competition severely undermined the company's gross margins by more than 100 bps.

In addition, the company lost customers and total order volumes to competitors as some priced below procurement costs.

Despite investing in e-books, Dangdang will unlikely benefit from the initiative because:

  1. It is still in the early stage of development
  2. China's e-book and e-reader market is highly competitive so Dangdang will not enjoy a first-mover advantage and dominant position in the industry
Source: Dangdang Q3 Earnings Preview: Price War Creates Near-Term Uncertainty