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Alibaba Profit, Earnings Increase
Chinese e-commerce giant grows despite a struggling national economy
By ALYSSA ABKOWITZ in Beijing and ANNE STEELE in New York
Updated May 5, 2016 8:19 a.m. ET
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Chinese e-commerce giant Alibaba Group Holding Ltd. said Thursday its fiscal fourth quarter net profit surged 86% from a year earlier, boosted by disposal gains on investments and businesses.
Alibaba said net profit for the three months ended March 31 rose to 5.37 billion yuan (832 million dollars) from 2.89 billion yuan a year earlier. Revenue rose 39% to 24.18 billion yuan from 17.43 billion, beating analysts’ expectations of 23.2 billion yuan.
Gross merchandise volume—a key metric that determines the growth rate of e-commerce companies—fell to 742 billion yuan at the end of March from 964 billion yuan at the end of December, which included Alibaba’s biggest retail day, Singles Day. That number includes shipping costs and confirmed, but not successfully closed, orders. Mobile GMV accounted for 73% of total GMV, up from 51% a year earlier.
Despite robust revenue growth, Alibaba continues to face headwinds. Competitor JD.com Inc. has been gaining market share, with its revenue growth outpacing Alibaba for the past six quarters. At the same time, Alibaba continues to throw money at deals such as its recent 1 billion dollars investment in Southeast Asian e-commerce startup Lazada Group and its 266 million dollars purchase of Hong Kong-based newspaper South China Morning Post. Some investors have questioned how several of the e-commerce giant’s tie-ups fit into the company’s overall strategy and it also continues to face criticism on its handling of counterfeit goods on its platforms.
“Competition may have an impact on the company’s growth,” said Henry Guo, an analyst at ITG Investment Research, referring to Alibaba’s ventures into on-demand services such as food delivery and travel.
Shares in the company added 4.9% premarket to 79.50 dollars. The stock had fallen 4.7% over the past year amid concerns of an economic slowdown in China. Despite those concerns, Alibaba has seen growth in sales and number of users, and online shopping has remained resilient through the first quarter, analysts at Nomura Securities said in a recent note.
“We showcase resiliency and growing clout of Chinese consumers,” Maggie Wu, chief financial officer, said in a statement.
During the quarter, growth in China’s rural landscape increased, with Alibaba having a presence in more than 14,000 rural villages, up from 12,000 villages during the previous quarter. Cross-border imports continued to help transaction volume on Tmall Global, with more than 100 international brands, including Costco and Macy’s, bringing goods to Chinese consumers, Alibaba said. The company also made strides in cloud computing business, with revenue increasing to 1.1 billion yuan, up 175% year over year.
Alibaba said it repurchased and canceled 5.8 million shares for about 365 million dollars in the fourth quarter.
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