By George Glover
Alibaba is bailing on traditional in-store shopping -- and investors don't seem too impressed.
The retailer's Hong Kong-listed shares sank 1.1% on Tuesday after it said it would sell the department-store chain Intime to textile and clothing company Youngor Group for about $1.02 billion. Its American depositary receipts slid 0.2%, having fallen by 2% Monday on concerns about weak consumer spending in China.
The move to sell Intime makes sense in theory -- it's a sign that Alibaba wants to refocus on higher-growth sectors like e-commerce and cloud computing.
But the exit will force the company to book a $1.3 billion loss, the ecommerce giant said. That's not pocket change -- last quarter, Alibaba logged adjusted earnings of about $6.5 billion. The sale also looks like a volte-face, considering Alibaba only bought Intime in 2017 in a $2.6 billion deal.
The sale is a sign that traditional, in-person shopping still hasn't recovered in China since the pandemic, despite Beijing's efforts to revive growth through stimulus packages. Disappointing economic data published Monday helped tell the story -- retail sales growth rose just 3% from a year ago last month, a slowdown from the 4.8% rise in October.
Alibaba is also struggling to stave off competition from rivals like Pinduoduo, owned by Temu parent PDD Holdings, which has offered aggressive discounts in a bid to eat into the company's market share.
As of Monday's close, Alibaba ADRs were up 11% in 2024 and its Hong Kong shares were up 10.3%. They're lagging Hong Kong's Hang Seng Index, up 16% this year, as well as the benchmark U.S. gauge the S&P 500, which has jumped 27% since Jan. 1.
Write to George Glover at george.glover@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 17, 2024 06:21 ET (11:21 GMT)
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