Summary
- Q3 revenues up 10% to 243 billion yuan vs forecast 246 billion
- Customer management revenue down 1% year on year
- Shares down about 3% in premarket trade
Chinese -commerce giant Alibaba Group Holding Ltd (9988. HK) was hit by a drop in sales at its core business segment due to intensifying competition. The company’s report was published on February 24 marking its slowest quarterly revenue growth since going public in 2014.
As consumers cut back discretionary spending, the slowing Chinese economy has also taken a huge toll on the company.
In October-December 2021, group revenue grew about 10% to 242.6 billion yuan ($38.37 billion), marking the first time quarterly sales growth has fallen below 20%. Based on Refinitiv data, the average revenue expected by analysts was 246.37 billion yuan.
The amount of money merchants spend on ads and promotions on Alibaba’s sites is tracked using a key metric known as customer management revenue, which fell 1% year on year.
Since the company’s IPO, this marks the first time revenue for the segment, which made up 41% of Alibaba’s total revenue, has decreased. The lowered merchant fees amid the slowing economy were in part the cause of the drop, according to Deputy CFO Toby Xu said, who was speaking on an investor call.
The firm, during China’s annual Singles’ Day promotional event last November, recorded gross merchandise value growth of 8.5%, a record low.
Before the opening bell, shares of Alibaba were down about 3% in New York. After the results were announced, they dropped almost 7%, tracking losses in global shares after Russia launched an all-out invasion of Ukraine in the past week.
The company’s rivals, who have capitalized on the booming trend of live-streaming e-commerce, such as Hong Kong-owned Douyin and Kuaishou, are also giving Alibaba intensifying pressure.
Vinci Zhang, who tracks China’s e-commerce sector at research firm Pacific Epoch, said:
“Merchants now have to allocate their advertising dollars to different platforms. In the past, if you were an apparel merchant, maybe you would allocate 100% to Alibaba, but now a percentage of that goes to the short video players.”
For the quarter that ended in September, Alibaba’s fintech affiliate, Ant Group reported a profit of about 17.6 billion yuan, compared with 15 billion yuan a year before, according to Alibaba’s filings on February 24.
Alibaba’s profits from Ant Group are reported in arrears. China has subjected Ant to a sweeping restructuring, which derailed its $37 billion initial public offering in late 2020.
Roughly $7.7 billion worth of shares were purchased by the company for the nine months ending in December.
From the previous quarter, adjusted core earnings (EBITDA) for the unit declined 66% sequentially despite the company’s cloud business’ fiscal third-quarter revenue growing 20% year-on-year to hit 19.5 billion yuan ($3.08 billion).
An analyst at Lightstream Research, Oshadhi Kumarasiri said:
“It seems like Alibaba is finding it difficult to maintain the growth trajectory in most markets including the cloud business.”
From 79.43 billion the previous year, quarterly net income attributable to shareholders slumped to 20.43 billion yuan. Alibaba, once Asia’s biggest listed company, has long given up its crown to Taiwanese chipmaker TSMC, and even fallen behind beverage maker Kweichow Moutai (600519. SS) and local rival Tencent (0700. HK).
Amid Beijing’s regulatory crackdown on certain industries, the company’s U.S.-listed shares have lost roughly half their value in the past 12 months
($1 = 6.3226 Chinese yuan renminbi)
