Alibaba benefits from cost-saving measures as losses narrowed from Cainiao to e-commerce
- The e-commerce giant was able to grow its adjusted income by 19 per cent in the third quarter, even though sales rose only 3 per cent
- “Wide-ranging efforts in cost-reduction and efficiency-improvement measures are beginning to bear fruit,” said Alibaba CEO Daniel Zhang Yong
Chinese e-commerce giant Alibaba Group Holding has seen initial results in its bid to trim costs, its latest financial results and analysts’ comments showed.
The Hangzhou-based company, which owns the South China Morning Post, managed to grow its adjusted income by 19 per cent, despite a merely 3 per cent rise in revenue, according to its financial report released on Thursday.
As part of its cost-cutting measures, Alibaba slashed 1,797 jobs in the quarter ended September 30. It has reduced losses across the board: adjusted losses from its digital media and entertainment business, for instance, narrowed to 117 million yuan (US$16.4 million) from 931 million yuan a year ago.
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Cainiao, the company’s logistics arm, posted 125 million yuan in earnings, reversing a loss of 315 million yuan a year earlier.
Losses at Alibaba’s international commerce narrowed to 960 million yuan from 2.48 billion yuan a year ago, while earnings in its main e-commerce business rose 6 per cent, thanks to reduced losses in Taobao Deals, a discount-oriented shopping app designed to compete against Pinduoduo and Taocaicai, an online grocery service.
“The adjusted net income was much better than expected,” said Tsz Wang Tam, a Hong Kong-based equity analyst at DBS bank. “Revenue growth wasn’t very strong, but it was within expectations.”
Alibaba’s stock price in New York gained 7.8 per cent on Thursday on the back of the latest financial results and the company’s promise to expand a share buy-back plan. Alibaba shares in Hong Kong rose 2.2 per cent to close at HK$80 on Friday.
“The share price rose because investors saw how the company managed to improve efficiently and reduce cost in its main business,” said Cheng Yu, a researcher at Beijing-based research institute Kandong.
Alibaba’s increased scrutiny of its expenses takes place against a backdrop of rising economic headwinds in China.
Under Beijing’s strict zero Covid-19 policy, which involves border controls and snap lockdowns, the world’s second-largest economy saw only 3 per cent growth from January to September, falling short of the annual target of “around 5.5 per cent”.
Retail sales, a measure of consumer spending, shrank 0.5 per cent in October from a year ago, while social retail sales in the first 10 months of the year rose 0.6 per cent from the same period last year, according to data from the National Bureau of Statistics.
Alibaba’s China commerce sales, which include revenue from its flagship shopping platforms Taobao and Tmall, fell 1 per cent year on year to 135.4 billion yuan in the third quarter.
“The macro environment would be the primary determinant not just for Alibaba, but for all the players in the consumption space, both online and offline,” said Daniel Zhang Yong, chairman and CEO of Alibaba, in a conference call on Thursday.
He added that “wide-ranging efforts in cost-reduction and efficiency-improvement measures are beginning to bear fruit”.
