Alibaba (BABA) ends the fiscal year on a solid note despite a challenging environment

Shares of Alibaba Group Holding Ltd. (NYSE: BABA) gained 15% on Thursday following a strong earnings report from the company. The Chinese ecommerce giant delivered better-than-expected results for its fourth quarter of 2022 amid a challenging backdrop. The stock has dropped 20% year-to-date.

Company performance

Revenue increased 9% year-over-year to $32.1 billion in Q4 2022, beating market estimates. The top line growth was driven by an 8% revenue increase in the China commerce segment. Adjusted earnings per ADS decreased 23% YoY to $1.25 but came above expectations.

Annual active customers globally reached approx. 1.31 billion for the 12 months ended March 31, 2022. Alibaba reached its goal of 1 billion customers in China amid headwinds that impacted supply chains and consumer sentiment. The company’s global consumer-facing businesses generated $1.3 billion in GMV.

China commerce business

For the 12 months ended March 31, 2022, Alibaba’s China consumer-facing businesses generated GMV of approx. $1.25 billion. For the same period, the China commerce segment had a combined 903 million annual active customers, representing a quarterly net increase of 21 million. This growth was driven by the successful execution of the company’s multi-app strategy to create personalized experiences for users of various demographics.

Taobao and Tmall witnessed high consumer retention. In FY2022, more than 124 million annual active consumers each spent over RMB10,000 on Taobao and Tmall. Approx. 98% of customers who used these two platforms in FY2021 continued to be active on them in FY2022. In FY2022, online physical goods GMV of Taobao and Tmall, excluding unpaid orders, recorded year-over-year low single digit growth.   

The resurgence of the COVID-19 pandemic in China has impacted Alibaba’s business to varying degrees. The company saw a low single digit decline in revenue growth in April compared to the same period last year. Online physical goods GMV of the company’s China retail marketplaces, excluding unpaid orders, witnessed a year-over-year decline in the low teens percentage in April.

While user traffic and engagement have remained resilient during the pandemic, consumption patterns across categories have changed. Demand for essential supplies such as food and FMCG products have increased significantly as customers stockpile at home. Categories such as healthcare, activewear and outdoor products have also seen growth whereas consumption of fashion and electronics has seen a decline.

Outlook

Amid these uncertainties, Alibaba decided not to provide guidance but the company believes it will continue to generate strong operating cash flow to maintain strategic flexibility. In FY2023, Alibaba plans to focus on sustainable high-quality revenue growth and optimizing its cost structure to improve returns.

Click here to read more on ecommerce stocks