(Reuters) – Alibaba Group Holding Ltd warned of a decline in sales in its key e-commerce businesses this quarter as the coronavirus affects supply chains and shipments in China.
The executive warning came during a earnings call for the quarter ended December 2019 that saw the company beat analysts ‘estimates and bring in record deals for its annual singles’ day shopping event.
CEO Daniel Zhang said the late return to work after the New Year celebrations due to the virus outbreak that killed more than 1,350 people in China and infected thousands more had caused traders problems and delays in order fulfillment.
He said orders for food delivery had decreased year over year due to the number of restaurants that had closed as a result of the outbreak. And while the company saw a surge in demand for goods from its Hema supermarkets, limited delivery capacity held it back.
Chief Financial Officer Maggie Wu said most of Alibaba’s companies that rely on physical goods sales would likely see sales decline this quarter.
“We like it when other companies aren’t immune to supply and demand,” she said. “Your recovery and long-term success will drive the long-term growth of the Alibaba Group.”
Despite the optimistic forecast, Zhang said Alibaba had seen more people return to work in major cities and logistics networks returned to normal operations until Monday.
He also said that DingTalk, the company’s enterprise chat app, saw “explosive growth” during the crisis as employees and schools used it for remote working and online teaching.
“Alibaba’s revenue for the next few quarters is likely to be affected by the coronavirus outbreak. However, the company’s business is strong enough to withstand the brief downturn. The cloud computing business will take responsibility for a more positive outlook, ”said Jesse Cohen, senior analyst at Investing.com.
FILE PHOTO: Alibaba Group logo will be on display during Alibaba Group’s global shopping festival on 11/11 Singles’ Day on November 10, 2019 at the company’s headquarters in Hangzhou, Zhejiang Province, China. REUTERS / Aly Song / File Photo
Q3 BEATS FORECAST
Alibaba usually has its highest sales in the December quarter due to its mega-shopping bonanza on Singles’ Day in November. The company announced that sales during the 24-hour event reached a record $ 38.4 billion in 2019.
The group generates its revenue primarily from the sale of advertising and promotional services to third party vendors who list products on their Taobao and Tmall e-commerce websites.
The company said it was helping to fight the coronavirus outbreak by ensuring basic supplies and introducing relief measures for its dealers.
The MYBank unit of Alibaba subsidiary Ant Financial has announced that it will offer 20 billion yuan ($ 2.9 billion) in loans to companies in China after the outbreak.
The outbreak, which originated in Wuhan City, has resulted in companies laying off workers, looking for cheaper finance, and struggling to resume production after an extended New Year’s vacation as supply chains are disrupted.
Alibaba is often viewed as a window into the health of China’s consumer economy, which Beijing sees as key to sustained economic growth.
The epidemic is expected to put more pressure on China’s economy, just as the government had hoped a tentative deal with the United States would ease a protracted trade war that had weighed on its growth.
Revenue in Alibaba’s core business rose 38% to 141.48 billion yuan for the third quarter ended December 31, while revenue in its cloud computing unit rose 62% to 10.72 billion yuan.
Net income attributable to common shareholders increased from 33.05 billion yuan to 52.31 billion yuan.
With no items, the company made 18.19 yuan per American Depository Share (ADS). According to Refinitiv’s IBES data, analysts had expected 15.75 yuan per ADS.
Total sales rose 38% to 161.46 billion yuan, beating the estimate of 159.28 billion yuan.
The company’s US-listed shares rose nearly 1% to $ 226.30 in premarket trading.
Reporting by Akanksha Rana in Bengaluru and Josh Horwitz in Shanghai; Adaptation by Sriraj Kalluvila and Mark Potter