Alibaba shares tumble 11% after firm slashes sales outlook

Hong Kong

SHARES of Alibaba Group Holding plunged 11 per cent on Friday (Nov 19) after the Chinese e-commerce giant slashed its forecast for annual revenue growth on increased competition and a regulatory crackdown.

Alibaba now expects revenue for the year ending in March to rise between 20 per cent and 23 per cent, the slowest pace since its 2014 stock market debut and down from a May forecast of 29.5 per cent growth. The company also undershot expectations for earnings per share in the second quarter.

Chinese shoppers have become more cautious about spending amid coronavirus outbreaks and that, combined with supply disruptions, contributed to slower growth for China's economy in the quarter.

"These economic headwinds, coupled by intensifying market competition also affected our core commerce business in China," Alibaba CEO Daniel Zhang said on an earnings call, adding that demand for apparel and general merchandise had been particularly affected.

But analysts also noted that while Alibaba had been hit by slower-than-expected growth in demand for fashion and accessories, its rivals had done much better in apparel sales.

At the same time, big e-commerce companies in China are having to contend with the expansion into e-commerce from the likes of short video apps Kuaishou and ByteDance's Douyin and which are now benefiting from unprecedented regulatory efforts to ensure there is more competition in the marketplace.

"We see intensified competition further eating into Alibaba's market share and widening the difference in revenue growth of Alibaba versus peers," Daiwa Capital Markets analysts said in a research note.

For the quarter ended Sep 30, Alibaba earned 11.20 yuan per share on an adjusted basis, missing an average estimate of 12.36 yuan.

Revenue climbed 29 per cent, the smallest rise in 6 quarters, to 200.7 billion yuan (S$42.8 billion), just under a Refintiv consensus estimate.

Including Thursday's losses, Alibaba's stock has lost a huge 38 per cent so far this year, valuing the company at about US$390 billion.

Its shares in Hong Kong ended 10.6 per cent lower at HK$139.30 on Friday. REUTERS