China experienced abnormal logistics and delivery services due to COVID-19 protocols which led to major drop in sales for Alibaba last quarter.
On Thursday, November 17, Chinese e-commerce giant Alibaba (HKG: 9988) posted a low single-digit rise in its quarterly(Q2 2023) revenue. This was slightly lower than the market expectations as COVID-19 curbs and deteriorating economic outlook stifled consumer spending.
Alibaba in Q2 2023
Along with the Chinese government’s strict zero-COVID policies, retail spending in China has tanked. this has significantly impacted the overall economic activity. In the quarter ending September 30, the revenue for Alibaba grew by 3% to 207.18 billion yuan ($28.96 billion). However, as per the Refinitiv consensus drawn by 25 analysts, the market expectations were at 208.62 billion yuan.
For years, Alibaba has stayed as one of the fastest-growing Chinese internet companies posting double-digit revenue growths. But burdensome government regulations and the strongest COVID-19 crackdowns have proved to hamstring its business. Additionally, Alibaba is also facing challenges with increasing costs and other supply chain issues. In its earnings release, Alibaba Chief Executive Daniel Zhang said:
“The uncertainties of the global landscape have only reinforced our resolve to focus on building capacity that will yield sustainable, high-quality growth for our customers and our own business over the long term. The trust of our shareholders has enabled Alibaba’s development over the past 23 years, and we are committed to improving shareholder return as we continue to strengthen the foundations for Alibaba’s future.”
Today in the Hong Kong market, Alibaba stock is trading 2.17% up at a price of 79.95 HKD. The stock price is still down 30% since the beginning of 2022.
Alibaba Shares Gloomy Outlook for Q3
The current quarter for Alibaba could also be gloomy as per the insights shared by the company. So far, Alibaba hasn’t disclosed its “single’s day” shipping festival sales for the first time. The company, however, said that the results were in line with the last year, which was also its lowest growth ever.
During their earnings call, Zhang also said that nearly 15% of places in China experienced abnormal logistics and delivery services due to COVID-19 protocols. This has impacted the company’s shopping season sales.
On the other hand, Alibaba’s financial affiliate Ant Group is also facing a government-mandated revamp. The company has yet to revive plans for its public market debut after its plans for a $37 billion debut with dual listing were derailed in 2020.