Alibaba share price plummets on disappointing revenue figures

 
Joe Hall
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Alibaba founder Jack Ma (Source: Getty)

Alibaba's share price is set for a continued slump after its revenue and sales growth came in weaker than expected in the first quarter.

The figures

The Chinese e-commerce company's stock opened over seven per cent down on the New York Stock Exchange this morning after it reported a 28 per cent increase in revenue to $3.26bn (£2.02bn) - lower than the expected $3.4bn.

Read more: E-commerce giant Alibaba acquisitions hit new high

Investors appear unmoved by the group's announcement that it had signed an agreement with American retail giant Macy's to bring the company's products to consumers in China.

Gross merchandise volume sold on the group's various e-commerce marketplaces slowed to its most sluggish rate of growth in three years in the quarter, growing by 34 per cent in the year to $109bn.

However, Alibaba's revenue from mobile devices encouraged as it overtook desktop for the first time, rising 225 per cent to $1.3bn and representing 55 per cent of all sales.

Since it's record-breaking initial public offering of $68 per share last September, Alibaba's share price has risen a modest 14 per cent but has dropped 35.6 per cent from its record high of $120 in November on as it has embarked on a number of costly acquisitions.

The firm today announced it had signed off on a $4bn stock-buyback programme spread over two years in order to offset the impact caused by using shares in employee compensation.

Why it's interesting

Alibaba's latest tie-up with Macy's through its online Tmall store - which recorded a 55 per cent increase in gross merchandise volume to $40bn - is just the latest small example of its continuing expansion ambitions better demonstrated by its recent $4.6bn acquisition in retail group Suning.

Yet the group has by concerns of increasing regulatory scrutiny in China and the US. The Chinese State Administration for Industry and Commerce investigated the firm's e-commerce platforms for the alleged sale of counterfeit goods.

Also concerning for Alibaba investors will be the increasing cost to the company of finding new cutomers. The cost of new customers represented 33 per cent of revenue at $1.1bn due to an "increase in costs associated with our new businesses initiatives including its new Netflix-style streaming service.

What Alibaba said

Macy's is one of the most iconic brands in the world and we are honored Macy's China limited has chosen us as their exclusive partner to grow their business in China.

Macy's exclusive Tmall global flagship store is a major win for consumers across China. It reinforces Tmall Global's status as the premiere solution for brands and retailers in their strategic online presence and direct engagement with customers in China.

- Alibaba chief executive Daniel Zhang

In short

Alibaba's 28 per cent in revenue may not look like a disaster at first glance - but its growth-hungry investors expect more and want indication that the firm's acquisitions are in its interests.

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