BEIJING — Alibaba Group posted a 33 percent rise in net income in the quarter ended Dec. 31, driven by its retail business and cloud arm, at the same time shrugging off concerns of any impact from the U.S.-China trade war and a macroeconomic slowdown in China.
During its busiest quarter encompassing its signature Singles’ Day shopping festival, the Chinese tech company reported net income of 30.96 billion renminbi, or $4.5 billion at current exchange. Topline growth was 117.28 billion renminbi, or $17.06 billion, up 41 percent, with revenue from its core commerce business also rising in line.
On a call Wednesday, Alibaba’s first order of business was to address the trade war. (American and Chinese diplomats meet again this week in Washington, D.C., to try to hash out a deal.)
“The primary growth driver is not exports but domestic consumption and corporate transformation. Digitization of the retail sector and the resulting efficiency gains will accrue to Alibaba, with or without a trade war,” said Alibaba’s executive vice chairman Joe Tsai.
Chief executive officer Daniel Zhang also addressed fears sparked last week when China released its lowest annual GDP growth rate since 1990 of 6.6 percent.
“The slowdown of the macro [economy] might cause concerns in the market. However, what we see from Alibaba platforms is that Chinese consumption growth is still strong, driven by a growing base of increasingly affluent young consumers,” said Zhang, echoing LVMH Moët Hennessy Louis Vuitton, which on Tuesday reassured investors that its China sales in the fourth quarter were brisk.
“These aspirational Chinese consumers look for a rich shopping experience and high-quality product and services on our platforms. Our Tmall physical goods GMV growth was 29 percent year-over-year this quarter, while China’s overall online physical goods growth grew 21 percent. The robust growth was driven by strength in FMCG, apparel and home furnishing categories,” he said.
Seemingly in a reference to Apple, which operates a store on Tmall and whose lackluster growth in the market set off a wave of worry about China, Zhang commented: “Due to lack of technology innovation, mobile phones showed constant growth near term.”
He added: “While categories in consumer, apparel, home furnishings executed resilient growth in this quarter, we also observed some categories like electronic toothbrushes and beauty electronic devices grow fast on our platform, representing Chinese consumers’ [interest in] continuing to upgrade their lifestyle.”
During the quarter, more than 70 percent of the increase in annual active consumers were from third- and lower-tier cities. In October, Alibaba’s C2C marketplace Taobao rolled out a new user interface, which the company said improved the monetization rates and recommendations of the mobile app.
On the high-end spectrum, the group said Valentino, Ermenegildo Zegna, Stuart Weitzman and Sergio Rossi opened Tmall flagship stores during the period, also joining the Tmall Luxury Pavilion, which now has more than 80 brands.
“There is strong growth coming from Tmall and Alibaba Cloud,” said eMarketer analyst Oscar Orozco. “While the Chinese economy suggests a bleaker outlook in 2019, the company continues to grow its user base at a healthy rate and is working on monetizing new ad revenue streams, which should keep driving growth in the coming year.”
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