Yonghui Supermarket, once a "new retail" star, can now be called a "loser" in the physical retail industry. In its most glorious period, the company once surpassed industry giants such as China Resources and RT-Mart, and successfully entered the top 50 listed companies in Asia. But now it has fallen to the point of continuous losses and continuous asset impairment, and is facing an existential crisis.
In 2023, Yonghui Supermarket released its 2022 annual report, and although the loss was narrower than the previous year, it still reached 1.329 billion yuan. This is the third consecutive year that the company has lost money. Before that, in 2021 and 2022, its losses were as high as 3.944 billion yuan and 2.763 billion yuan, with a total loss of more than 8 billion yuan. This trend of losing and retreating makes people worry about the future of Yonghui Supermarket.
What's even more worrying is that this former "new retail" star has now fallen into various crises. Not only are senior executives frequently leaving, but even JD.com, the big financier behind it, is also reducing its stake, which casts a shadow on the future of Yonghui Supermarket. This, coupled with the ongoing asset sales, undoubtedly shows that the company is at a critical moment of life and death.
What is the origin of the fall of Yonghui Supermarket? Is it a cold winter for traditional supermarkets under the impact of e-commerce? Or is there a problem with the company's internal management? Or is it some other deeper reason? With these questions, let's analyze how this former "new retail" star has fallen to such a point.
The dilemma of traditional supermarkets under the impact of e-commerce
Yonghui Supermarket, which emerged in the 90s of the last century, was once a standout in the physical retail industry. Through a differentiated business strategy, featuring fresh products, the company has successfully built its own moat and established itself in the industry.
In 2010, Yonghui Supermarket successfully landed on the A-share market, becoming the first private supermarket company listed on the Shanghai Stock Exchange. Subsequently, under the strategic investment of JD.com, the company further accelerated its pace of development, successively launched new formats such as Yonghui Life Store and Super Species, and gradually explored a new retail model that integrates online and offline.
In 2017, Yonghui Supermarket achieved a revenue of 58.591 billion yuan and a record high net profit. By 2020, its annual revenue will reach a historical peak of 93.199 billion yuan, which is only one step away from 100 billion revenue.
However, under this high-speed development trend, the disadvantages of Yonghui Supermarket have gradually emerged. Despite the company's record revenue, its profitability has not kept up, and its net profit margin has been declining since 2017, reaching only 1.77% in 2020. It can be seen that the company's rapid expansion has not brought corresponding earnings growth, but has dragged down the overall profitability.
The reason for this is mainly due to the double impact of the rise of e-commerce and the change of consumer shopping habits. With the rapid development of e-commerce platforms, people are becoming more and more accustomed to shopping online, and their dependence on physical stores is gradually decreasing. This is undoubtedly a heavy blow to Yonghui Supermarket, which mainly focuses on offline stores.
Coupled with the low gross profit margin of the fresh food category itself, this e-commerce impact has made Yonghui Supermarket even worse. Although the company has tried to respond by closing loss-making stores, optimizing its supply chain, and strengthening its digital transformation, the results have not been satisfactory, and it is still difficult to curb the trend of losing money year after year.
The departure of senior executives and the acceleration of the shrinkage of major shareholders
In addition to the challenges of the external environment, the internal management problems of Yonghui Supermarket are also a major reason for its difficulties.
As a veteran of Yonghui Supermarket, Wu Guangwang has worked in the company for more than 15 years. His departure reflects the significant changes the company is facing and may also have some internal management issues.
At the same time, JD.com, the majority shareholder of Yonghui Supermarket, has also begun to reduce its stake. On March 20, the company announced that Suqian Hanbang Investment, a shareholder holding 5.27% of the shares, plans to reduce its holdings by no more than 1%, while Suqian Hanbang and Jingdong World Trade Center are acting in concert, with a total shareholding ratio of 13.39%.
This undoubtedly casts a shadow on the future development of Yonghui Supermarket. As the big financier behind it, once Jingdong reduces its shares, it is tantamount to announcing that it has given up this "pro-son". This is a heavy blow to a company that is on the verge of life and death.
In fact, Yonghui Supermarket's share price has also suffered a heavy blow as a result. As soon as the news of the reduction broke, its stock price plummeted by 4.71% in the secondary market, and has been declining for several days since then. Compared with the highest price of 37.71 yuan per share in 2010, the current share price of Yonghui Supermarket is only about 2 yuan, and the total market value has shrunk to 20 billion yuan, down more than 90% from the peak.
Heavy asset sales and liabilities
In order to solve the dilemma of continuous losses, Yonghui Supermarket is constantly optimizing stores, laying off employees and closing loss-making stores, and on the other hand, it is also significantly reducing R&D investment. Although these measures have narrowed the losses, they obviously do not fundamentally solve the company's problems.
As a result, Yonghui Supermarket began to sell its assets again. In addition to the previously sold shares of Hongqi Chain (002697.SZ) and Dalian Wanda Commercial Management, on the day of the release of the 2023 annual report, the company also announced the sale of 65% of its equity in Yonghui Yunjin Technology Co., Ltd., obtaining a consideration of 336 million yuan.
This frequent asset sale not only reflects the tight capital chain of Yonghui Supermarket, but also conveys that the company is at a critical moment of life and death. In the face of huge losses year after year, the company has no choice but to continue to sell its bottom to survive.
And this practice of "selling assets" has undoubtedly further aggravated the heavy debt of Yonghui Supermarket. The data shows that the company's debt-to-asset ratio is long, assets sold and liabilities are heavy
In order to solve the dilemma of continuous losses, Yonghui Supermarket is constantly optimizing stores, laying off employees and closing loss-making stores, and on the other hand, it is also significantly reducing R&D investment. Although these measures have narrowed the losses, they obviously do not fundamentally solve the company's problems.
As a result, Yonghui Supermarket began to sell its assets again. In addition to the previously sold shares of Hongqi Chain (002697.SZ) and Dalian Wanda Commercial Management, on the day of the release of the 2023 annual report, the company also announced the sale of 65% of its equity in Yonghui Yunjin Technology Co., Ltd., obtaining a consideration of 336 million yuan.
This frequent asset sale not only reflects the tight capital chain of Yonghui Supermarket, but also conveys that the company is at a critical moment of life and death. In the face of huge losses year after year, the company has no choice but to continue to sell its bottom to survive.
And this practice of "selling assets" has undoubtedly further aggravated the heavy debt of Yonghui Supermarket. The data shows that the company's asset-liability ratio has remained high at more than 80% for a long time, which is significantly higher than the average of the same industry.
The shortage of funds and high debt have caused Yonghui Supermarket to fall into a vicious circle. In order to stop losses, the company had to keep selling assets, but this further pushed up the debt ratio, leaving the company in a deeper and deeper predicament.
Even more worryingly, even if cash is generated through asset sales, the funds are ultimately used to pay off debt and maintain day-to-day operations, making it difficult to truly invest in key areas of business transformation. This undoubtedly makes it more difficult for the company to turn around its losses.
It can be said that Yonghui Supermarket is now in a difficult situation. The combined challenge of dealing with the ongoing pressures of the external environment and addressing internal management and funding issues is compounded.
From "New Retail" Star to "Loser"
Looking back on the development process of Yonghui Supermarket, people can't help but sigh, how can this once unparalleled "new retail" star fall to such a point now?
In fact, the rise and fall of this company reflects the difficulties encountered by the brick-and-mortar retail industry as a whole. The rapid development of e-commerce has indeed brought a severe test to traditional supermarket enterprises. However, compared with its peers, Yonghui Supermarket fell faster and deeper, and its internal management and strategy problems cannot be ignored.
At the beginning, Yonghui achieved good results with the help of JD.com's strategic investment. But the subsequent rapid expansion has masked its own fragile profitability. In addition, the development of new business formats is not as expected, and the losses continue to expand, which has become the main factor dragging down the company.
What's even more worrying is that JD.com, as a major shareholder, has now begun to reduce its stake in Yonghui. This undoubtedly casts a heavier shadow over the future of this company. The frequent departure of senior executives also shows that there are serious problems in the company's internal management.
In addition, in order to alleviate the financial pressure, Yonghui Supermarket continued to sell assets, but this practice of "selling off belongings" further increased its debt. Such a vicious circle has brought this former "new zero-reality star" to the brink of complete collapse.
From the industry leader at its peak to today's "loser", the fall of Yonghui Supermarket is undoubtedly embarrassing. The fate of this company not only reflects the pains of the brick-and-mortar retail industry, but also highlights the deep-seated problems in its own development strategy and management methods.
In the fierce market competition, Yonghui Supermarket must start from the inside, comprehensively sort out its own problems, and find new momentum for sustainable development. Only then can it hope to rise again from the abyss and regain its footing at the forefront of the industry. Otherwise, this former "new retail" star may not be able to escape the tragic ending of the "loser".