Alibaba's Profit Slumps on Impairments — Update
By Mauro Orru
Alibaba Group Holding posted lackluster sales growth and a plunge in profit for the October-December quarter after the Chinese e-commerce giant booked more than $3 billion in impairments linked to its Sun Art retailer business and its Youku video platform.
The company said Wednesday that revenue edged up 5% in its fiscal third quarter to the equivalent of $36.67 billion. Sales at Alibaba's core digital retail and online commerce businesses, Taobao and Tmall, grew just 2% on year to $18.18 billion. The group said that while the volume of orders had increased strongly, their average value was in decline.
China's economy grew 5.2% last year after expanding just 3% in 2022, a remarkably weak performance for investors used to prepandemic rates of 6% or more. The country's economy has been suffering from a prolonged downturn in the property sector as well as weak exports and consumer demand since it emerged from the pandemic in early 2023.
Sales at Alibaba's international digital commerce business climbed 44% on year to $4.02 billion, citing global demand for products at relatively cheap prices. However, the group's cloud-intelligence business posted just a 3% increase in sales to $3.95 billion. Alibaba is seeking to reduce its exposure to low-margin project-based contracts.
"Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing," said Chief Executive Eddie Wu. "We will step up investment to improve users' core experiences to drive growth in Taobao and Tmall Group and strengthen market leadership in the coming year."
Net income attributable to ordinary shareholders slumped 69% to $2.03 billion. Alibaba booked roughly $3.25 billion in impairments in the quarter that weighed on income. Excluding the impairments, share-based compensation expenses and other items, profit fell just 4% to $6.75 billion.
Meanwhile, the company approved a $25 billion increase to its share repurchase program through March 2027, meaning Alibaba has $35.3 billion available under its buyback program through the next three fiscal years. Chief Financial Officer Toby Xu said the decision underscored the group's confidence in the outlook of its business and cash flow.
Write to Mauro Orru at mauro.orru@wsj.com
(END) Dow Jones Newswires
February 07, 2024 07:56 ET (12:56 GMT)
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