On Thursday, Alibaba Group Holding Ltd issued its quarterly results for the fiscal second quarter. The company reported single-digit revenue growth and that revenue was below analysts’ expectations. Alibaba’s US-listed shares dropped 2 percent before the bell. The company, like a handful of others, is facing Covid restrictions in China and macroeconomic challenges which have caused a reduction in consumer spending. The Chinese government’s zero-Covid policies have hugely impacted a handful of businesses, as its caused frequent lockdowns and disrupted economic activity.
For the quarter being considered, revenue was up 3 percent to 207.18 billion yuan ($28.96 billion), below analysts’ estimate of 208.62 billion yuan, according to analysts.
Customer management revenue which provides information on how much merchants spend on Alibaba dropped 7 percent year on year. This is the steepest decline for the segment which usually accounts for 30 percent of the company’s total revenue.
While speaking on an earnings call, Alibaba’s CEO Daniel Zhang noted that consumption demand had grown weak and that the Covid-19 resurgence “affected one area after another, resulting in abnormal or suspended logistics service in different places.”
For the fiscal second quarter, Alibaba reported 20.56 billion yuan in net loss attributable to shareholders. The company, however, earned 12.92 yuan per American Depository Share (ADS) excluding one-off items. This surpassed analysts’ estimate of 11.62 yuan per share profit.
The ongoing quarter has not also been great for the company. Last week, Alibaba failed to provide information on its “Singles Day” shopping festival for the first time. It only noted that the results were in line with last year’s, which was its lowest-ever growth.
The company’s CEO added on the call that about 50 percent of places in China experienced an abnormality in logistics and delivery services as a result of the strict Covid-19 protocols and that this affected performance of the shopping festival. The CEO also noted that the unusually warm weather for the season took a toll on the purchases of clothing items.
The company had announced in August that it was going to complete its primary conversion of shares to the Hong Kong Stock Exchange by the end of this year. It will, however, not be completing it by the end of this year.