Chinese e-commerce giant Alibaba reported flat sales growth for the first time on Thursday as the country grappled with an economic slowdown and the resurgence of Covid-19 made consumers nervous.
Alibaba’s performance is widely viewed as a gauge of Chinese consumer sentiment given its market dominance, and its revenue growth has slowed significantly over the past year.
Revenue came in at 205.6 billion yuan ($30.7 billion) in the April-June quarter, beating analysts’ expectations, although slightly below the same period last year after the company’s sales in China in the commercial segment declined, Alibaba said.
The company has been struggling with growing competition and the economic fallout from the tough Covid restrictions, which have hit consumer sentiment, soared unemployment and entangled supply chains.
“After a relatively slow April and May, June saw signs of recovery across all of our businesses,” Alibaba Group chairman and chief executive officer Daniel Zhang said in a statement.
“Despite the weak economic conditions, we’ve managed to generate stable revenues and contain losses in several strategic business areas by improving operational efficiencies,” he added on a conference call.
The company’s revenue growth was flat “mainly due to a decline in revenue in the China commerce segment,” although this was offset by growth in the cloud segment, Alibaba said.
Many parts of China have faced tough lockdowns in recent months as officials scramble to stamp out the Omicron variant as part of the country’s zero-Covid policy.
Shanghai, China’s largest city and a major economic hub, went into lockdown for two months during the quarter due to Covid-related restrictions.
The company cited “restrictions that caused supply chain and logistics disruptions in April and most of May” that hurt the performance of its China trade sector, although demand picked up in June during a popular shopping festival.
Profit for the latest quarter was 22.7 billion yuan, compared with 45.1 billion yuan a year earlier.
Alibaba recently built up its international trading businesses, such as Lazada in Southeast Asia and Trendyol in Turkey.
It has also shifted from its aggressive market expansion in the past in the face of slowing growth.
– Challenges –
Aside from containing the coronavirus, Alibaba is grappling with a regulatory crackdown on China’s tech giants and other challenges overseas.
US authorities have placed the company on a watch list that could see it delisted in New York if it fails to comply with disclosure orders, causing its shares to plummet.
The company is seeking a primary listing in Hong Kong, which could allow it to access mainland China’s vast pool of investors, a move that comes as Chinese tech companies trading in New York are increasingly concerned about regulatory action by US authorities.
The market value of Alibaba, a tech giant, has also fallen after Beijing launched a sweeping crackdown in 2020.
In recent years, Chinese officials have targeted alleged anti-competitive practices by some of the country’s biggest names, spurred by fears that big internet companies control too much data and are expanding too quickly.
This included canceling at short notice a planned IPO of Alibaba’s financial arm Ant Group, which would have been the world’s largest IPO at the time.
Last week, a report said Alibaba co-founder Jack Ma plans to relinquish control of Ant Group to appease Chinese regulators and revive the digital payments unit’s IPO.
According to the latest results, US-listed shares of Alibaba rose 4.5 percent in premarket trading.
China’s economy grew just 0.4 percent in the second quarter of this year, the slowest growth since the coronavirus first broke out more than two years ago.
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