May 19, 2017 3:27 am JST

Alibaba posts 65% operating profit jump as users buy more

Higher per-person sales mitigates slower growth for e-commerce giant

WATARU KODAKA, Nikkei staff writer

Alibaba's headquarters in Zhejiang Province.

SHANGHAI -- Chinese tech giant Alibaba Group Holding's income from operations surged 65% on the year to 48 billion yuan ($6.97 billion) for the fiscal year ended March, as the increase in domestic users of its e-commerce services slowed, but customers bought more.

Revenue soared 56% to 158.2 billion yuan, the company said Thursday. Annual active online buyers in China, which contribute 70% of sales, rose 7% over 12 months to 454 million people. This was lower than the roughly 20% growth the previous year, but average purchase value per customer climbed more than 30%.

Sales from international online retail, which had been a source of worry, more than tripled to 7.3 billion yuan. Alibaba's purchase last year of Southeast Asian e-commerce company Lazada Group contributed heavily, and the percentage of revenue from international retail operations improved to 5%, up three percentage points on the year.

Net income, however, dropped 42% to 41.2 billion yuan from a year earlier, when Alibaba booked unusual gains primarily from the reappraisal of group companies' worth.

The online shopping powerhouse also announced Thursday it would repurchase $6 billion of its stock over the next two years. The company said the buyback is intended to prevent per-share profits from being diluted through the use of stock to reward officials and employees.

China's rural market has become an intense battleground for e-commerce companies. Gross merchandise volume in rural areas was 350 billion yuan in 2015, and in 2017 that figure could grow 37% on the year, according to Elinor Leung, an analyst at brokerage CLSA. Despite stiff competition, Leung sees rural investment as manageable due to Alibaba's franchise model, "where it passes on all commissions to local partners, but incurs limited losses," she said.

Alibaba is also working on online grocery shopping, another promising field. "China's online grocery penetration is at only 4%," Leung noted, "compared to 36% for electronics and 21% for apparel." She expects the country's online grocery penetration "to quadruple to 16% by 2020," and sees competition stiffening in the future for the young market.

Alibaba listed on the New York Stock Exchange in September 2014. Its shares there dipped into the $80 range at the end of last year, but have since recovered to all-time high territory, around $120. The company is strengthening non-core businesses such as finance and cloud services, and has lately stepped up its acquisitions of brick-and-mortar locations such as department stores.

Nikkei staff writer Mariko Tai in Hong Kong contributed to this story.

Asia300

Alibaba Group Holding Ltd.

China

Market(Ticker): NYS(BABA)
Sector:
Industry:
Retail Trade
Internet Retail
Market cap(USD): 384,185.12M
Shares: 2,529.36M

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