Alibaba Boosts Its Stake in Online Retailer Zulily to 9.3%

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Alibaba Chairman Jack Ma
Jack Ma, billionaire and chairman of Alibaba Group Holding Ltd, has set a goal of getting 50 percent of sales from outside China as the nation’s economy is projected to grow at its slowest pace since 1990. Photographer: Krisztian Bocsi/Bloomberg

Alibaba Group Holding Ltd., China’s biggest e-commerce company that held its initial public offering last year, bought $56.2 million of stock in U.S. online retailer Zulily Inc. this week, according to a regulatory filing.

The purchases brought Alibaba’s holdings of Seattle-based Zulily to 11.5 million shares, or a 9.3 percent stake, according to regulatory filings and data compiled by Bloomberg. Alibaba’s Zulily holdings were worth $152.9 million at Friday’s closing price of $13.30.

Alibaba Chairman Jack Ma has set a goal of getting 50 percent of sales from outside China as the nation’s economy is projected to grow at its slowest pace since 1990. Online commerce from China accounted for 80 percent of revenue in the March quarter, while international e-commerce sales were just 9 percent of the company’s total, Alibaba said.

“Alibaba continues to focus on making investments in forward-thinking, innovative entrepreneurs that are developing leading products and technologies,” Jennifer Kuperman, vice president of international corporate affairs at Alibaba, said in an e-mail. “The Zulily team has a compelling vision for the future that is consistent with our investment philosophy.”

Alibaba has announced at least $2.4 billion in investments in the past 12 months including a Chinese soccer team, a smartphone maker and a mobile application for hailing taxis. The company is trying to diversify while still tapping the more than 557 million Chinese who access the Internet from their smartphones and tablets.

Slumping Stock

Zulily, which sells clothing, home decor and related items, mostly to women, has seen its stock fall 82 percent since its all-time closing high of $72.75 on Feb. 27, 2014, after a November 2013 initial public offering. The stock dropped to a record low close of $10.82 on May 6 and then rebounded 23 percent in the following two days as Alibaba added to its stake.

At the end of March, Zulily had 5 million customers who had made at least one purchase in the previous year, up 35 percent from the previous year. More than half of all Zulily sales are on mobile devices.

Alibaba’s most recent Zulily share purchases were in five transactions from May 6 to May 8, at prices ranging from $10.75 to $12.26, according to the filing.

“We have great respect for the team at Alibaba and all that they have built,” Darrell Cavens, Zulily chief executive officer, said in an e-mailed statement.

Rising Revenue

Alibaba announced a 45 percent increase in revenue, according to a separate regulatory filing on May 7. The company also said Daniel Zhang will become its chief executive officer on May 10, replacing Jonathan Lu, who will remain on the board as vice chairman.

Alibaba’s shares have gained 28 percent after being sold at $68 apiece in a September IPO that raised a record $25 billion. Inc. gets more than one-third of its e-commerce revenue internationally, and the company is trying to further expand its global reach with investments in India and China.

China and the U.S. are the world’s largest e-commerce markets. Global e-commerce spending will reach $1.6 trillion this year, with China and the U.S. combining for more than half of those sales, according to research firm EMarketer.

Alibaba’s Zulily stake was previously reported by the Wall Street Journal.

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