Retail in Asia

Featured

Unexpected rebound in Alibaba’s profits, beats gloomy forecasts

Alibaba Group exceeded Wall Street’s expectations in its first quarter results. Across the world’s second-largest economy, shoppers have swelled and supply chains have untangled, according to the company. The resurgence of Covid-19 in China helped Alibaba recover from a slump during China’s second biggest shopping festival, 6.18.

The company’s schemes also encouraged a higher shopping rate, including Alibaba’s ‘88VIP’ loyalty program. The program led to a significant increase in paid gross merchandise volume (GMV) year-over-year. As of June 30, there were 25 million ‘88VIP’ members, who spent over RMB 57,000 on average per year.

SEE ALSO: Luxury beauty brands’ Taobao live-stream GMV grew 107 percent in 2021

According to Thomson Reuters and Bloomberg, Alibaba generated net income attributable to ordinary shareholders of RMB 22.74 billion (3.4 billion USD) in the quarter ended June 30. Its revenue in the quarter was flat versus RMB 205.74 billion in the same period a year earlier. In both Thomson Reuters and Bloomberg’s consensus forecasts, the result exceeded RMB203.2 billion.

In the quarter ended June 30, Alibaba generated a net income of RMB 22.74 billion (3.4 billion USD). Alibaba’s cloud segment grew by 10 percent to RMB 17.69 billion in the quarter, offset by a decline in revenue at its core engine, China commerce, of 1 percent to RMB 141.94 billion.

According to financial analysts, the China commerce segment suffered from a spike in COVID-19 cases that caused rolling lockdowns, factory closures, and supply-chain bottlenecks that impacted consumer goods from apparel to electronics. Alibaba’s senior management closely monitored the proportion of consumer spending to disposable income in the first half of the year.

There was a decline of 18 percent year-on-year in adjusted earnings before interest, taxes, and amortization (Ebita) of RMB 34.42 billion for the quarter, a figure that reflects the company’s underlying performance. As a result of that, Thomson Reuters’s consensus forecast of RMB 26 billion was smashed.

Source: Shutterstock

Taobao Deals and Taocaicai, which provide consumers with next-day pick-up services for groceries and fresh goods at neighbourhood pick-up points, both significantly reduced losses quarter-over-quarter. The GMV of Taocaicai grew more than 200 percent year-over-year during the quarter. The Southeast Asian e-commerce platform Lazada narrowed its losses year-over-year during the quarter by improving operating efficiency.

Taobao and Tmall saw their online physical goods GMV decline for the quarter by a mid-single-digit year-over-year due to the pandemic, supply chain disruptions, and logistics bottlenecks in April and most of May. In late May, logistics normalized and GMV started to recover. Customer-management revenue (CMR) decreased 10 percent year-over-year to RMB 72.26 billion.

SEE ALSO: Struggling between Douyin or Tmall Global? Here’s a guide for you

Fashion & accessories and consumer electronics, which include unpaid orders, saw a decline in paid GMV. Despite this, Alibaba observed a rise in healthcare consumption as well as interest-based consumption categories such as pet care, collectibles, and outdoor and active equipment. In the twelve months ended June 30, over 123 million annual active consumers spent over RMB 10,000 each on Taobao and Tmall.