A shopping cart is seen in front of the Alibaba logo in this photo illustration July 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
Aug 10 (Reuters) – China’s Alibaba Group Holding (9988.HK) on Thursday reported the strongest quarterly sales growth in almost two years as its domestic e-commerce division focuses on low-cost products to attract consumers amid a gloomy economic environment.
The Chinese e-commerce giant reported first-quarter revenue of 234.16 billion yuan ($32.29 billion), up 14% from the year-ago quarter, which was hit by strict pandemic lockdowns. The figure
According to data from Refinitiv, this topped analysts’ estimate of 224.92 billion yuan.
The company’s U.S.-listed shares are up as much as 4.8% in early trade.
“Most investors were expecting a good quarter, but the magnitude of the outperformance, particularly on earnings growth, probably exceeded most expectations,” said Alicia Yap, an analyst at Citi Bank. Alibaba’s net income rose 51% year over year.
The latest revenue numbers represent an improvement from flat growth to 3% over the past four quarters.
However, fears have grown over the Chinese economy, which has stalled after an initial quick recovery following the lifting of COVID containment measures late last year. On Wednesday, China reported that consumer price inflation slipped into deflation in July, a development expected to further weigh on buyers’ willingness to buy.
“The latest macroeconomic data points to some uncertainty about the pace of recovery from the COVID crisis, but as economic and consumer activity continues to pick up, our companies have shown encouraging trends,” said Daniel Zhang, CEO and Chairman of Alibaba Group Analysts in a conference call following the results.
First-quarter sales through the end of June were helped by a rebound in consumer purchases on Alibaba’s Taobao and Tmall marketplaces, boosted in part by the 618 Shopping Festival, China’s second-biggest online shopping event, in June.
Competition from rivals known for offering low-cost products, such as PDD Holdings’ (PDD.O) Pinduoduo and ByteDance’s Douyin, the Chinese version of TikTok, has increased recently. Both pose major challenges for Alibaba.
In response, Trudy Dai, CEO of Taobao and Tmall Group, said Alibaba will invest more to attract bargain hunters, particularly young people, the elderly and shoppers from China’s underdeveloped cities.
“Our price-performance battle will continue and will be an area of big investment,” Dai said.
A 6.5% increase in daily active users in June was cited as an indicator of improvement for the Taobao app, which tends to sell cheaper goods than the brand-dominated Tmall.
Revenue at the Cloud Intelligence Group, a key growth driver outside of e-commerce, posted the lowest revenue growth among the group’s six divisions at 4%, but the division’s underlying profit more than doubled as the workplace collaboration tool , Dingtalk, helped to reduce costs.
This was the latest earnings announcement under Zhang, who will step down from his posts in September to focus on running the cloud division.
The cloud unit is expected to seek an IPO soon. Alibaba announced in May that it would spin off the division and seek an IPO within 12 months.
The role of CEO will be handed over to Eddie Yongming Wu, chairman of Alibaba’s Taobao and Tmall group, while vice chairman Joseph Tsai will take the chair.
Regulatory concerns have eased for China’s tech giants, including Alibaba, this year as Chinese authorities seek to boost private sector confidence.
These were the first quarterly results for the $241 billion market-valued behemoth since splitting its business into six entities, which many experts say could also ease control of the tech giant.
(1 Chinese Yuan Renminbi = $0.1387)
Reporting by Yuvraj Malik in Bengaluru and Casey Hall in Shanghai; Adaptation by Shounak Dasgupta and Sharon Singleton
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