E-stores remain key for Alibaba as earnings rise, department store investment not yet paying off

Alibaba, China's top e-commerce firm, beat analyst estimates with a 56 percent rise in first-quarter revenue, driven by strong online sales.

Thursday's results show that Alibaba Group Holding, one of Asia's most valuable companies, continues to derive the lion's share of its revenue from e-commerce, despite strong growth in its entertainment and cloud businesses. Sales on the company's e-commerce platforms made up 86 percent of revenue in the three months to June 30, up from 73 percent a year prior.

Alibaba's stock is up more than 81 percent this year, buoyed by company predictions of strong full-year revenue growth of between 45 and 49 percent.

Chief Executive Daniel Zhang also confirmed the company led a $1.1 billion (854.77 million pounds) investment in Southeast Asian retailer Tokopedia, adding to its expanding network of assets in the region. And in June, Alibaba invested a further $1 billion in Singapore-based e-commerce platform Lazada Group. It has also targeted new merchants in Russia and the US as part of a wider plan to boost revenues and attract new customers outside China.

During a call with analysts on Thursday, executives said the firm expects a more meaningful contribution from offline initiatives as part of its so-called "new retail" strategy.

Alibaba, though, has yet to prove the value of several recent large-scale offline investments, according to analysts, including a $2.6 billion infusion into department store chain Intime Retail Group Co Ltd. "At least for now we don't see any full integration between offline and online (technology) and that's a problem," said Pacific Epoch senior analyst Steven Zhu. "If you don't have full integration then new retail remains a concept rather than reality."

Alibaba's revenue rose to 50.1 billion yuan ($7.51 billion)for the three months ended June 30, compared with analysts' average estimate of 47.7 billion yuan, according to Thomson Reuters I/B/E/S.

In the cloud business, revenue grew by 96 percent in the quarter to 2.4 billion yuan, with paying customers breaking the 1 million mark for the first time, up from 577,000 a year earlier. Alibaba's cloud business boosted its global data centres to 17 during the first quarter, with the addition of two centres in India and Indonesia.

Revenue in the entertainment business rose by 30 percent to 4 billion yuan.