Judging by the numbers, Alibaba Group Holding Ltd. Chief Executive Officer Daniel Zhang’s first Wall Street outing was a big letdown.
In the first quarterly results since Zhang took over in May, Asia’s largest Internet company posted its slowest sales growth in at least three years. Shares in the company fell 5.1 percent in New York trading, dropping to the lowest since the company’s initial public offering in September.
Zhang’s biggest challenge now is gaining investors’ confidence, especially as the Chinese economy cools after years of torrid growth. He helms a company that has lost about $100 billion of its value since November, the largest destruction of shareholder value globally.
The career finance executive announced Wednesday that the company will buy back as much as $4 billion of its shares over two years, a move to prop up its beleaguered stock.
“We closely monitor the Chinese economy and consumer behaviors but as we’ve always said, we manage our business and execute our growth strategy for the long term,” Zhang told analysts on a post-earnings conference call.
Zhang has beefed up the company’s presence in two crucial areas: mobile business development and global expansion. International commerce revenue climbed 19 percent, while mobile transactions more than doubled.
Zhang has kept himself busy since taking over from the well-regarded Jonathan Lu in May. Just this month, he presided over the single largest deal in Alibaba’s history, a $4.6 billion investment in Suning Commerce Group Ltd.
He again made plain his intention to ride a global shift toward mobile commerce and services, explore an underserved Chinese countryside, and extend Alibaba’s successful home model to foreign markets from Russia to Brazil.
On Wednesday, the company announced an agreement with Macy’s Inc., under which the U.S. company will become the first American department store to open an exclusive online store on Tmall.
“In terms of overseas expansion, what Zhang really has to prioritize now is to bring more global well-known brands to help improve Tmall’s value,” said Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP. “Zhang was able to improve mobile monetization rate at Alibaba, which is pretty good.”
A Mobile Courtship
Alibaba is being squeezed by price cuts and competition in China’s bigger cities, a shift to shopping on smartphones that generates less advertising revenue and the country’s slowest economic growth since 1990.
Gross merchandise volume, which measures transactions on its Chinese retail marketplaces, rose 34 percent to 673 billion yuan in the June quarter, short of the 38 percent growth expected by analysts.
Investors and rival executives will continue to scrutinize Zhang’s performance in the quarters to come.
Alibaba co-founder Jack Ma once expressed skepticism about what he called professional managers. He may have handed the reins to just such a person.
A former PricewaterhouseCoopers LLP accountant with a calm demeanor, Zhang has built a record of success in finance and operations at Alibaba. He helped build out e-commerce platforms after joining the company’s Taobao online marketplace as chief financial officer just eight years ago.
He was the architect of Singles Day, the Nov. 11 annual shopping blitz that’s become the biggest 24-hour sales period for the company and a national cultural phenomenon.
In his latest role, the CEO mapped out a plan to provide 1 billion yuan in angel investments to court the developers crucial to Alibaba’s cloud-computing and mobile-software businesses.
And Zhang accelerated a global search for youthful talent. In May, Alibaba started a global MBA program that will let participants from around the world rotate among its different departments over two years.
Another of Zhang’s most pressing tasks will be to guide Alibaba deeper into rural markets. That’s where Suning and its extensive nationwide store network will come in handy.