Alibaba Sales Soar as Shoppers Defy China's Slowdown

It's Sustaining High Margins Despite Concerns About Consumer Spending

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Alibaba's revenues jumped as China's consumers kept shopping despite a slowdown.
Alibaba's revenues jumped as China's consumers kept shopping despite a slowdown. Credit: Andrew Harrer/Bloomberg

Alibaba Group's quarterly revenue rose a better-than-expected 39% after China's biggest e-commerce company drew in more users and boosted services to merchants on its platforms.

Sales jumped to $3.7 billion in the three months ended March, the company said. Alibaba, which links buyers and sellers, continues to expand even as the Chinese economy grows at the slowest pace in 25 years. The online emporium is making more from mobile advertisements, deepening its push into rural domestic regions and branching out overseas to boost transactions.

"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."

Net income rose 85% to $815 million. Affiliate Zhejiang Ant Small & Micro Financial Services Group, which owns payment platform Alipay, incurred a net loss after spending to drive user growth, the company said.

Shares of Alibaba Group Holding Ltd. rose more than 4% in pre-market trading. The stock has dropped 6.7% this year compared with a 1.4% advance in the NYSE Composite Index.

Revenue on Alibaba's Chinese retail e-commerce platforms jumped 41%, driving growth in spending by merchants on the company's marketing services. Commissions accounted for about a third of that.

Alibaba has pulled out the stops to get its e-commerce platforms in front of villagers, setting up free Internet-equipped computers and working with local officials to train potential buyers and sellers.

It had a presence in 12,000 villages across the country by the end of January, out of about 600,000. That effort to diversify the business comes as Alibaba is simultaneously trying to tap more of the 620 million Chinese who access the Internet from their smartphones and tablets.

"The company was able to better monetize on selling advertisements to merchants," Marie Sun, an analyst at Morningstar Investment Service, said before the earnings. "As the economy growth slows, it seems that merchants are more willing to place ads with bigger platforms like Alibaba that have a wider reach of customers."

--Bloomberg News--

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