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Marketing push helps Alibaba to post increased sales

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Bloomberg

Alibaba Group Holding Ltd. posted a 39 percent surge in revenue as China’s dominant e-commerce operator shrugged off a slowing economy with promotions to woo cash-rich consumers.
Asia’s largest internet company posted better-than-expected sales of 24.2 billion yuan ($3.7 billion) in the March quarter and said it will start providing annual forecasts. Alibaba shares jumped 4 percent to $78.83 at the close in New York.
Alibaba, often regarded as a proxy for Chinese consumer spending, is capitalizing on the liquidity of households and expanding into rural areas, helping limit the impact of an economy growing at the slowest pace in 25 years. The company’s platforms, which link buyers and sellers, hit a 3 trillion-yuan milestone of goods sold during the period and the online emporium made more from mobile advertising and expanded overseas.
“Alibaba is still growing very nicely and sustaining very high margins in the face of the concerns about Chinese consumers and the face of competition,” said Gil Luria, an analyst with Wedbush Securities Inc. “It’s good results for Alibaba and it seems like their business is holding up.”

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Net income rose 85 percent to 5.3 billion yuan, just shy of the 5.4 billion-yuan average of estimates. Affiliate Zhejiang Ant Small & Micro Financial Services Group, which owns Alipay, incurred a net loss after spending to drive user growth. Adjusted earnings-per-share were 3.02 yuan, trailing analysts’ projections for 3.52 yuan.
The marketing push helped spur a 21 percent jump in active users to 423 million. That in turn underpinned a 41 percent jump in revenue on Alibaba’s Chinese retail e-commerce platforms. Mobile shopping on local retail sites almost tripled and now accounts for 63 percent of sales.
Vice Chairman Joseph Tsai highlighted the $4.6 trillion of net cash reserves held by Chinese households as a key driver of ongoing spending and growth at Alibaba. After free cash flow reached $8 billion last year, he has pledged to keep investing to pursue growth — despite the potential drag on the bottom line.
“Going forward we are prepared to continue investing in high-potential businesses that are highly strategic to Alibaba, from digital entertainment to local services to international expansion,” Tsai said on Alibaba’s blog Thursday. “These businesses contribute to losses in our current income statement.”
Alibaba expects last month’s $1 billion deal for control of Lazada Group SA, which gives it access to six Southeast Asian markets, will help Chinese merchants expand sales in the region. “Lazada is a very important acquisition, Lazada has a very great recognition,” CEO Daniel Zhang said.

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