Online shopping surge helps Alibaba defy odds
Alibaba Group Holding Ltd. defied the slowdown in China’s economy with sales that climbed by almost a third as the online emporium captured more of the nation’s shift to mobile shopping. Shares rose the most in five months.
Sales jumped 32 per cent to 22.2 billion yuan ($3.5 billion (U.S.)) in the three months ended September, the company said Tuesday, beating analyst estimates. Shares climbed as much as 8.4 per cent, the biggest intraday gain since May, before closing at $79.41, a 3.97-per-cent gain. The stock is heading for its best month since the initial public offering.
Alibaba forged partnerships with electronics chain Suning Commerce Group Co., expanded its range of merchandise and offered new cloudbased services to stoke transactions and limit the impact of an economy heading for its slowest growth in 25 years.
Increased promotions on Tmall.com and Taobao Marketplace under new CEO Daniel Zhang drove sales ahead of next month’s Singles’ Day, the country’s biggest shopping event.
“The results were surprising because people were expecting weak performance due to an overall slowdown in China’s economy,” said Li Yujie, an analyst at RHB Research Institute Sdn in Hong Kong. “People’s expectations were pretty low.”
Net income climbed to 22.7 billion yuan after recognizing an 18.6 billion-yuan gain in the market value of its stake in Alibaba Health Information Technology Ltd., a separate publicly traded company.
Even as China’s economic growth drops to a level not seen since the late 1970s, billionaire chairman Jack Ma is pushing ahead with acquisitions. The company has participated in almost $15 billion of deals announced this year, about triple the number for all of 2014, according to data compiled by Bloomberg.
“When you look at the individual Chinese consumer, they’re very liquid,” vice-chairman Joseph Tsai told analysts on a conference call. “A temporary setback in the macroeconomy is not going to affect their consumption pattern in a fundamental way.”
The company this month offered $4.6 billion for the rest of Youku Tudou Inc. to stream more video content to Chinese Internet users through control of the YouTube-like site.
Buying Youku is part of Alibaba’s plans to reach a bigger share of the 594 million Chinese who access the Internet from mobile devices and are hungry for online content.
Alibaba is investing more in online-to-offline services, or 020, in competition with rivals Tencent Holdings Ltd. and Baidu Inc. That includes investing in Didi Kuaidi, China’s biggest taxi-hailing application, and backing the merger of group-buying platforms Meituan.com and Dianping.com.
“Alibaba is a very, very aggressive company,” Ted Leonsis, a venture capitalist who is also chairman of Groupon Inc., said on Bloomberg Television. “They’re doing a really, really good job. I would be buying Alibaba right now.”