Alibaba reports sluggish growth as consumer spending slows

Alibaba reported sluggish growth in the third quarter as the ecommerce giant continues to feel the impact of China’s zero-Covid lockdowns, which have hammered economic growth and consumer spending in the country.

The Chinese group on Thursday said revenue for the three months to the end of September rose 3 per cent from a year earlier to Rmb207bn ($29bn), falling short of analysts’ expectations.

“We delivered solid results this past quarter despite ongoing macro environment challenges,” said chief executive Daniel Zhang. “Consumption appetite was weak . . . the resurgence of Covid has affected one area after another,” he said.

Zhang said sales at its annual shopping event known as Single’s Day were flat from the previous year and warned of delivery disruptions that could hit the business in the current quarter.

From October to early November, 15 per cent of delivery areas had abnormal or suspended services because of Covid disruptions, he said.

“This had a significant impact on merchants’ ability to fulfil orders on time,” added Zhang.

Alibaba faces a host of challenges that have sent its shares falling by three-quarters of their value since Beijing called off the planned public offering of sister company Ant Group more than two years ago. Shares were down more than 2 per cent in pre-market trading in New York.

China’s tough regulatory crackdown aimed at reining in the country’s tech giants continues to simmer. Alibaba last year paid a record $2.8bn antitrust fine and pledged to halt the practice of forcing some of its sellers to stay away from rival ecommerce platforms. 

It also faces growing competition from rivals JD.com, Pinduoduo and a new breed of livestreaming ecommerce platforms like ByteDance’s Douyin, which have taken share from its ecommerce businesses Tmall and Taobao.

Sales in Alibaba’s customer management segment, which tracks Taobao and Tmall, fell 7 per cent year on year during the third quarter, a slight improvement from the 10 per cent decline in the second quarter. 

Shawn Yang, managing director at Blue Lotus Capital, said the rise of selling on short video platform Douyin had been particularly damaging to Alibaba. “Douyin has become a major branding platform so a lot of large FMCG [fast-moving consumer goods] brands have started allocating budget to the platform,” he said. 

Revenue in Alibaba’s cloud segment — which the company has pitched as key to its future — continued to decelerate, rising just 4 per cent compared to a year ago.

Alibaba has vowed to tighten its belt amid the slowdown. On Thursday it said net income rose 19 per cent on year to Rmb33.8bn when excluding the changes in the value of its investments and share-based compensation. 

It has continued to trim its headcount in the period, shedding almost 2,000 employees and bringing its total employee count down about 6 per cent since the start of the year.

Alibaba and rival Tencent have focused on returning capital to shareholders amid the steep fall in their share prices and regulatory crackdown. Tencent on Wednesday said it planned to distribute the majority of its $22bn stake in delivery group Meituan to shareholders as a dividend. 

Alibaba said it had spent $2.1bn on share repurchases during the September quarter and announced it was adding $15bn of firepower to the programme that runs to the end of fiscal year 2025. 

Meanwhile, Alibaba’s fintech arm Ant remains in the government’s crosshairs as it continues to restructure its operations under the guidance of the central bank. Profits for the Jack Ma controlled company fell by more than half in the second quarter to an estimated Rmb7bn.