Alibaba delivers on revenue but feels China slowdown

Thu Jan 28, 2016 10:09am EST
 
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(Reuters) - Strong holiday sales helped e-commerce giant Alibaba Group Holding Ltd (BABA.N: Quote) beat forecasts on Thursday with a 32 percent rise in third-quarter revenue, but it was not immune from China's slowdown.

Alibaba's results also reflected a weakening of the Chinese economy, with so-called gross merchandise volume (GMV) rising by its slowest annual rate in more than three years.

As Chinese growth fell to its weakest pace in 25 years, Alibaba's GMV -- the total value of goods transacted on its platforms -- rose 23 percent to 964 billion yuan ($147 billion).

Alibaba's U.S.-listed shares fell by 2.1 percent to $68 at 1458 GMT (9:58 a.m. ET) following the results.

"Revenue was better than expected," Wedbush Securities analyst Gil Luria said. "The flip side is the volume growth was less than expected."

Luria said volumes might have been hit by Alibaba's efforts to clean up its marketplaces, which have been plagued by merchants faking transactions to get better rankings, which can in turn boost sales.

Alibaba is trying to replace decelerating volume growth in online shopping by expanding in other areas such as online video and local services.

But the majority of Alibaba's revenue still comes from China's online shoppers buying from domestic businesses, a business driven by growth in GMV.

Executive Vice Chairman Joe Tsai said Alibaba was buoyed by two trends that were running counter to the larger China economy, namely strong retail sales growth and deepening online penetration.   Continued...

 
A logo of Alibaba Group is pictured at its headquarters in Hangzhou, Zhejiang province, China, October 14, 2015. REUTERS/Stringer/Files