Internet & Tech

Zhang delivers

Decent results from Alibaba even in tough times


Sales leapt 37% in fourth quarter

Call it the kind of crisis that most companies would kill for. Alibaba released its fourth quarter results on Tuesday, following weeks of rumours that its relationship with the Chinese government has soured spectacularly. But so what? Sales were up more than a third and profits surged ahead even faster.

Alibaba’s stock price has fallen sharply over the same period, shaped by uncertainty around Ant Group, the fintech offshoot in which it holds a third of the shares. Jack Ma, Alibaba’s founder and former boss, triggered the tempest with a public rebuke of the country’s antiquated banking system in October. His remarks led to the last-minute cancellation of Ant’s IPO, reputedly on the instructions of Xi Jinping, the Chinese president. Since then the government has launched a review of the fintech sector that threatens to bring treatment of the digital players more into line with that of the traditional banks.

Ma spent the period in political purdah before re-emerging briefly at a livestreamed conference late last month. But the business he built has shown little sign of retreat, reporting a 37% jump in sales for the quarter ending in December, compared to a year earlier.

Alibaba ploughed ahead during the early months of the pandemic as people turned to online shopping to buy things without leaving their homes. It did well again as consumers carried on shopping as Covid-related restrictions were eased in the latter part of the year. “Thanks to the rapid recovery of China’s economy, Alibaba had another very healthy quarter,” celebrated Daniel Zhang, its chairman and chief executive.

A rise in active consumers in its ‘core commerce’ business supported a 38% increase in revenues across platforms like Tmall and Taobao – all in a year when retail sales in general declined in China.

The numbers were flattered a little by the purchase of Sun Art, a retail chain, last October and sales growth has been slowing on the surges that the company has reported over much of the past five years. However, there are signs that other parts of the empire could take on more of the load. Revenues from the cloud business unit soared by half year-on-year, making it profitable for the first time. Cainiao, its logistics arm, also did well, turning cashflow positive during the period.

Overall net income rose to a little over Rmb79 billion ($12.22 billion) for the quarter, an increase of more than half on the same period last year. Ant Group added Rmb4.8 billion to the pot, which is hardly a dominant contribution. Yet the unknown is how regulatory action is going to curtail its commercial prospects in online payments and block access to lucrative areas like consumer lending and wealth management.

Alibaba avoided comment on how the “rectification” campaign against Ant might affect its business. One question is whether the campaign will constrain consumer credit in general, undercutting some of the spending on Alibaba’s marketplaces. But the bigger concern is that the sudden scrutiny could spill over into other sectors where Alibaba has a dominant position.

E-commerce is the obvious target, with the Hangzhou-based behemoth controlling nearly 60% of the market. Maybe the government will look less sweetly on that kind of stranglehold than it did previously? Anti-monopoly officials are already investigating practices like ‘forced exclusivity’, that are said to dissuade vendors on its platforms from doing business with competitors.

Alibaba’s shares have recovered some of the ground lost in November and December and the company is planning a $5 billion bond sale in the next few days in another signal that sentiment is improving. But Jack Ma is yet to be forgiven by the authorities, it seems. Case in point is his omission from a celebration of China’s top entrepreneurial achievers in the state media on Tuesday. The people in the ranking might have behaved like “reckless heroes” in disrupting some of China’s older economy, acknowledged Shanghai Securities News, the compiler of this week’s list. But then they became leaders of companies “that respected the rules of development and abided by market rules,” it added, rather tellingly for Ma.

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