Alibaba Stresses Key Role of Ele.me as Sales Rumor Denied

BEIJING, February 13 (TMTPost)-- Alibaba Group Holding Ltd. executive denied report about plan to sell its food delivery unit Ele.me.

Credit：TMTPost

“ I don't think there's any need for us to make further comment because we've already addressed that rumor and have stated that that's not true,” Chief Financial Officer (CFO) Toby Xu responded to an analyst’s question about recent report that Alibaba is considering sales of Ele.me. Xu added Ele.me is “a very important asset for us in the hyper local segment”.

Xu made the remark following Alibaba’s quarterly financial results released last week. Alibaba posted slower-than-expected growth of sales in the quarter ended December 31 2023, or its third fiscal quarter of the fiscal year 2024. Revenue that quarter rose 5% year-over-year (YoY) to RMB260.35 billion (US$36.67 billion), missing Wall Street expectation of RMB262.07 billion. The YoY growth evidently decelerated cooling from the previous quarter. The first and second fiscal quarter recorded YoY increases of 13.9% and 8.5% respectively.

The non-GAAP adjusted EBITA, excluding share-based compensation expense, impairment of intangible assets and goodwill and certain other items, grew 2% YoY to RMB52.84 billioin, and diluted earnings per ADS decreased 2% YoY to RMB18.97. Net income attributed to ordinary shareholders crashed 69% YoY to RMB14.43 billion, which was primarily due to impairment of Sun Art, one of Alibaba’s first investments in the brick-and-mortar grocery space as part of its "new retail" strategy of taking physical stores online, and Alibaba’s video platform Youku.The impairment of intangible assets related to Sun Art recorded RMB12.08 billion in the December quarter, and impairment of good will that quarter surged 213% YoY to RMB8.49 billion, RMB2.71 billion out of which came from Youku.

For the December quarter, revenue from Local Services Group, one of six major business groups that Alibaba announced in March 2024 that it decided to split into, grew 13% YoY to RMB15.16 billion, driven by health growth of Ele.me and rapid growth of Amap, according to Alibaba’s financial report. Order YoY growth of the business group that quarter topped 20%. For the twelve months ended December 31, 2023, Local Services Group’s annual active consumers reached over 390 million and their annual purchasing frequency grew strongly YoY. Its losses for the December quarter continued to narrow, fueled by improving business scale and efficiency. Adjusted EBITA that quarter of the business group stood at the loss of RMB2.068 billion, compared with the loss of RMB2.923 billion the same period a year ago. Alibaba said the 29% of YoY narrowing loss was primarily due to its “To-Home” business fueled by Ele.me’s improved unit economics and increasing scale.

Talks about Alibaba’s sales of Ele.me swirled these months. TikTok’s Chinese sister Douyin was said to acquired Ele.me for US$7 billion in mid-December. Douyin and its owner ByteDance later dismissed the news separately. Relevant person in charge said Douyin doesn’t have such plan, according to Chinese digital newspaper The Paper. Less than a month later, ByteDance was said to be in talks about takeover of Ele.me, and there are still two disagreements on the deal: one is the acquisition price, another is the retention of Ele.me’s team. Ele.me said the news is just a rumor and absolutely false, and Douyin’s official reiterated there is no such plan.