Alibaba raises sales forecast
E-commerce firm beats estimates driven by leap in consumer spending
HONG KONG: Alibaba Group Holding Ltd raised its outlook for full-year revenue growth after reporting sales that beat estimates, driven by a leap in Chinese consumer spending and a push into new businesses.
China’s biggest e-commerce company is now predicting a 49% to 53% rise in revenue in the current fiscal year, after acquiring and folding in results from its logistics arm Cainiao. It reported a 61% rise in sales to 55.1 billion yuan (US$8.3bil) in the three months ended September, surpassing the 52 billion-yuan projected. Alibaba’s shares climbed 4.3% in pre-market trade.
The e-commerce giant has opened its wallet to woo shoppers and improve marketing services for merchants while splurging billions to look for new sectors of growth. It’s shaking up supermarkets and department stores while investing in artificial intelligence and cloud computing, areas in direct competition with Amazon.com Inc. The Chinese company’s cloud business almost doubled revenue in the quarter, sustaining a rapid pace of growth.
“Alibaba is doing really well in advertisement monetisation, in that sense it’s more like a media company than an e-commerce company,” said Steven Zhu, a Shanghai-based analyst at consultancy Pacific Epoch. “The company’s ability to make money from its mobile app has improved significantly.”
Revenue from core commerce, which remains by far the largest slice of Alibaba’s business, surged 63% to 46.5 billion yuan, buoyed by 488 million active consumers on its Chinese retail marketplaces. A lot of that growth stemmed from mobile spending, as mobile monthly active users reached 549 million.
Alibaba is now building on that still-expanding user base by devising a series of expensive forays into physical retail – part of billionaire Jack Ma’s ambition to revamp a US$4 trillion sector. His visions have been echoed by Amazon’s Jeff Bezos via his acquisition of Whole Foods Market Inc. Alibaba is trying to transform the way retailers monitor inventory based on real-time demand to make multiple layers of middlemen redundant.
That effort requires efficient logistics. Alibaba took control of its loss-making delivery business Cainiao in September, and pledged to spend US$15bil over five years on expanding and improving a delivery network that marshals two million people across more than
600 cities.
By absorbing the unprofitable unit however, Cainiao could eat into Alibaba’s earnings in subsequent quarters.
Adjusted earnings-per-share were 8.57 yuan compared with the 6.90 yuan average of estimates. Shares of Alibaba closed Wednesday at US$186.08 in New York. The stock has more than doubled this year, adding US$250bil to its market value.