Alibaba shares drop analysts warn virus’ “impact is more significant than everyone expected”
Alibaba’s shares have dropped more than two per cent in morning trading as analysts warn virus’ “impact is more significant than everyone expected”.
The Chinese ecommerce giant revealed a healthy 56 per cent rise in net income over the final quarter of 2019 yesterday, but issued a stark warning that the outbreak across its home country will impact sales “across the board” in the coming months.
In its final quarter Alibaba, which accounts for two-thirds of everything bought online in China, posted net revenues of 52.3 billion yuan (£5.74 billion) or 19.55 yuan (£2.15) per share, up significantly from 33.1 billion yuan (£3.63 billion) or 12.64 yuan (£1.39) per share in the same period a year earlier.
Its adjusted earnings per share also beat analyst expectations, rising from 12.19 yuan (£1.34) to 18.19 yuan (£2), while revenues for the quarter increased from 117.3 billion yuan (£12.8 billion) to 161.5 billion yuan (£17.73 billion), comfortably above market expectations of 159.7 billion (£17.53 billion).
Despite the positive results across the board, its chief executive Daniel Zhang warned that the outbreak of the deadly coronavirus, now officially named ‘COVID-19’, has severely impacted its operations and sales figures.
He warned that Alibaba’s retail platforms including Tmall and Taoboa, which account for well over half of its total revenues, were set to shrink in the coming quarter.
This will mark a dramatic turnaround in its retail operations which have seen annual growth of more than 30 per cent for years.
Furthermore, big brands which sell on the platform including Uniqlo and Estée Lauder have seen their average daily sales divebomb between 40 and 80 per cent since the start of the outbreak.
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“The impact is more significant than everyone expected,” financial giant Bernstein’s David Dai said.
“If Alibaba is like this then so are many others. We need to revise our assumptions on the impact to the entire economy”.
Despite online sales increasing while shoppers are told to stay in their homes, Alibaba is struggling to meet demand as few delivery drivers, factory workers or third party merchants have returned to work since the outbreak.
Zhang added: “We are being tested. The delay in employees returning to work from spring festival holidays is preventing merchants and logistics companies from resuming operations.”