Alibaba Group Holding Limited (BABA Quick QuoteBABA - Free Report) reported fourth-quarter fiscal 2024 non-GAAP earnings of $1.40 per ADS (RMB 10.14), which beat the Zacks Consensus Estimate by 12.9%. The figure decreased 5% from the year-ago quarter’s reported number in RMB terms.

Revenues of RMB 221.87 billion ($30.73 billion) rose 7% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $30.59 billion.

The top-line increase was driven by solid momentum across the international commerce retail and wholesale businesses. Strength across the local services and Cainiao logistics services contributed well. The improving performance of the Taobao and Tmall Group segment was a positive.

However, the sluggish performance of the Digital Media and Entertainment Group was concerning.

Shares of Alibaba have returned 2.6% year to date, underperforming the Zacks Retail-Wholesale sector’s growth of 10%.

Revenues by Segments

Taobao and Tmall Group (42% of the total revenues): The segment comprises Taobao, Tmall, Xianyu, 1688.com and other businesses operating in China’s retail and wholesale markets. Alibaba generated RMB 93.22 billion ($12.9 billion) of revenues from the segment, which grew 4% from the year-ago quarter’s reported figure.

China commerce retail (94.7% of the Taobao and Tmall revenues): The business vertical’s revenues for the reported quarter were RMB 88.3 billion ($12.2 billion), reflecting a 3% rise from the year-ago quarter. The improvement was attributed to customer management revenues, which grew 5% year over year, driven by strength in search and recommendations. Also, growing online GMV on Taobao and Tmall was a positive.

However, revenues from direct sales and others declined 2% year over year, which was a negative.

China commerce wholesale (5.3%): The business generated revenues of RMB 4.95 billion ($686 million), which grew 20% on a year-over-year basis. This was attributed to increasing revenues from value-added services.

Alibaba International Digital Commerce Group (12.4% of the total revenues): The segment comprises Lazada, AliExpress, Trendyol, Alibaba.com, and other businesses operating in the international retail and wholesale markets. Alibaba generated RMB 27.45 billion ($3.8 billion) in revenues from the segment, which grew 45% from the year-ago quarter.

International commerce retail (81.2% of international revenues): Revenues for the reported quarter were RMB 22.3 billion ($3.1 billion), up 56% from the year-ago quarter’s reported figure, owing to solid combined order growth in AIDC’s retail businesses. Also, the strong momentum in AliExpress’ Choice was a positive.

International commerce wholesale (18.8%): The business generated revenues of RMB 5.2 billion ($716 million), which increased 11% on a year-over-year basis. Strength in cross-border-related value-added services contributed well.

Local Services Group (6.6% of the total revenues): The segment’s revenues grossed RMB 14.63 billion ($2.03 billion), up 19% from the year-ago quarter. The rise was driven by strong order growth in the Ele.me and Amap businesses.

Cainiao Smart Logistics Network (11.1% of the total revenues): Revenues summed up to RMB 24.6 billion ($3.4 billion), up 30% from the year-ago quarter. The upside was led by a solid momentum across cross-border fulfillment solutions.

Cloud Intelligence Group (11.5% of the total revenues): The segment generated revenues of RMB 25.6 billion ($3.5 billion), up 3% from the year-ago quarter. This was attributed to strength across Alibaba’s consolidated businesses.

Digital Media and Entertainment Group (2.2% of the total revenues): Revenues logged RMB 4.95 billion ($685 million), decreasing 1% from the year-ago quarter’s reported figure.

All Others (23.2% of the total revenues): The segment’s revenues were RMB 51.5 billion ($7.1 billion), down 3% from the year-ago quarter. Declining revenues from Sun Art was concerning.

Operating Details

In the fiscal fourth quarter, sales and marketing expenses were RMB 28.8 billion ($3.99 billion), up 15.6% from the year-ago quarter. As a percentage of total revenues, the figure expanded 100 basis points (bps) to 13%.

General and administrative expenses were RMB 14.02 billion ($1.6 billion), up 9.3% from the year-ago quarter. As a percentage of total revenues, the figure was flat year over year.

Product development expenses were RMB 14.1 billion ($1.95 billion), up 1.5% from the year-ago quarter. As a percentage of total revenues, the figure contracted by 100 bps year over year.

The operating income was RMB 14.8 billion ($2.05 billion) in the reported quarter, down 3% year over year. The operating margin was 6.7% in the fiscal fourth quarter, contracting 60 bps from the year-ago quarter.

Adjusted EBITDA decreased 4% from the year-ago quarter to RMB 30.8 billion ($4.3 billion).

Balance Sheet & Cash Flow

As of Mar 31, 2024, cash and cash equivalents were $34.4 billion (RMB 248.1 billion), down from $35.9 billion (RMB 254.8 billion) as of Dec 31, 2023.

Short-term investments totaled $36.4 billion (RMB 262.96 billion) at the end of fourth-quarter fiscal 2024, down from $42.3 billion (RMB 300.42 billion) at the end of third-quarter fiscal 2024.

Alibaba generated $3.2 billion (RMB 23.3 billion) in cash from operations in the reported quarter, down from $9.1 billion (RMB 64.7 billion) in the previous quarter.

BABA’s free cash flow was $2.1 billion (RMB 15.4 billion).

Zacks Rank & Stocks to Consider

Currently, Alibaba carries a Zacks Rank #5 (Strong Sell).

Investors interested in the broader retail-wholesale sector can consider some better-ranked stocks like The Gap , AutoZone (AZO Quick QuoteAZO - Free Report) and Casey’s General Stores (CASY Quick QuoteCASY - Free Report) . The Gap sports a Zacks Rank #1 (Strong Buy), and AutoZone and Casey’s carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Gap has gained 6.8% in the year-to-date period. The long-term earnings growth rate for GPS is estimated at 12%.

Shares of AutoZone have gained 50.7% in the year-to-date period. The long-term earnings growth rate for AZO is projected at 13.24%.

Casey’s has gained 23.6% in the year-to-date period. The long-term earnings growth rate for CASY is anticipated at 9.74%.