Chinese tech giant Alibaba's latest quarterly numbers reveal how the company is struggling in the face of increasingly stringent regulatory scrutiny. The firm's net profit for the quarter fell 74% to RMB 20.43 billion ($3.2 billion) from a year ago even as its revenue grew just 10% to RMB 242.6 billion ($38.3 billion) for the December quarter, YoY.
Alibaba's net profit slide was attributed largely to a RMB 25.1 billion impairment charge made to its digital entertainment and media business, the company disclosed, without providing further details. For its latest quarterly results, Alibaba separated its Chinese and international retail businesses.
The former, which accounts for nearly three-quarters of its topline, inched ahead just 7% in the quarter YoY, impeded by a regulatory crackdown and growing homegrown competition. This despite Alibaba accounting for Singles Day in the quarter with gross merchandise value (a measure of all goods sold in the 11 day period) coming in at RMB 540.3 billion. Yet this metric is often misleading since not all this accrues to Alibaba. At the end of the day profit for the Chinese business dipped 20% on year.
Numbers of Note
“Alibaba delivered steady progress this quarter as we continued to execute our multi-engine growth strategy in a complex and volatile market environment," said Daniel Zhang, chairman and chief executive officer of Alibaba Group in a media release. He later told analysts the firm was "fully on track" to reach to reach the target of 1 billion China annual active consumers (AACs) by the end of this fiscal year. "And Taobao Deals has been the major contributor to our new user acquisition," he added. "With 1 billion high-quality AACs, we believe we have substantially captured all consumers with purchasing power in China."
For the China commerce business, customer management revenue (CMR) is a key metric used to measure Alibaba's performance. CMR is revenue Alibaba gets from services such as marketing that it sells to merchants on its Taobao and Tmall. This metric registered a 1% year-on-year fall coming in at just over RMB 100.09 billion.
Alibaba's international commerce retail business, including Lazada, AliExpress, Trendyol and Daraz, had 301 million AACs in the twelve months ended December 31, 2021, representing a net increase of 16 million. During the quarter, combined order growth of these businesses was around 25% year-over-year, driven by growth in Lazada and Trendyol, but decreased from AliExpress in Europe due to value-added tax levied on cross-border parcels below €22 in value slowed overall growth.
This story first appeared on Campaign Asia-Pacific.