Reality Hits Alibaba’s Results
Months after monster U.S. IPO, e-commerce company faces expensive effort to court mobile phone users, challenges in managing expansive business
On Wednesday, Alibaba Group Holding Ltd. BABA -5.12 % reported its slowest quarterly revenue growth in more than three years, while its transactions with Chinese consumers also disappointed investors. Its shares were off 5.7% at $72.96 in Wednesday trading in New York. The stock, which climbed as high as $120 in November, is now just 7.3% above its initial public offering price of $68.
Hangzhou-based Alibaba, China’s biggest online commerce company, has registered some successes. On Wednesday, it said it was doing more business with consumers on their mobile gadgets and reaping more revenue from each of those transactions.
Both have been key challenges as Alibaba and its rivals chase Chinese consumers as they shift to using smartphones.
Alibaba also faces concerns over how slowing economic conditions and China’s stock-market correction will affect retail spending. Alibaba Chief Executive Officer Daniel Zhang said Wednesday the company is keeping an eye on consumer trends but felt optimistic because its most active buyers make frequent purchases throughout the year, including of daily-use products.
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Revenue grew 28% to $3.26 billion, missing analysts’ estimates for $3.39 billion.
The company attributed the slower revenue growth to the effect of a government order earlier this year for all online lottery sales to be suspended, lower fees from Alibaba’s group-buying and flash sales site, and the transfer of its small-loans business to its financial affiliate.
But an analyst said the slower growth could have been the result of management changes that began with the shuffling of top ranks at Alibaba’s shopping platforms in March. The move saw three major business units—the Chinese retail platforms Taobao, Tmall and group-buying site Juhuasuan—folded into one.
“The impact is that for a short period there’s a business suspension and then a change of direction,” said Tian X. Hou, founder of research firm T.H. Capital LLC. “New management will have a new policy, and basically you slow down.”
Despite the disappointing revenue, Alibaba’s financials still looked strong in absolute terms, said Sean Zhang, an analyst with 86Research Ltd. in Shanghai.
“Alibaba remains the proxy of China’s e-commerce sector,” Mr. Zhang said. “Even within five years, Alibaba will remain the dominant player.”