(Bloomberg)—Alibaba Group Holding Ltd. posted sales and earnings that topped estimates as the Chinese ecommerce giant overhauled shopping recommendations to defy a slowing economy. Alibaba owns and operates marketplaces Taobao and Tmall, which hold the No. 1 and No. 2 spots in the ranking for Internet Retailer Online Marketplaces.
Revenue climbed to 93.5 billion yuan ($13.6 billion) in the three months ended in March, about 1.8% above estimates as adjusted earnings-per-share of 8.57 yuan ($1.25) topped projections for 6.5 yuan ($0.95). Gross merchandise value, or the value of all goods sold, on Alibaba’s Chinese marketplaces grew 25% to 5.73 trillion yuan ($833.3 billion) for fiscal 2018, with Tmall increasing 31% and Taobao up 19% year over year. Alibaba expects sales in the current year to jump at least 33% to more than 500 billion yuan ($72.72 billion). Alibaba’s fiscal year ended March 31.
As Alibaba pushes deeper into businesses like cloud computing, it’s getting better at understanding ecommerce customers and making money from recommendations based on their preferences. The move is driving more sales than traditional search and boosting its ability to sell targeted advertising to merchants on its main Taobao platform, the giant reports. That is bolstering revenue growth even as escalating U.S.-Chinese tensions threaten to further dampen the world’s No. 2 economy.
“The results were really good, especially given how the macro economy hasn’t been that great,” said Steven Zhu, an analyst with Pacific Epoch in Shanghai. “It’s a great sign that core ecommerce was growing strong.”
Alibaba’s main shopping app Taobao started testing an ad product known as “super recommendations” in April, according to an April 18 HSBC report. The feature allows merchants to use text, graphics and short videos to market their wares on a number of new personalized recommendation feeds including “guess you like it,” a product display based on users’ browsing and purchase history; “good stuff here,” a shopping guide; and live-streaming showrooms.
Earlier on Wednesday, rival Tencent Holdings Ltd. posted the slowest revenue growth since its 2004 initial public offering, although earnings topped estimates.
Alibaba’s core commerce business posted revenue of 78.9 billion yuan ($11.47 billion), a jump of 54%. Alibaba’s customer management revenue, which includes advertising and fees charged to merchants, grew by 31%. That’s a sign that the recommendation-based ad business is luring more merchants to spend, Zhu said.
In other earnings news:
- Department store Macy’s Inc., No. 5 in the Internet Retailer 2019 Top 1000, reported double-digit growth in its online business for the first quarter ending May 4, with mobile sales growing faster than any other channel. It didn’t break out exact figures. However, store sales were also up 0.7%, beating analysts’ projections and continuing the trend of increasing store sales for the sixth straight quarter.
- Apparel brand Ralph Lauren Corp. (No. 85) delivered an 11% increase in ecommerce sales for its fiscal year ending March 30, according to the retailer’s earning release. That includes both sales from sites operated by the brand and sales to other ecommerce retailers, with 11 new wholesale digital partners in Europe helping to boost international online growth. Those new retailers include youth-oriented shops like Slam Jam Socialism in Italy and Kickz in Germany.