Alibaba sales growth plumbs new low during China’s slowdown

Alibaba Group Holding Ltd. projected sales below expectations after reporting its slowest pace of revenue growth on record, reflecting the impact of China’s economic contraction across its online marketplaces.

The Chinese e-commerce leader forecast growth in revenue this year of least 27.5 per cent to more than 650 billion yuan ($91 billion U.S.), lagging the 657 billion yuan average of analysts’ estimates. It also reported a 22 per cent rise in sales to 114.3 billion yuan in the March quarter. Net income was 3.2 billion yuan, down from a year ago when it booked an 18.7 billion yuan one-time gain on investments.

Alibaba’s results demonstrate the world’s second largest economy has yet to fully shake off COVID-19, with consumers still hesitant about spending on big-ticket items. Asia’s largest corporation is tackling not just a record slowdown in its home market but also the rise of rivals such as ByteDance Ltd. and Pinduoduo Inc. Total e-commerce in China rose just 5.9 per cent in the coronavirus-stricken period, less than a third of 2019’s pace, according to government data. But online shopping is on the rebound, the company said Friday.

“Despite a challenging quarter due to reduced economic activities in light of the COVID-19 pandemic in China, we achieved our annual revenue guidance,” chief financial officer Maggie Wu said in a statement. “Although the pandemic negatively impacted most of our domestic core commerce businesses starting in late January, we have seen a steady recovery since March.”

Alibaba has lost more than $40 billion of market value since the coronavirus first erupted in January. Beyond its core commerce business, the Tmall operator is going head-to-head with social media and gaming giant Tencent Holdings Ltd. for internet leadership in everything from online media to payments and cloud computing.

In February, Alibaba declared a waiver of some service fees for merchants struggling financially during the outbreak on its main direct-to-consumer Tmall platform. In April, the company rolled out a new 10-billion-yuan subsidy program for Tmall users to buy electronics, encroaching on Inc.’s traditional turf. These initiatives may further compress margins for the June quarter.

What Bloomberg intelligence says

The company’s businesses most impacted by merchant and logistic disruptions are also its most lucrative, such as retail marketplaces Taobao and Tmall, while faster-growing segments like cloud computing and digital entertainment don’t contribute to profit. Subsidies for users and merchants will add to costs. Alibaba may provide an improved growth outlook for the June quarter given the retreat of the pandemic in China, but the recovery could be gradual as consumption sentiment remains weak.
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