Stock Loss Torpedoes Earnings At Alibaba -- WSJ
May 23 2020 - 2:02AM
Dow Jones News
By Liza Lin and Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 23, 2020).
Alibaba Group Holding Ltd.'s fourth quarter profit fell 88% from
the same period a year ago after the coronavirus pandemic affected
the value of the Chinese e-commerce giant's public investments.
Alibaba, China's most valuable technology company, reported net
income of 3.16 billion yuan ($447 million) for the quarter ended in
March. The decline was mainly because of a net investment loss of
$1.09 billion as the pandemic weighed on stock markets and dented
the value of Alibaba's equity investments, the company said Friday.
A year earlier, Alibaba had a net investment gain.
Even so, the spending power of Chinese consumers remained
strong. Revenue rose 22% to 114.31 billion yuan, exceeding the
expectations of analysts polled by FactSet. Alibaba's revenues
mostly come from ad sales and selling other services to third-party
merchants on its platform. China commerce retail sales grew 21%
from a year ago.
More consumers began buying fresh food and groceries online,
with city lockdowns forcing people to cook at home, Daniel Zhang,
Alibaba's chairman and chief executive officer told investors.
Still, other categories such as apparel and makeup fell, as most
people wore face masks and stayed home, he added.
Alibaba -- which runs China's two most popular e-commerce
platforms -- started to see a recovery in those platforms beginning
March as the country returned to normalcy quickly with the
government's rapidly-introduced virus control measures, Chief
Financial Officer Maggie Wu said.
Its businesses have been steadily recovering and in April,
transaction volumes and user activity in Alibaba's China retail
businesses returned to levels seen in the October-December quarter,
she said.
The Hangzhou-based company said it expects revenue to top 650
billion yuan this fiscal year.
When the coronavirus first broke out in late January, Alibaba
had warned investors that the virus would hurt the company in the
short run.
Uncertainties still exist, Ms. Wu said, as countries around the
world face fallout from the pandemic and there is little clarity on
the speed of a global economic recovery. Geopolitical issues
between the U.S. and China also weigh on the economy, she
added.
Alibaba's earnings results will likely be closely monitored by
major retailers globally, as they assess the impact of the
coronavirus on their own sales and watch for the speed of
recovery.
Earnings per American depositary share were 1.16 yuan a share
compared with 9.84 yuan a share a year earlier. On an adjusted
basis, earnings per ADS were 9.20 yuan, versus analysts'
expectations of 6.05 yuan a share.
Sales in the company's cloud computing business grew 58% from a
year ago, while digital media and entertainment segment revenue for
the March quarter rose 5%.
On Friday's investor call, Ms. Wu also addressed a bill passed
by the U.S. Senate on Wednesday that might force Chinese companies
such as Alibaba and Baidu Inc. to give up their U.S. listings.
American regulators say China has often been unwilling to allow
access to audit records sought by an oversight board, making it
hard for them to assess the credibility of many Chinese firms
listed in the U.S.
Ms. Wu said the company was "closely watching the developments,"
and that Chinese and U.S. securities regulators and the oversight
board were already in talks.
Corrections & Amplifications Alibaba posted a net investment
loss of $1.09 billion for its latest quarter. An earlier version of
this article incorrectly reported the investment loss as $1.09
million. (Corrected on May 22.)
Write to Liza Lin at Liza.Lin@wsj.com and Allison Prang at
allison.prang@wsj.com
(END) Dow Jones Newswires
May 23, 2020 02:47 ET (06:47 GMT)
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