Increase revenue and reduce losses, Suning Tesco returned to the track of steady development

In the context of the new crown pneumonia epidemic and macroeconomic adjustment, the retail industry is facing downward pressure, how to turn the crisis into an opportunity, test the wisdom of every retail track player.

On the evening of April 29, Suning Tesco (002024. SZ) publishes its 2021 annual report and 2022 first quarter report. In the fourth quarter of last year, the company's merchandise sales scale increased by 24.39% month-on-month, and the EBITDA (excluding the impact of operating cash flow factors on the basis of EBITDA) in November and December continued to be positive. EBITDA continued to be positive in the first quarter of 2022, achieving profitability in the core business of home appliances 3C in a single month in March.

Since the second half of last year, with the support of Jiangsu Province, Nanjing Municipal Government and industrial investors, Suning Tesco has actively promoted cost reduction, efficiency improvement and income increase, and since the fourth quarter of last year, the company's operating conditions have been actively improved and its hematopoietic capacity has been restored.

Analysts pointed out that Suning Tesco accelerated the increase in revenue and loss reduction, the fourth quarter performance achieved a "V-shaped rebound", and the first quarter of this year continued to climb the positive trend, marking that Suning Tesco is throwing off the historical burden and returning to the track of steady development.

Facing the development of 2022, Suning Tesco said that it will further improve the company's liquidity by deepening the cooperation between banks and enterprises, accelerating asset revitalization, continuing to strengthen the commodity supply chain, and making every effort to accelerate the operation and repair, so as to achieve the annual profitability of the core business of home appliances 3C.

Scene optimization is the focus of store upgrades

The past 2021 has been a difficult year in the development process of Suning Tesco, experiencing the impact of multiple factors and putting pressure on operating performance.

Inspired by the enterprise spirit of "persistent struggle and never say defeat", the company insists on going on and out, which is also the momentum where the company can always maintain its confidence in development and use it to start again.

Since 2021, Suning Tesco has further focused on the core business of home appliance 3C, focusing on core competitiveness and improving operational efficiency. Offline, strengthen the upgrading of the store model, strengthen the ability to obtain customers in front of the store and the construction of scenes and experiences, and have 11,281 stores of various types by the end of 2021. Online, Tmall Suning Tesco flagship store achieved profits in the fourth quarter, and Suning Tesco's main station also significantly reduced losses and is expected to achieve profitability in 2022.

The company's retail cloud, easy to collect cloud, social cloud and other incremental business rapid development, of which the focus of the sinking market retail cloud opened 2678 stores throughout the year, the total reached 9178, and achieved a single quarter GMV scale increased by 27% year-on-year.

According to the financial report data, in 2021, Suning Tesco achieved operating income of 138.904 billion yuan, and the scale of commodity sales in the fourth quarter increased by 24.39% month-on-month, of which the sales revenue of comparable stores of home appliances with the largest profit contribution weight increased by 21.91% month-on-month. The company achieved a single-month EBITDA profit in November and December.

Scene optimization is the focus of Suning Tesco's store upgrade in 2022. Ren Jun, President of Suning Tesco, said: "We must take the 'future-oriented new store model' as a core retail product, starting from the user, integrating scene goods, through the fulfillment service, and cross-domain dual-line promotion, to create a new template benchmark." ”

In January this year, as the first "four-in-one" innovative store presented in front of the market and consumers, Suning Tesco Xiaolingwei Store integrated home decoration, home appliances and home furnishing in the original business area of only 1200 square meters, providing users with one-stop solutions such as whole house intelligence, quality set of home appliances, whole house home decoration customization, home appliance home economics and life services.

By adjusting the spatial layout and display form, casarte, COLMO, boss, Fangtai and other quality home appliances will be displayed and experiential display; the whole process service of integrated home decoration, home appliances and home furnishing from local transformation to overall design will be introduced; and the special area for small household appliances category and private home will be created to meet the "home needs" of consumption upgrading.

The ultimate purpose of Suning Tesco's four-in-one store launch is undoubtedly to allow more users to "return" to offline stores. According to the data, Suning Tesco currently has more than 10,000 smart stores in the country and is the largest chain enterprise in China.

The company will further accelerate the upgrading of the new store model this year, launch the "one-size-one store" model in July and August, and gradually promote it after the pilot to achieve the national store upgrade goal.

These initiatives have proven to be effective.

In the first quarter of 2022, EBITDA was 260 million yuan, achieving quarterly positive, achieving a profit in the 3C core business of home appliances in a single month in March, and the company's operating cash net inflow in the first quarter was 1.296 billion yuan, and obtained an incremental credit of 1.05 billion yuan, which effectively supplemented liquidity and ensured the continued stability of operation.

While continuously improving operations, the results of cost reduction and efficiency increase are obvious.

According to the financial report data, the company's total expense level in 2021 decreased by 14.35% compared with 2020, and the fourth quarter expense decreased by 30.73% month-on-month. Excluding the impact of the annual special provision for impairment of related assets, investment losses, deferred income tax and other factors, the company's net profit attributable to the shareholders of the listed company in the fourth quarter was a loss of 1.218 billion yuan, a significant reduction in losses from the previous quarter. In the first quarter of 2022, the total expenses fell by 43.53% year-on-year, and the net profit attributable to the shareholders of the listed company was a loss of 1.029 billion yuan, and the loss continued to narrow.

Incremental space: customized, high-end, township market

In addition to store upgrades, Suning Tesco also needs to find incremental space.

Based on the needs of users' family scenes, the company will build subdivision scene operation capabilities, commodity collocation and combination capabilities, logistics installation and fulfillment capabilities, and upgrade from "buyer electricity to Suning" to "customized family scenes to Suning" to create differentiated advantages.

Suning Tesco said that it will comprehensively break through the large-scale customized procurement model, achieve a significant increase in business scale and revenue proportion, and will take the lead in making breakthroughs in home appliances in 2022, with omni-channel customized procurement targets accounting for 15%-20%.

In order to match the adjustment of business operations, in 2022, Suning Tesco will strengthen the construction of organizational self-drive, improve the matching of responsibilities and rights, strengthen the construction of incentive system, further delegate authority to regional terminals, and enhance the flexibility of theater-based organizations. At the same time, the company will also strengthen the construction of the 1200 project and talent echelon, boldly promote and appoint outstanding young cadres, introduce more senior middle and senior managers for key professional positions, continue to improve the company's ability structure and professional structure, and support the effective implementation of the strategy.

In the era of the crowd, high-end is another breakthrough.

With the rise of a new generation of consumer groups, new consumer demand is emerging - on the one hand, concise and young home appliances are more popular; on the other hand, the main appeal of the post-90s is the complete purchase of high-end home appliances.

Taking Casarte as an example, in July last year, Suning Tesco and Haier reached a three-year strategic cooperation of 100 billion yuan, of which the high-end home appliance market became the consensus of both sides. The two sides plan to continue to consolidate their leading position in the high-end market share through strategies such as upgrading of front-end home appliances and scene layout.

In April this year, the "Casarte Comfort Home Improvement Festival" was held, according to the goals of both sides, during the event, 15 three-winged birds Casarte 001 store ushered in the upgrading of the ability to change the bureau, 41 digital model room special training and 198 cross-industry circle layer tasting meetings landed. In addition, in the Suning Tesco retail cloud channel, 3,000 stores jointly participated to serve the sinking market consumer demand.

"Casarte began to make scene-based transformations last year, creating a smart solution covering all scenes of food, clothing, housing and entertainment, which coincides with the home scene proposed by Suning Tesco." Song Zhaowei, general manager of Casarte in Haier Zhijia China, believes that Suning Tesco has 32 years of experience in home appliance retail, and its huge vertical user group with very high relevance and professional after-sales service network can match and help casarte's further development.

The township market is another point of strength for Suning Tesco.

In recent years, relying on the retail cloud, Suning Tesco has continued to empower small and medium-sized franchisees with scene power, including store building, operation, scene transformation, space design, etc., and since last year, it has also grafted the successful experience of reusing home appliances, introduced household, bathroom and other categories, so that county stores can upgrade the scene and experience, which also provides a foundation for high-end set of home appliances to enter the market.

"In Shenmu, Shaanxi, the people have more savings and low cost of living, and they are more willing to spend money on the quality of life." Li Xin, a retail cloud franchisee, said that the living area of local families can generally reach 140 square meters, and the cost of hard and soft decoration such as home appliances and home decoration can generally reach 400,000.

"For traditional county and town home appliance operations, the supply chain, digital system and professional service foundation are weak points. Retail cloud can provide one-stop solutions for goods, technologies and services, as well as warehousing financial tools such as cloud warehouses and fast financing to solve the problems of store sampling, inventory and capital occupation, and franchisees only need to focus on store operations. Li Xin also believes that it is Suning Tesco's professional retail service capabilities that give him the confidence to open 5 stores in Shaanxi County in 3 years.

It is understood that at present, Suning Tesco Retail Cloud has helped more than 1,800 brands sink, double-line services exceed 250 million users, and the speed of "seven stores a day" has become the efficiency representative of the sinking market.

Suning Tesco retail cloud data show that in the first quarter of this year, the quality consumption of the county and township markets was further activated, the sales of high-end brand Casarte three-door refrigerators increased by 156% year-on-year, the sales of COLMO wall-hung air conditioners increased by 98% year-on-year, and the upgraded products such as dryers, integrated stoves, water purifiers, and dishwashers were popular, with an increase of 363%, 138%, 78% and 65% respectively.