Alibaba bolsters share buyback as revenue falls short of expectations

Alibaba results: Alibaba Group Holding reported third-quarter revenue below analysts' estimates on Wednesday, citing intense competition and a sluggish economic recovery in China, the world's second-largest economy.

Following the announcement, Alibaba's US-listed shares plummeted nearly 6 per cent despite the company's announcement of a $25 billion stock buyback programme, failing to ignite investor interest. 

Concurrently, Alibaba's Hong Kong shares experienced a 5.4 per cent decline early on Thursday.

The company faces stiff competition from rivals such as Douyin and PDD Holdings, which have reshaped the e-commerce landscape by offering year-round discounts and lower-priced items.

In response to these challenges, Alibaba unveiled its largest restructuring in its 24-year history last March, dividing into six units to address slower earnings growth. 

However, plans for the spin-off and IPO of its cloud unit were scrapped amid uncertainties surrounding U.S. export restrictions on AI chip components to China.

CEO Eddie Wu, who took the helm in September, stressed revitalising the growth of Alibaba's core businesses, including e-commerce and cloud computing. 

Net income attributable to ordinary shareholders plunged to 14.4 billion yuan ($2 billion), with net income at 10.7 billion yuan, down 77 per cent primarily due to valuation changes in equity investments and impairments related to Sun Art, a hypermarket operator, and Youku, an online video streaming service.

Analysts noted that Alibaba signalled 2024 as an investment year, anticipating decreased profitability due to increased investments. 

Taobao and Tmall Group revenue saw only a 2 per cent growth for the quarter, despite year-end sales events like Singles Day, which typically drive up online shopping activity.

Alibaba executives highlighted early signs of recovery in Taobao and Tmall Group's gross merchandise volume, stressing upon a strategy focused on enhancing purchasing frequency for improved GMV growth.

Meanwhile, rival PDD surpassed Alibaba as the most valuable Chinese e-commerce company on December 1, fueled by concerns over Alibaba's slower turnaround in its cloud business and customer management revenue.

Alibaba executives also tempered expectations regarding the near-term potential of public offerings for its Cainiao logistics and Freshippo grocery business, citing unfavourable market conditions.

Reports emerged that Alibaba was considering selling several consumer sector assets, including Freshippo, which has engaged in a price war with Walmart's Sam's Club. 

However, a Freshippo spokesperson denied these reports.

Alibaba Chairman Joe Tsai acknowledged the possibility of divesting traditional physical retail businesses but cautioned that it would take time due to challenging market conditions.

On a brighter note, Alibaba's International Digital Commerce arm, including AliExpress and Alibaba.com, performed strongly, with AliExpress orders surging 60 per cent year-on-year.

Jiang Fan, CEO of the AIDC unit, highlighted major growth opportunities in various markets.

Alibaba faces formidable challenges amid intensifying competition and economic headwinds, prompting strategic shifts and investment initiatives to reignite growth across its core businesses.

(With Reuters Inputs)