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Alibaba Revenue Grows At Weakest Pace In Three Years As Slowing China Bites

Published on Jan 30 2019 1:00 PM in Retail tagged: Alibaba / Singles' Day / Paywall / quarterly results

Alibaba Revenue Grows At Weakest Pace In Three Years As Slowing China Bites

E-commerce giant Alibaba Group Holding Ltd's quarterly revenue grew at its weakest pace in three years, as the impact of a slowing China and a crippling Sino-US trade war kept buyers away during its top-sale season.

Mounting Pressures

The result is likely to add to investor worries, as it highlights the mounting pressures facing the e-commerce behemoth, whose sales are often seen as a yardstick of consumer spending in the world's second-largest economy.

On Thursday, Alibaba – the second-most valuable public company in Asia, after Tencent – posted third-quarter revenue of 117.28 billion yuan (€15.3 billion), compared to 83 billion yuan (€10.8 billion) a year earlier.

That compares with an estimate for revenue of 118.9 billion yuan (€15.40 billion) from 31 analysts polled by Refinitiv.

Net income rose by 33%, to 30.96 billion yuan (€4 billion), however, beating estimates and sending Alibaba's stock up by 2% in pre-market trade.

Slow December

Alibaba typically posts its highest revenue in the December quarter, due to its mega Singles' Day in November – the world's biggest online sales event that outstrips the sales of US shopping holidays Black Friday and Cyber Monday combined.

In 2018, even though Alibaba netted a record $30 billion from Singles' Day, annual growth dropped to the weakest rate in the event's ten-year history, as a slowing China and trade tensions chilled sentiment.

Economic Uncertainty

Anticipating headwinds from economic uncertainty, Alibaba had lowered its revenue outlook for its financial year ending March, even before the top sales season.

However, last week, Alibaba's executive vice-chairman, Joe Tsai, noted that sales had ticked up in December, although demand for big-ticket items continued to slow.

Tsai also brushed aside concerns about the trade war, saying that people were overly worried about its impact on China's economy.

Chinese consumers are still fundamentally very strong, and consumption is going to grow over the next five to ten years, he added.

Alibaba's founder, Jack Ma, has previously described the China-US trade spat as the "most stupid thing in the world".

Slow Growth

China's economic growth in 2018 slowed to its weakest in nearly three decades, amid faltering domestic demand and bruising US tariffs. Growth is expected to ease further this year.

On Tuesday, China's Ministry of Industry and Information Technology (MIIT) reported that revenue growth rates for domestic technology companies did not rise in 2018, and that consumer spending had slowed amid increased economic pressures.

Businesses worldwide are bearing the brunt of slowing growth in China, which has generated a third of global growth in recent years.

This week, Apple reported that its iPhone sales slipped in the holiday shopping quarter for the first time, due to weak demand in the Asian country.

Saturation In Urban Market

Given signs of saturation in China's urban market, Alibaba has been trying to grow outside of its core e-commerce business to win new customers.

The company continued to invest heavily in cloud computing, artificial intelligence, and online entertainment in the December quarter.

Revenue from its cloud business rose by 84%, to 6.6 billion yuan (€0.85 billion), while sales from its digital entertainment and media business rose by 20%, to 6.5 billion yuan (€0.84 billion).

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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