Business

Alibaba warns of slowing Chinese consumer spending

US-listed shares of Alibaba fell more than 10% after the e-commerce giant cut its sales forecast sharply, citing slower growth in Chinese consumer spending.

In its quarterly results on Thursday, Alibaba said it now expects sales growth of 20-23% in 2022 compared with its previous forecast of 30% growth after experiencing “soft market conditions”. than”.

Recent Chinese economic data painted a bleak picture of the country’s growth prospects. Retail sales rose just 2.5% year-on-year in August, well below economists’ forecasts for a 7% rise and the slowest increase in 12 months.

Alibaba is also grappling with stiffer competition from established rivals such as Pinduoduo and JD.com as well as more up-and-comers, all of which are trying to steal market share.

Maggie Wu, Alibaba’s chief financial officer, said competitors are “increasingly investing to acquire users and demonstrate high spending”. Competitors are luring merchants away from Alibaba’s Taobao e-commerce business with lower setup, transaction and advertising costs.

Alibaba said it has increased subsidies for its merchants to prevent them from going to competitors.

“The competition in China’s e-commerce sector is reflected in the falling profit margins of Alibaba and JD.com,” said Michael Norris, technology analyst at research firm AgencyChina. It’s a reflection of the increasingly fierce battle for shoppers’ wallets.”

Revenue increased 29% to Rmb 200.7 billion ($31.4 billion) in the three months to the end of September compared with the same period last year. These numbers were improved by the merger of supermarket chain Sun Art, which was acquired last year.

Net income fell 87% to Rmb 3.4 billion, missing forecasts. Alibaba blamed high investment and losses on stock investments as the reasons for the drop.

The company’s disappointing earnings report came after its share price began to rise in October, when analysts estimated that Beijing’s worst regulatory assault on the sector internet has ended.

Alibaba has shown better performance elsewhere, with revenue at its cloud computing division growing 33% to Rmb 20 billion, part of a “multi-engine approach to growth”, the company said. ty said.

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