Alibaba Group (BABA) is divesting its 99% stake in the department store chain, Intime, to Youngor Group, a China-based manufacturer of apparel and textile products. The deal, valued at 7.4 billion yuan ($1.02 billion), reflects BABA’s efforts to shift focus from traditional retail business to its core e-commerce and cloud businesses. The sale is expected to result in a loss of around 9.3 billion yuan ($1.3 billion) for Alibaba.
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It is worth mentioning that the company acquired Intime in 2017 for $2.6 billion. In recent years, the unit’s performance has been impacted by slowing consumer spending in China. Additionally, it has faced intense competition from Pinduoduo (PDD) and ByteDance’s Douyin, which have been gaining market share in the Chinese e-commerce market.
Alibaba Shifting Focus Away from Brick-and-Mortar Retail
In addition to Intime, Alibaba is planning to sell its controlling stake in Sun Art Retail Group, a major supermarket chain in China. Investors should note that BABA made huge investments in the traditional retail sector, acquiring stakes in companies such as Suning and Sun Art Retail, under its former CEO Daniel Zhang.
Zhang aimed to combine online and offline retail into a unified structure. However, a slowing domestic economy and intensified competition led Alibaba to prioritize its core e-commerce operations and explore new growth opportunities.
Slowing Retail Spending in China Remains a Concern
Investors should note that the sale of Intime coincides with the latest economic report from China, which indicated sluggish domestic demand in China.
On Monday, China revealed that total retail sales grew by only 3% in November, the slowest pace in three months. The disappointing data shows that the Chinese government’s efforts to boost the economy have not yet produced significant results. This suggests a need for additional stimulus measures to support growth in 2025.
Is BABA a Buy, Sell, or Hold?
Turning to Wall Street, BABA stock has a Strong Buy consensus rating based on 14 Buys and one Hold assigned in the last three months. At $127.05, the average Alibaba price target implies a 47.63% upside potential. Shares of the company have gained 13.4% year-to-date.
