What happened

Shares of Dingdong (Cayman) Limited (DDL 1.48%) were gaining today after the Chinese e-commerce grocery company posted solid results and a profit on the bottom line in its fourth-quarter earnings report.

As of 11:23 a.m. ET, the stock is up 4.7% after having gained as much as 25% earlier in the session.

So what

Revenue rose 13.1% in the quarter to $899 million.

While revenue growth was moderate, the company's efforts to control costs seemed to be the main reason the stock rose.

Gross margin surged from 27.7% to 32.9%, which the company credited to improvements in product development capabilities, and its fulfillment expenses fell from 32.6% of revenue to 24.1% due to an increase in average order value and improved frontline labor efficiency.

Its sales and marketing expenses were also down sharply, plunging 74.5% to $13.2 million due to a lower user-acquisition cost and a more established brand name.

As a result, the company finished the quarter with non-GAAP (adjusted) net income of $16.8 million, or $0.05 per share, which was better than the lone analyst estimate of $0.03 per share. That was also significantly above its loss of $150 million in the quarter a year ago.

Management also said the company posted a GAAP profit in both November and December, showing its profitability continued through the quarter. 

Now what

Dingdong was founded just five years ago, and investors should be encouraged to see the company turn profitable, as it's penetrating a massive market.

Looking ahead to 2023, the company said it was confident it would at least break even on the bottom line in the first quarter and for the full year.

With COVID restrictions receding in China, 2023 could be a strong year for Dingdong, especially if it can keep its costs under control.