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Competition And Slow Demand Prompt Alibaba To Cut Sales Outlook


11/19/2021


Competition And Slow Demand Prompt Alibaba To Cut Sales Outlook
Growing rivalry in an increasingly crowded business space has forced a downgrading of its anticipated annual revenue growth by the Chinese e-commerce behemoth Alibaba Group Holding Ltd. That pushed down the shares of the company by 11 per cent.
 
The company now anticipates that growth in its revenue for the fiscal year ending in March to be between 20 per cent and 23 per cent, which is also the slowest rate of growth for the company since it made its debut on the stock market in 2014. In May the company had forecast the number to be at 29.5 per cent.
 
The earnings per share of the company for its second quarter were also below expectations of the market.
 
The covid-19 outbreaks have made consumers in China more cautious about expanding and this factor, in combination with disruptions in the global supply chains, has also forced a slowdown in China’s economic growth for the quarter. 
 
"These economic headwinds, coupled by intensifying market competition also affected our core commerce business in China," Alibaba CEO Daniel Zhang said on an earnings call and added that the segments in which demand has been particularly impacted are apparel and general merchandise.
 
A fall in demand, against expectations, in fashion and accessories, has impacted Alibaba, whereas the performance in the apparel segment has been much better for Alibaba’s rivals, analysts noted,
 
The foray of companies such as short video apps Kuaishou and ByteDance's Douyin into the e-commerce business has also had an effect on China’s big e-commerce companies. The unprecedented regulatory measures imposed in China to bring in more competition in the marketplace are proving to be beneficial for these rival companies expanding into e-commerce. 
 
"We see intensified competition further eating into Alibaba's market share and widening the difference in revenue growth of Alibaba vs. peers," Daiwa Capital Markets analysts said in a research note.
 
The stocks of JD.com Inc surged by 6 per cent after the company reported better than expected quarterly results on Thursday.
 
Earning of 11.20 yuan per share on an adjusted basis was reported by Alibaba for the quarter ended Sept. 30, which was lower than the average estimate of analysts 12.36 yuan.
 
The company also reported a revenue growth of 29 per cent which is the slowest growth for the company in six quarters, at 200.7 billion yuan ($31.4 billion), which also slightly missed the consensus estimate of Refintiv.
 
Alibaba claimed it had a single-digit increase in physical products gross merchandise value, a crucial online retailing indicator that measures the total amount of merchandise sold through a marketplace, but it didn't go into depth or give a comparison to previous quarters.
 
Alibaba's stock has dropped a massive 38 per cent this year, pricing the business at around $390 billion, including Thursday's losses. On Friday, its Hong Kong shares were down 10.6 per cent.
 
Ant Group, Alibaba's fintech subsidiary, had a quarterly profit of 19.7 billion yuan, up 39 per cent from the previous quarter. Alibaba accounts for Ant's profit one quarter late.
 
(Source:www.economictimes.com)


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