Alibaba lowers sales forecast and cites uncertain economy

Alibaba lowers sales forecast and cites uncertain economy

BEIJING – Chinese e-commerce giant

Alibaba Group Holding


BABA -1.31%

Ltd. reduced its full-year sales forecast by 4% to 6%, pointing to growing doubts about the economy, as China's expansion recently slowed to its weakest in nearly a decade.

In a trade dispute with the US, consumers are tightening their purses on some purchases. The slowdown is likely to hit consumer durables hardest and Alibaba has already seen slower growth in consumer electronics, particularly mobile phones, said Deputy Chairman Joe Tsai.

Other services, such as meal delivery, are unlikely to be affected, Tsai said. Alibaba saw continued growth in consumer goods, cosmetics and apparel, he said.

China's economy as a whole is slowing down in view of the controversial struggle with the US for trade. However, Alibaba also faces strong competition from Chinese online retailers such as JD.com and Pingduoduo Inc., said Steven Zhu, senior analyst at Pacific Epoch in Shanghai.

This slows sales with ads that sellers place on Alibaba's platforms, he said – a high yielding company that is characterized by Alibaba's bread and butter business.

"That's the main problem," he said.

NYSE listed Alibaba operates China's two largest online trading platforms, Taobao and Tmall. Turnover serves as a crude barometer for China's consumer economy in the face of escalating trade conflicts with the US.

Alibaba now expects full-year sales of 375 billion yuan to 383 billion yuan ($ 53.97 to $ 55.12 billion), the company said.

In the three months ended September 30, Hangzhou-based Alibaba sales increased 54% year-on-year to 85.1 billion yuan, driven by solid demand from Chinese online consumers. However, this was still below the analysts' estimates – analysts surveyed by FactSet expected $ 86.7 billion. A year earlier, the company achieved sales of 55.1 billion yuan.

Second-quarter net income increased 13% to 20.0 billion yuan, nearly doubling the 10.6 billion yuan analysts expected. A year earlier, it was 17.7 billion yuan.

Alibaba's core business, Taobao and Tmall, increased 56% to 72.5 billion yuan.

Earlier this week,

Baidu
Inc.,

Another Chinese tech giant warned that dwindling confidence in the Chinese economy could slow search engine revenue growth.

Tencent Holdings
GmbH.

Baidu, Alibaba and Tencent are collectively known as the BATs.

The second quarter result is the first result announced after President Jack Ma's announcement in September that he intends to retire in one year.

Mr. Ma said he expects the trade dispute with the US to continue for a long time, possibly even 20 years, and that companies in both countries would feel the pressure.

Write to Yoko Kubota at yoko.kubota@wsj.com

,

Leave a comment

Send a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.