SHANGHAI — Alibaba shares dropped 10.7 percent in Hong Kong trading Friday as the firm slashed guidance and saw its earnings tumble for the quarter.
The decline followed a drop of 11.3 percent in Alibaba’s New York shares the day before.
Alibaba said Thursday that net profit fell 81 percent in the quarter to Sept. 30 and it missed expectations as it grappled with the slowing economy in China and an anti-monopoly crackdown. The company previously told investors it expected to bring in 930 billion renminbi for the year, just under 30 percent year-over-year growth, but reduced its forecast to between 20 and 23 percent.
Alibaba’s core commerce business saw revenue grow 31 percent year-on-year to 171.17 billion renminbi, also missing expectations.
“We recorded single-digit physical goods GMV year-over-year growth, primarily due to slowing market conditions and more players in the China e-commerce market,” the firm said in its earnings release. “By categories, physical goods GMV growth was slower in the apparel and accessories category, but continued to be resilient in the consumer electronics and home furnishing categories.”
Alibaba recently wrapped its Nov. 11 Singles’ Day sale, the biggest retail event of the year on the Chinese calendar. Although it took in $84.54 billion during the sales period, an 8.5 percent increase from the year prior, it was much slower than the 26 percent jump the online giant posted last year as newer entrants to e-commerce like Douyin battle for market share.
Daiwa Capital Markets analyst John Choi predicts intensified competition will further eat into Alibaba’s market share.
“While Alibaba was affected by the macro slowdown in apparel and accessory GMV growth, its peers in contrast observed robust growth in apparel sales,” wrote Choi in a report, such as JD.com.
“We expect the ramp–up of the e-ommerce business of other entertainment platforms to monetize their user traffic is possibly the other reason, as the shopping scenarios for Chinese consumers are becoming more dispersed,” said Choi. “While we still believe Alibaba has an economic moat in China’s e-commerce space due to the strong mindshare of its users, the market should reset the expectation such that Alibaba’s GMV will largely grow in tandem with the macro due to scale.”
Competitor JD.com, which also reported quarterly earnings on Thursday, saw net revenues of 218.7 billion renminbi, or $33.9 billion, a 25.5 percent increase from the same time a year ago. The figures beat expectations, boosting its Nasdaq-listed shares by nearly 6 percent.