Alibaba takes hit as growth cools

NEW YORK: Chinese online giant Alibaba saw shares take a sharp hit as a disappointing quarterly report showed sales growth cooling.
Profit in the quarter ended June 30 doubled to $4.97 billion (30.8 billion yuan), mainly due to one-time gains of $3.9 billion from the sale of its stake in film unit Alibaba Pictures.
But Alibaba shares tumbled more than five percent to close in New York at $73.38 on disappointment over revenue growth.
The company said revenue, which excluded one-time gains, rose 28 percent from a year ago to $3.27 billion (20.2 billion yuan), below analysts’ expectations of $3.39 billion.
“The report itself shows some robust growth across many of the company’s closely watched metrics, yet the problem for investors is that the growth still did not live up to heightened expectations,” said analysts at Briefing.com.
“The added problem for Alibaba is a macro (economic) problem, and specifically the slowdown that is happening in China. Alibaba is of course working to expand its business internationally, but it is the Chinese consumer that drives its business.”
Cantor Fitzgerald analyst Youssef Squali said in a research note that Alibaba is likely “to continue to dominate the rapidly growing Chinese e-commerce market for years to come, but we also believe that near-term predictability of growth and margins has deteriorated given the macro backdrop in China.”
The rise in sales was driven by retail trade in China, which accounted for 78 percent of revenue in the first fiscal quarter, the company said in a statement.
Chief executive Daniel Zhang said the company had “a strong quarter and we continued to build the foundations for future growth.”
He added that “we are excited about our top strategic priorities, including internationalization, winning in mobile, expanding our ecosystem from cities to villages, and investing in core technologies that will propel our cloud computing business.”
Chief financial officer Maggie Wu said Alibaba was generating more revenue from users of mobile devices in China.
She hailed “significant progress monetizing our mobile traffic, with our mobile revenue exceeding 50 percent of our total China commerce retail revenue for the first time.”
The company also said it authorized a $4 billion share buyback plan over two years, which could help boost Alibaba’s share price.
Alibaba shares slumped to their lowest level since its record-breaking public offering in 2014 at $68 a share.
Separately, Alibaba said it had reached a deal with Macy’s to bring a selection of the US retailer’s merchandise to Chinese consumers.
“Macy’s is one of the most iconic brands in the world and we are honored Macy’s China Limited has chosen us as their exclusive partner to grow their business in China,” said Zhang.
Under the agreement, Macy’s China subsidiary “will launch an exclusive online flagship store” on Alibaba’s Tmall retail platform, a statement said.
Founded by Jack Ma in 1999, Alibaba is China’s biggest e-commerce company but is seeking to expand beyond its traditional business.
The Chinese company and Amazon are considered competitors in some areas, but unlike the US firm which makes its own e-book reader, Alibaba has no products of its own and simply provides a trading platform.