Retail in Asia

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Alibaba announces financial results

Alibaba Group

Alibaba Group Holding Limited, Chinese e-commerce giant, announced its financial results for the quarter ended 30th June, 2020.

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“We delivered a very strong start to our new fiscal year,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

In the quarter ended 30th June, 2020, revenue was US$21,762 million, an increase of 34% year-over-year. Annual active consumers on China retail marketplaces reached 742 million, an increase of 16 million from the 12-month period ended 31st March, 2020.

Mobile MAUs on its China retail marketplaces reached 874 million in June 2020, an increase of 28 million over March 2020. Income from operations was US$4,912 million, an increase of 42% year-over-year. Adjusted EBITDA, a non-GAAP measurement, increased 30% year-over-year to US$7,224 million. Adjusted EBITA, a non-GAAP measurement, increased 31% year-over-year to US$6,422 million.

Net income attributable to ordinary shareholders was US$6,736 million, and net income was US$6,573 million. Non-GAAP net income was US$5,587 million, an increase of 28% year-over-year. Diluted earnings per ADS was US$2.46 and non-GAAP diluted earnings per ADS was US$2.10, an increase of 18% year-over-year. Diluted earnings per share was US$0.31 and non-GAAP diluted earnings per share was US$0.26, an increase of 18% year-over-year.

Net cash provided by operating activities was US$7,091 million and non-GAAP free cash flow was US$5,176 million.

In June 2020, China retail marketplaces had 874 million mobile MAUs, representing a quarterly net increase of 28 million. Annual active consumers on China retail marketplaces was 742 million for the twelve months ended 30th June, 2020, representing a quarterly net increase of 16 million.

Tmall online physical goods GMV, excluding unpaid orders, grew 27% year-over-year during the June 2020 quarter, with all major categories growing at similar or faster rates compared to the December 2019 quarter, before the onset of the COVID-19 pandemic. Fast-moving consumer goods, home furnishings and consumer electronics categories were the fastest growing categories during the quarter.

Tmall Global is the premier platform that helps overseas brands and merchants reach Chinese consumers directly. During the quarter, Tmall Global GMV, excluding unpaid orders, grew over 40% year-over-year, reflecting strong consumer demand for high quality, branded products from overseas, as well as increasing online purchases due to the impact of the COVID-19 pandemic on international travel.

Alibaba achieved another record 6.18 Mid-Year Shopping Festival in scale and reach. As part of the festival, China retail marketplaces, together with local governments and merchant partners, distributed billions of RMB in consumer coupons and subsidies to stimulate domestic consumption and revitalize businesses across China.

Taobao Live’s ecosystem continues to strengthen with broader adoption by brands, retailers and merchants across all product categories. During the June 2020 quarter, Taobao Live GMV continued to grow over 100% year-over-year. In addition, live streaming sessions hosted by merchants accounted for approximately 60% of Taobao Live GMV.

New Retail operations continue to accelerate digitalization of offline retail partners and enable them to offer a seamless omni-channel experience for consumers. Businesses within New Retail grocery vertical are benefitting from Chinese consumers’ increasing adoption of online shopping for groceries and daily necessities.

For the June 2020 quarter, online penetration of self-operated grocery retail chain Freshippo’s GMV continued to be above 60%. As of 30th June, 2020, Alibaba self-operated 214 Freshippo stores in China, primarily located in tier 1 and tier 2 cities.

Tmall Supermarket continues to deepen its collaboration with Sun Art through Alibaba’s omni-channel solutions for retail grocery partners. Half-day delivery service helped Sun Art capture new online consumers living within a 20 kilometer radius from its stores. In the June 2020 quarter, Alibaba enabled approximately 15% of Sun Art’s total revenue. food delivery GMV growth turned positive in April and improved during the quarter as lockdown measures for the pandemic in China were lifted. Unit economics per order for the on-demand delivery business was positive during the quarter, reflecting improved delivery network efficiency as well as enhanced marketing efficiency that leverages our consumer insights technology. Merchant acquisition continued to accelerate, with the number of registered merchants of as of June 30, 2020 growing 30% year-over-year.

Cainiao Network continues to improve the efficiency of its partners and China’s logistics industry overall through its data technology and infrastructure investments. In June 2020, Cainiao Post recorded over 100% year-over-year growth in average daily package volume. The revenue from Cainiao Network’s logistics services was US$1,092 million in the quarter, an increase of 54% compared to the same quarter of 2019, primarily due to the increases in both average revenue per order and volume of orders fulfilled from our fast growing cross-border and international commerce retail businesses.

Revenue from local consumer services, which primarily represents platform commissions, fees from provision of delivery services and other services provided by our on-demand delivery and local services platform, was US$1,005 million in the quarter, an increase of 15% compared to the same quarter of 2019, primarily due to an increase in average order value.

Lazada, Southeast Asian e-commerce platform, continues to deliver strong growth momentum. For the June 2020 quarter, Lazada achieved over 100% quarterly order growth, reflecting strong consumer demand in general merchandise, FMCG and electronics categories. During the quarter, Lazada also saw solid merchant growth and greater increases in product supplies. Brands and merchants are also leveraging interactive engagement formats such as live-streaming and mini-games on Lazada to connect with online consumers.

Revenue from international commerce retail business in the quarter was US$992 million, an increase of 26% compared to the same quarter of 2019. The increase was primarily due to the growth in revenue generated by Lazada and Trendyol, which was partially offset by the decrease in revenue from AliExpress as a result of the deconsolidation of AliExpress Russia businesses in October 2019, as well as ongoing supply chain and logistics disruptions caused by the COVID-19 pandemic.

Alibaba Cloud leads the Asia Pacific cloud computing market by continuing to expand and upgrade its Platform as a Service offerings, such as data analytics and database management. Revenue from Alibaba’s cloud computing business in the June 2020 quarter was US$1,747 million,  an increase of 59% compared to the same quarter of 2019, primarily driven by increased revenue contributions from both public cloud and hybrid cloud businesses.

Youku continues to focus on increasing paying subscribers and delivering a superior user experience by offering more original and exclusive content. Youku’s daily average subscriber base increased by over 60% year-over-year during the quarter. The increase was primarily driven by Youku’s more effective targeting of new subscribers and increased contribution from the 88VIP membership program on China retail marketplaces. Additionally, as Alibaba continues to focus on return on investments and cost efficiencies for the Youku business, loss year-over-year further narrowed during the quarter.

Revenue from digital media and entertainment segment in the quarter was US$990 million, an increase of 9% compared to the same quarter of 2019. The increase was primarily due to the increase in revenues from online games and membership subscriptions, partly offset by the decrease in revenue from customer management.

Starting this quarter, Alibaba reclassified revenue from its self-developed online games business, which was previously reported under the innovation initiatives and others segment, as revenue from digital media and entertainment segment because it has moved beyond the incubation stage.

The growth of commission revenue was primarily due to strong 27% year-over-year growth of Tmall online physical goods GMV, excluding unpaid orders. Commission revenue did not grow in proportion to the growth of Tmall online physical goods GMV (excluding unpaid orders), mainly because of faster growth in FMCG and consumer electronics categories that have lower blended commission rates, and also because of our initiatives to support our merchant customers, including our waiver of annual services fees for the first half of 2020.

“Others” revenue under China commerce retail business was US$4,261 million, achieving year-on-year growth of 80% compared to the same quarter of 2019. The increase was primarily driven by contributions from our direct sales businesses, including Tmall Supermarket and Freshippo, as well as our consolidation of Kaola starting in September 2019.

The company expects that the proportion of revenue of its direct sales businesses will continue to increase as it further implement New Retail strategy. Revenue from innovation initiatives and others in the quarter was US$155 million, a decrease of 6% compared to the same quarter of 2019.

Cost of revenue in the quarter was US$11,963 million, or 55% of revenue, compared to the same quarter of 2019. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from 51% in the quarter ended 30th June, 2019 to 54% in the quarter ended 30th June, 2020. The increase was primarily due to increased revenue contributions from the company’s direct sales businesses such as Tmall Supermarket and New Retail, which resulted in increased cost of inventory, as well as our consolidation of Kaola, partly offset by a decrease in delivery costs of our local consumer services and a decrease in content cost by Youku.

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“Alibaba delivered excellent results this past quarter. We were well positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations. We mobilized our entire digital infrastructure to support the economic recovery of businesses across a wide range of sectors, while broadening and diversifying our consumer base by addressing their changing preferences in a post-COVID-19 environment. Despite these unusual times, we remain focused on the long term, on fulfilling our mission, and on creating true value for our consumers and business customers,” said Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group.