Suning lost another 4.3 billion, and once stepped on Lei Evergrande, the rich second generation of football may not be able to play
Manchester City defeated Inter Milan 1-0 in the 2022–23 Champions League final at the Ataturk Olympic Stadium in Istanbul, Turkey, in June 2023. Source: Visual China
Author | Wen Shijun
Edit | Wang Weikai
Produced by | Prism Tencent Xiaoman Studio
Even if the net profit in 2023 quietly loses 4.277 billion yuan, this is still the "best" year for Suning Tesco (ST Tesco, 002024.SZ) in the last four consecutive net profit loss fiscal years.
Compared with 2021, with a huge loss of 44.179 billion yuan, Ali and Jiangsu and Nanjing state-owned assets urgently entered the bureau, and the founder Zhang Jindong left as chairman. What's more, it has been nearly two years since the "hat" ST was "wearing a hat", and losses have long been commonplace, so the 2023 annual results briefing held on the afternoon of April 19, 2024 was much earlier than in May of previous years.
At this performance briefing, Suning Tesco naturally showed its posture of turning around losses in 2023: "With the strong support of the provincial and municipal governments and the unified leadership of the board of directors", "strive to overcome the lack of corporate liquidity", "achieve a steady development faster than the industry", achieve sales revenue of 62.627 billion yuan, and the net profit attributable to the parent company decreased by 74.79% year-on-year.
However, in the 2023 financial report, the auditor PricewaterhouseCoopers listed some grim data: as of December 31, 2023, Suning's current liabilities exceeded current assets by 43.014 billion yuan, but cash and cash equivalents were only 3.815 billion yuan. The debt pressure mainly came from two aspects: 19.138 billion yuan of bank loans and interest payable (including those triggering the prepayment clause), and 32.944 billion yuan of overdue payables.
In fact, PwC gave an unqualified audit report with an emphasis paragraph: "There are significant uncertainties that may give rise to material doubts about Suning.com's ability to continue as a going concern", but "this matter does not affect the audit opinion issued". In other words, this is a "disclaimer" for Suning's future operations, especially the risk of debt, when PwC has recognized the fairness of the financial data after the audit.
At the performance briefing on April 19, some investors asked about the specific plan to solve the debt problem, and Suning Tesco gave a more general reply: for suppliers in arrears, it is necessary to "solve historical problems by resuming cooperation and expanding the gross profit generated by cooperation", of course, the market's customary "installment or deferred payment" and "debt-to-equity swap" can also be discussed.
In essence, in front of Suning's creditors, there is only one compromise plan of "exchanging time for space" - the company is still alive, and the debt can be repaid slowly. In particular, with the departure of Huang Mingduan, chairman of the Ali department in the recent fiscal year, and the "comeback" of the founder Zhang Jindong, the future seems to have ignited a little flickering light.
It's a little bit stronger than despair. After all, assuming that the flame of hope is shattered, if Suning Tesco falls, it will be the turn of the "creditors", that is, banks and suppliers, to accrue the tens of billions of losses.
Advance and retreat have always been Zhang Jindong's core issues
On January 2, 2024, the first day after the New Year holiday, Suning Tesco held an annual work deployment meeting called "Breaking the Establishment and Entering the Stability", and Zhang Jindong, who had not been seen for a long time, came forward. For Zhang Jindong, who previously retired to the "honorary chairman" of a listed company, this time he chose to "advance", but he wanted to be "stable".
In April 2023, Suning Tesco made a major personnel adjustment. In the board of directors after the change, only one director, Hu Xiao, is left to represent the Alibaba department. The new chairman who replaced Ali's candidate Huang Mingduan was Ren Jun, the president who joined Suning at the age of 22, and was 46 years old at the time. A number of new presidents of the "post-80s" business department who appeared in the list of executives, including Xu Zhong, Liu Sai, Sun Bo, Wang Lingjun, Wang Kui, Xu Kaichuang, Wang Zhenwei, Xu Hailan, Hao Jia, Bian Yangyu, etc., are all cadres of Suning's "1200 Project".
The 1200 project originated from Suning's plan to introduce 1,200 fresh undergraduate graduates launched in 2002. In the years that followed, the name of the program remained in place, although the number of recruits far exceeded the 1,200 in the first phase. These talents, recruited directly from the campus, have been working at Suning since graduating from university and are considered to be the descendants of Zhang Jindong.
This also confirms the judgment of the previous market: as the old subordinates have taken on heavy responsibilities, the only one who is in charge of the handsome seal behind it is the boss Zhang Jindong.
At this "Breaking and Stabilizing" meeting, Zhang Jindong made a very specific work deployment: "In 2024, we will focus on building a number of benchmark flagship stores with regional influence", and "more than 3,000 new stores will be opened throughout the year" in the sinking market, and "deep link and take root in major traffic platforms".
The veteran came out to carry the banner, and a group of loyal young generals charged into battle, which is Zhang Jindong's idea of "comeback". He said: "It is necessary to let young cadres who are more energetic, more thoughtful, and dare to compete take on great responsibilities and carry the banner. In fact, including the previous presidents of the business department from the 1200 project, in 2023, Suning Tesco will have 32 "post-85s" who will serve as general managers and above.
Zhang Jindong made these requests to Suning Tesco in the name of the chairman of Suning Group. According to the shareholding structure announced in the 2023 annual report, Suning Electric Appliance Group and Suning Holding Group have a combined shareholding of just over 4% in the listed company Suning Tesco, and Zhang Jindong's direct shareholding in the listed company has reached 17.62%. However, Zhang Jindong did not use the position of honorary chairman of Suning Tesco to disclose the information of the aforementioned meeting.
After all, the position of honorary chairman is not an honor for Zhang Jindong.
As of the end of 2023, Suning.com's equity and control relationship chart. Source: Company financial report
By March 2024, the Ali department will further fade out. Taobao China, the former major shareholder, transferred all its shares (19.99%) of Suning Tesco to Hangzhou Haoyue. The new major shareholder, Hangzhou Haoyue, is also a 100% owned company by Alibaba. Although this is a transfer between different entities within the Ali system, there is no wind and no waves. Such changes are due to the integration of Alibaba's internal resources and financial optimization, but more importantly, there is no longer a clear "Taobao China" in the list of shareholders of Suning.com.
A gentleman does not stand under a dangerous wall. Ali is retreating, and Zhang Jindong, who has returned to the battlefield, can only play chess at the level of Suning Tesco.
In the 2023 financial report, the strategy of "retreat" was expressed by Suning Tesco as "focusing on the 3C business of core home appliances" and "realizing its own recovery and development". At the performance briefing on April 19, in response to the question of the turnaround timetable raised by the author of "Prism", Suning Tesco gave a reply that emphasized the "strategic positioning of home appliance retail service providers" twice.
The information disclosed in the financial report seems to have returned to the era when Suning was king offline: first- and second-tier cities re-operated "open big stores and open good stores". Third- and fourth-tier cities are focusing on "retail cloud franchises" – providing cloud services and tools for franchisees, with the goal of retail sales. This may be the closest business to the cloud, which used to be called a "cloud business".
The proportion of online sales is no longer announced in the financial report (the figure is 70% in 2020), and there is even less information about the Internet. It may be that the traffic of its own platform is indeed limited, and the financial report admits that "the main website of Tesco (even without APP) focuses on stock and loyal members".
Zhang Jindong actually retreated to the place he was familiar with and the most secure, and retreated to the base camp of home appliance 3C retail as the core business. This is where it all began, and where there is no retreat.
The top 10 stores in Suning Tesco in terms of sales scale in 2023 (area unit: square meters). Source: Company financial report
The middle of the day is the after-effects of radical expansion
Everything was foreshadowed in the early 2010s. At that time, Huang Guangyu, the soul of the old rival Gome, was in prison, making way for Suning and Zhang Jindong. But the good times did not last long, the rapid rise of online channels, and Suning had to face the aggressive competition of competitors such as JD.com, Tmall, and Amazon China.
Zhang Jindong chose to "enter" at that time.
Listed companies have changed their names several times: from Suning Electric to Suning Yunshang, from Suning Yunshang to today's Suning Tesco. With the rapid expansion of online and offline, and one price war after another, Zhang Jindong wants to build China's "Walmart + Amazon". The first role model has long occupied the first place in the world's top 500, and the second role model is the benchmark of the Internet era, which makes the market full of imagination.
In June 2015, catalyzed by the A-share bull market, the market value of Suning Tesco (then known as "Suning Cloud Business") soared to 168.3 billion yuan. Zhang Jindong himself has a wealth of 81 billion yuan, ranking ninth in the 2015 Hurun Report.
Accompanying the shadow is the expansion of ambition. In addition to continuous investment online and offline, a series of investments, mergers and acquisitions that do not seem to be successful today are also accumulating debts and risks: from the maternal and child e-commerce Red Child, to the group buying website Manzao.com, from the video website PPTV, to the Dragon Ball live broadcast of the e-sports track, from the stake in the smartphone Nubia, to the acquisition of Tiantian Express, the track has been right, but it seems that it has not been able to produce too many ripples in the market.
It is even more important to come and go with Evergrande. In September 2017, photos of Zhang Jindong and Xu Jiayin drinking "a glass of wine" circulated on the Internet. In November of that year, Suning Holding Group (a non-listed company) made a strategic investment of 20 billion yuan in Evergrande. In June 2018, Suning Tesco invested 9.8 billion yuan to jointly establish Hengning Commercial (Shenzhen Hengning Commercial Development Co., Ltd.) with Evergrande, accounting for 49% of the shares.
It all peaked in 2019. At the beginning of the year, Suning Tesco bought 100% of the shares of 37 department stores held by Wanda Department Store at a price of 2.7 billion yuan. In June, Suning acquired 80% of Carrefour China's shares for 4.8 billion yuan.
Expansion and re-expansion are strategies that Zhang Jindong has been familiar with in the era of store management. Of course, expansion requires costs, in fact, Suning's net profit deducted from non-attributable to the parent company has been negative since 2014. But this is not a problem for Zhang Jindong, and the logic is very clear: sell assets to maintain the stability of profits and credit, and deploy incremental assets on the premise of ensuring continuous financing ability.
In fact, while expanding aggressively, with the sale of a number of assets such as stores, PPTV, Alibaba stocks, and Suning Financial Services, the company's net profit did not begin to lose money until 2020 through the "adjustment of extraordinary profits and losses".
In the middle of the day, it is a day. In 2020, just when the layout of Carrefour + Suning Tesco had just been completed, and when Zhang Jindong's career was infinitely close to "Walmart + Amazon", the epidemic came, and many previous investments began to shrink significantly, and they had to start accruing losses. For example, in the huge loss of 44.179 billion yuan in 2021, Hengning Commercial, a joint venture between Suning Tesco and Evergrande, had a provision for bad debts of 20.99 billion yuan, directly subtracting the net profit of Suning Tesco shareholders of 10.285 billion yuan.
More critical is the liquidity crisis: performance is under pressure, fundraising is not easy, debt terms are followed up heavily, and the capital chain is extremely under pressure. Later, the outside world was already very familiar with the outside world, and Ali was invested in the rescue with Jiangsu and Nanjing. The contraction in order to "survive" has begun after Huang Mingduan, chairman of the Ali department, entered the market, until Zhang Jindong's return, and a cleaner break was carried out.
The landmark event was Carrefour's mass shutdown. From more than 200 stores nationwide at the time of takeover, to the rental of only four operating and owned properties at the end of the 2023 financial reporting period. However, Zhang Jindong did not plan to completely zero these assets, and in the financial report, he used a sentence about the future of Carrefour: "Carrefour China mainly implements a redevelopment strategy through its own 12 properties as the basic stores." ”
In fact, according to the agreement between Suning Tesco and Carrefour China's parent company, Suning must unconditionally purchase the remaining 20% of Carrefour China's equity, totaling 1.2 billion yuan. At present, Suning Tesco has paid 204 million yuan, and the remaining about 1 billion yuan, although it has entered the legal arbitration process, it does not seem to have the motivation and action to continue to pay.
What's more, Suning Tesco, including Suning Group and Zhang Jindong's family, under the current circumstances, it must be prudent to come up with another 1 billion yuan.
Young owner Zhang Kangyang, how long can the chairman of Inter Milan sit
In 2016, which was the most prosperous, it was also the tide of global mergers and acquisitions of Chinese assets, and the Suning department led by Zhang Jindong also made several large-scale moves. The most well-known should be Suning Group in 2016 at a price of 273 million euros, winning nearly 70% of the shares of the century-old international football giant, Italian Inter Milan Club.
At the signing ceremony for the acquisition of Inter Milan held in Nanjing, Zhang Jindong and Inter Milan's then chairman Eric Thohir also drank a glass of wine. But more importantly, Zhang Jindong's son, Zhang Kangyang, who was born in 1991, was pushed to the forefront. Subsequently, Suning Group appointed Zhang Kangyang and five others to join Inter Milan's nine-member board of directors.
In October 2018, the 27-year-old Zhang Kangyang was unsurprisingly elected president of Inter Milan FC. This has become Zhang Kangyang's most important and infinite title. And Chairman Zhang, who frequently appeared in sports news headlines, is also reminding many Inter Milan fans in China that the highest level of love for a club is to let Dad buy it.
Although under the leadership of the post-90s boss, Inter Milan has won the championship in Italy many times in recent years. However, with the spread of financial pressure on Suning Tesco and even the entire Suning Group, the news of the sale of Inter Milan has been reported many times. What's more, running a football club is not a small financial pressure.
In 2021, under the leadership of chairman Zhang Kangyang, Inter Milan borrowed $275 million from Oaktree Capital of the United States. In September 2022, Zhang Kangyang had already approached Goldman Sachs and began discussions to find a buyer for Inter Milan. The reason is also very straightforward, Suning Group in distress may not be able to repay these arrears.
At present, the problem is very urgent. Suning's agreement with Oaktree Capital is due to expire on May 20, 2024, and with interest, the total debt has reached $350 million. If Zhang Kangyang can't find the funds to repay the loan and interest, or if he reaches a rollover agreement with Oaktree Capital, Inter's majority shareholder could change hands to the United States, the world's largest distressed asset fund, whose founder Howard Marx has been called the "Wall Street Vulture."
The author of "Prism" also asked Suning Tesco about the sale of Inter Milan. However, for the related transactions outside the listed company system, Suning Tesco said that it was also "the news I saw on the news", and the transaction of Inter Milan was a family affair, and the details were not understood.
As of April 18, 2024, "the owners of Inter Milan are close to reaching an agreement with Oaktree Capital to refinance the loan", according to overseas football professional media. In fact, it is also reported that Oaktree Capital has no intention of becoming the owner of Inter Milan, and they are more concerned about the safety and return of loans.
However, for Zhang Kangyang, the chairman's position may not be so stable, the debt is overwhelming, and there is no way to retreat. Although the issue of repaying the loan to Oaktree Capital is urgently resolved, the Italian sports media have also pointed out that Suning Group's intention to sell a majority stake in Inter Milan is certain.
I've seen the prosperity of the world, and it's time to quit. It's just that I haven't been able to find a buyer who can give a satisfactory price.
Suning Global, which is actually controlled by his brother, wants to transform but cannot
When it comes to the family, Suning Global (000718. SZ), the situation is not optimistic.
The Zhang brothers founded the "Suning" brand together, and later focused on retail and real estate, and almost simultaneously entered the capital market. In 2004, taking advantage of the tide of the country's launch of the small and medium-sized board, Suning Electric Appliances, which was controlled by Zhang Jindong, was listed on the Shenzhen Stock Exchange and became the first A-share household appliance chain enterprise.
Suning Global, which is actually controlled by Zhang Guiping, followed closely behind. In 2005, even though the IPO was suspended, Suning Global still successfully backdoor *ST Ji Paper (Jilin Paper). In the era when the public's understanding of the capital market is still relatively confused, this is another operation to accurately grasp the policy - in the context of the reform of equity division (opening up tradable shares and non-tradable shares), *ST Ji Paper is the first company with poor performance to transfer a controlling stake. As a "new model" to solve the problem of equity division, Suning Global's listing has become a textbook case.
The Zhang brothers had close financial ties in the early days of their entrepreneurial generation. Before the listing, Zhang Guiping held 90% of the shares of Suning Global, and his brother Zhang Guimin (Zhang Jindong's second brother) held 10% of the shares. Zhang Guimin's name also appeared in the IPO prospectus of Suning Electric, he was the original shareholder of the listed company Suning Electric Chain Group when it was established, and the shareholding ratio reached 18.78% at the peak.
In the process of Suning Global's backdoor listing, Zhang Guiping's son, 24-year-old Zhang Kangli, although he was still studying business administration at the University of Toronto, Canada, was still pushed to the front desk as a natural person to complete the acquisition of *ST Ji Paper with Suning Global.
With the endorsement of the identity of a listed company, superimposed on China's real estate industry to enter the historic fast lane, with star projects such as Suning Tianrun City, Suning Global once ranked 17th among the top 20 real estate companies in China and the top 500 private enterprises in China. But all this is now a thing of the past.
Judging from the latest financial data that has been made public. Suning Global's revenue in the first three quarters of 2023 was 1.465 billion yuan and its operating profit was 475 million yuan. To understand this volume, we can refer to Vanke, which has been in turmoil recently, and reported data in the third quarter of the same period, the latter's operating income and operating profit were 290.3 billion yuan and 28.2 billion yuan respectively. In terms of operating data, Suning Global has ranked in the bottom 30% of listed real estate companies, which is similar to the volume of many local urban investment real estate companies.
In addition to the impact of real estate policies and market cycles, the hesitation or contraction of Suning Global or its helmsman, Zhang Guiping, is also an important influencing factor. As early as the 2013-2014 real estate cycle, Suning Global judged that "the real estate industry itself may need a period of recuperation", "small and medium-sized companies will actively seek strategic and tactical transformation and adjustment", and said that it would "expand new strategic transformation directions". Soon in 2015, Suning Global put forward the "transformation goal of big culture, big health, and big finance".
Zhang Guiping, who is over the age of six, may no longer want to charge in the real estate industry, perhaps he has a higher pursuit in life, or he may have his own judgment on the general trend. In July 2016, Zhang Guiping joined the Revolutionary Committee of the Chinese Kuomintang, and in December, he became the president of the Central Entrepreneur Association of the Revolutionary Committee of the Chinese Kuomintang. In January 2018, Zhang Guiping was elected as a member of the 13th National Committee of the Chinese People's Political Consultative Conference (CPPCC) in his capacity as a member of the Revolutionary Committee of the Chinese Kuomintang. In 2019, Zhang Guiping, as a member of the National Committee of the Chinese People's Political Consultative Conference, said in an interview with the media: Suning Global will continue to pay attention to market and policy changes.
The rhythm of the market is inevitably different from the rhythm of strategic planning. Just the second year after the transformation was proposed, 2016 coincided with the big year of real estate. In that year, Suning Global's operating income of 8.247 billion yuan, real estate contributed 7.791 billion yuan, and the profit contribution reached 93.65%. After that, the real estate market gradually entered an adjustment cycle, and Suning Global's performance in the following years naturally began to contract.
In the end, the three transformation strategies of "big culture, big health, and big finance" have also shrunk to "big health", more specifically medical beauty. In the brokerage survey in September 2023, Suning Global positioned the company more directly: "While ensuring the sustainable and steady development of the main real estate business, it will focus on the transformation of anti-aging and regenerative medicine." ”
By the time of the 2023 semi-annual report, Suning Global, which had won the land king of Nanjing East Road, a prime location in Shanghai, and Suning Global, a benchmark for private real estate enterprises in Jiangsu, had no new land reserves. The remaining land reserves are sporadically distributed in Nanjing, Shanghai, Yixing and Xixian New Area of Shaanxi, with a combined remaining developable construction area of 2,086,600 square meters. This figure is less than 60% of the total construction area of 3.6 million square meters of Nanjing Suning Tianrun City that year.
What is still hard to change is that real estate is still a place to live. The latest data by business segment comes from the 2023 semi-annual report, and the slogan of transformation has been shouted for nearly ten years, but the operating income of the real estate business combined with the hotel business of more than 900 million yuan still contributes 88% of the total, on the contrary, the medical beauty is just over 9%.
During the aforementioned reporting period, Suning Global's operating profit was 475 million yuan, while the operating profit of a single real estate business was 551 million yuan. It can be said that even in the current market environment, real estate is still feeding other business sectors and supporting the entire Suning Global.
However, Suning Global's market value has fallen from a peak of 41.8 billion yuan in June 2015 to less than 5.9 billion yuan today - a lot less than the nearly 14.1 billion yuan market value of Suning Tesco, which is listed on ST.
As the Tao Te Ching says: There are many things and things, and each returns to its roots. In the final analysis, it is said to be quiet, which means to return to life.