SAO PAULO, Aug 4 (Reuters) - Latin American e-commerce giant MercadoLibre MELI.O on Monday posted a 1.5% dip in its second-quarter net profit from a year earlier, missing analysts' estimates, as increased free shipping in Brazil drove sales up but also hit margins.
MercadoLibre shares fell 6% in after hours trading.
MercadoLibre, Latin America's largest company by market value, reported net income of $523 million for the quarter through the end of June, below the $596 million expected by analysts in an LSEG poll.
MercadoLibre, based in Uruguay, operates an e-commerce platform and the fintech Mercado Pago, selling in nearly 20 countries throughout Latin America.
Net revenue of $6.8 billion was up 34% year-on-year, beating the estimate of $6.7 billion, with sales measured by gross merchandise value rising 37% on a forex-neutral basis.
In early June, MercadoLibre cut the threshold for purchases eligible for free shipping in Brazil, after also lowering shipping costs for companies and users selling on its platform in May, amid fierce competition in the country's e-commerce segment.
Brazil, the firm's main market, together with Mexico helped MercadoLibre to increase total items sold by 31% in the quarter, the fastest pace year-on-year since mid-2021.
However, that also hurt margins, said Chief Financial Officer Martin de los Santos.
"We don't want to miss the growth opportunities ahead of us," he said in an interview. "That might generate some short-term margin pressure, but we are very optimistic about the long-term trajectory of our profitability."
Earnings before interest and taxes $(EBIT)$ reached a record high of $825 million, but also missed the $869 million forecast. The EBIT margin stood at 12.2%, down from 14.3% a year earlier.
The CFO said that among the main impacts on margins were investments in free shipping and related marketing, and growth in its so-called 1P business, which sells directly to customers.
MercadoLibre's fintech arm grew its credit portfolio by 91% to $9.3 billion, while the 15-to-90-day default ratio fell 1.5 percentage points to 6.7%, the lowest since it started to release the figure seven years ago, the CFO said.