Alibaba Group Expects Revenue Drop as Result of COVID-19

Alibaba Group Holding Limited (NYSE: BABA and HKEX: 9988)  has announced its quarterly financial results up until Dec 2019. During this quarter, the Chinese online conglomerate experienced a revenue increase of 38 percent YoY (USD23,192 million).

“Alibaba Group experienced robust growth across our business this past quarter,” explained Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group. “Our digital economy reached new heights with another record 11.11 Global Shopping Festival for our merchants and partners. Continued investment in user engagement, especially through social commerce content, contributed to our strong gains in annual active consumers. As a result of its rapid growth, our cloud computing services for the first time generated revenue of over RMB10 billion in a single quarter.”

The annual active consumers of the marketplace, in China, reached 824 million in December 2019. This is an increase of 39 million over September 2019. Moreover, the EBITA for core commerce experienced a six percent growth YoY.

Despite the concerns over the coronavirus throughout China and its neighbouring areas, Alibaba group remains committed to increasing its digital footprint and maximising its digital infrastructure across its subsidiaries.

“We had a successful listing on the main board of the Hong Kong Stock Exchange in November and delivered strong results for the quarter, with top-line revenue growth of 38 percent year-over-year and adjusted EBITDA growth of 37 percent year-over-year,” explained Maggie Wu, Chief Financial Officer of Alibaba Group.

“Looking forward, we will remain dedicated to investing in digital infrastructure and services, supporting our customers and partners across the Alibaba Digital Economy, especially during the challenging time.”

Alibaba Group Holdings Limited includes a myriad of subsidiary companies, including AliExpress, Taobao, Tmall and AliPay. Alipay is currently the world’s largest mobile payment platform, overtaking PayPal in 2013.

Tmall is a B2B platform – in December 2019, GMV generated from Taobao Live, and the number of monthly active users who watched Taobao Live both grew over 100 percent YoY. “‘Taobao Live’, where merchants and key opinion leaders (KOLs) use live-broadcast to market to their fans and customers, has become one of the fastest-growing and an effective selling formats on our China retail marketplaces,” Alibaba Group said in a statement.

Tmall, a C2C and B2C platform, experienced strong results from the 11.11 sales event in 2019. Tmall online physical goods GMV, excluding unpaid orders, grew 24 percent YoY in the quarter ended December 31, 2019, with ‘strong growth in fast-moving’ consumer goods (FMCG) and consumer electronics.

“Our annual 11.11 Global Shopping Festival in the quarter was another record-breaking event, generating RMB268.4 billion (US38.4 billion) in GMV settled through Alipay on our retail marketplaces and consumer services platforms, up 26 percent YoY,” Alibaba Group said in a statement. “During this year’s festival, we continued to drive consumer value by offering savings and wider product assortment from high-quality merchants. We also enabled more brands to generate greater GMV and increase their penetration into less developed areas. Over 200,000 brands, including 22,000 international brands, participated in this year’s event, among which 15 brands each generated GMV of over RMB1 billion (US143.0 million) and 299 brands each generated GMV of over RMB100 million (US14.3 million). Consumer demand from less developed areas remained robust, accounting for 54 percent of the GMV during the festival.”

Alibaba Group and COVID-19

The worldwide response to the COVID-19 (coronavirus) has sparked concern for retailers, as well as supply chains located throughout China. There are currently 46,997 confirmed cases of COVID-19 worldwide, of which 46,550 cases are in China – the virus has killed more than 1,350 people in China.

Alibaba Group has warned of possible revenue slips as a result of this virus outbreak, especially within its own holdings. “In response to the coronavirus, we mobilised Alibaba ecosystem’s powerful forces of commerce and technology to fully support the fight against the outbreak, ensure supply of daily necessities for our communities and introduced practical relief measures for our merchants. No matter past, present or future, we remain true to our mission, and we will support our merchants to overcome this challenging time together,” Zhang explained.

The food delivery service has dropped significantly due to the outbreak. Still, Alibaba Group’s Hema supermarkets have experienced an uplift – however, due to a lack of delivery partners available, many customers are without their orders. Factory workers have been laid off to reduce contagion throughout China. This, in effect, has seen supply chains at limited capacity and unable to fulfil orders at expected turnover rates.

Alibaba Group is expected to see a drop in revenue due to the lack of fulfilment capacity. “We like other businesses are not immune to supply and demand,” said Maggie Wu. “Their recovery and long term success will translate to long term growth for Alibaba Group.”

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