Alibaba’s revenue soars
Alibaba Group Holding Ltd, China’s biggest e-commerce company, said fourth-quarter sales rose 39 percent after its core online shopping business grew, but profit fell for the first time as it spent on ventures like food delivery.
Net income excluding extraordinary items, Alibaba’s preferred measure for earnings, shrank 1.4 percent to 7.6 billion yuan from the previous year, as the company continued to invest heavily in new but shakier businesses.
Investors welcomed the higher-than-expected revenue, sending the firm’s American Depository shares up 3.7 percent to $78.60 by 1435 GMT (9:35 a.m. ET).
“Whatever they are doing must be working, and most importantly it’s a sign that the Chinese consumer may not be weakening quite yet,” said Gil Luria of Wedbush Securities.
But, not all of Alibaba’s businesses looked rosy.
Its online finance affiliate Ant Financial Services Group, one of founder Jack Ma’s crown jewels in his e-commerce empire, recorded a net loss in the quarter.
That business has spent heavily on its intense competition with WeChat Payment, one of the world’s largest payments systems and owned by Alibaba arch-rival Tencent Holdings Ltd.
Ant, which houses the massive Alipay online payment platform, is now valued at $60 billion and is gearing up for an IPO, despite the fact it is now losing money. Alibaba did not disclose how much Ant lost.
Ma has often said he is aiming for a mainland listing for Ant, but for a company to list in China, it must have three years of annual profits. Alibaba executives said on Thursday the finance firm is still profitable on an annual basis.
Alibaba’s revenues rose to 24.2 billion yuan ($3.7 billion) in the quarter ended March 31 from 17.4 billion yuan a year earlier, beating the average analyst estimate of 23.22 billion yuan, according to Thomson Reuters I/B/E/S.
Gross merchandise volume (GMV), or the total value of goods transacted on its platforms on China retail marketplaces, rose 24 percent to 742 billion yuan. The previous quarter it had risen 22.5 percent – the slowest pace on record.
Alibaba has been grappling with a slowdown in the world’s second-largest economy. It is also dealing with signs of maturation after years of breakneck growth for Internet businesses as hundreds of millions of people came online.
To that end, Alibaba has sought to expand into areas outside Chinese e-commerce, and last month said it would buy control of Southeast Asian online retailer Lazada Group for roughly $1 billion.
Similar gambles are taking a toll. During the first three months of 2016, Alibaba spent $2.2 billion on investments and acquisitions on businesses like food delivery and logistics, driving down margins.
Alibaba said it expects such bets, less profitable than its core e-commerce business, will hit its margins.
A new campaign by Chinese authorities may also pose risks to Alibaba’s business.
On Thursday, Chinese authorities said they will launch a campaign to clean up e-commerce – targeting trademark violations, counterfeit and poor quality products and the faking of transactions to boost a merchant’s online rankings – all of which are bugbears for Alibaba.
For Citizen TV updates
Join @citizentvke Telegram channel
Video Of The Day: Some MPs plan to shoot down Uhuru\'s proposal on VAT