Alibaba returns to pre-COVID levels, Estee Lauder misses estimates as COVID-19 hits retail

Yahoo Finance’s Emily McCormick joins The First Trade with Alexis Christoforous to discuss quarterly reports from Alibaba and Estee Lauder.

Video Transcript

ALEXIS CHRISTOPHOROUS: We have a few more earnings reports trickling into the market. Want to highlight Alibaba and Estee Lauder this morning. So Baba posted a beat on both its top and bottom line. Want to break it down now with Emily McCormick, who's back with us for this one. Emily, a strong quarter for the e-commerce site. What stood out to you?

EMILY MCCORMICK: Strong quarter for Alibaba. A key takeaway here-- the company said its core commerce business has now fully recovered to pre-pandemic levels. So really a testament here to the Chinese consumer coming back online as the coronavirus outbreak abates in that country.

If we take a look at Alibaba's company-wide growth rate, that also reaccelerated to be nearly on par with what it had been reporting before the pandemic. We saw top-line growth up 34% year over year to $154 million yuan. That's about $21.8 billion. Also saw mobile monthly active users up 28 million to 874 million as of June. That was above consensus expectations by about 3 million.

Now, taking a look at specific areas within the company, we saw Alibaba's Tmall Global grew gross merchandise value more than 40% over last year. And that's a platform that helps international brands reach Chinese consumers. Actually saw a benefit during the quarter because of decreased international travel and increased demand for international products here. Now, we do have Baba shares trading just slightly lower in early trading here. They're down about 2% but still up about 22% for the year to date, Alexis.

ALEXIS CHRISTOPHOROUS: All right. Want to hit on Estee Lauder now. Quite a different story there, missing expectations. Did they call out COVID-19 in their results?

EMILY MCCORMICK: Absolutely. Estee Lauder also getting hit here by store closures due to COVID-19. We especially saw sales hit in the Americas. In that geographic region, net sales were down 54% in the quarter. Now, we also saw the company swing to a fourth-quarter loss. That adjusted loss per share of $0.53 actually wider than expected, of course, also compared to earnings last year. So definitely seeing some disappointing results here.

We also had weaker-than-expected guidance for Estee Lauder. It estimated a second straight drop in net sales for the current quarter of as much as 13%. The company also announcing a restructuring plan to cut as many as 2,000 positions globally as well as closing up to 15% of its freestanding stores globally.

Now, that's expected to produce restructuring and other charges of as much as $500 million. It eventually is expected to yield annual benefits of as much as $400 million. So something to keep in mind here in the coming quarters for Estee Lauder.

Now, we do have shares of that company trading lower here, just over 8% in early trading, adding it to-- it actually was up 2% for the year to date, but quickly paring those gains, Alexis.