It's tragic! RT-Mart suddenly closed 20 stores, with a huge loss of 1.6 billion

Kanjian Finance

2024-05-25 08:53Posted in Guangdong financial field creators

RT-Mart, accelerate the lag.

On May 21, RT-Mart's parent company, Sun Art Retail (06808. HK) disclosed its financial results for the fiscal year ended March 31. Among them, the company achieved revenue of 72.567 billion yuan, a year-on-year decrease of 13.3%; The annual loss amounted to 1.605 billion yuan, compared with 109 million yuan in the same period last year, which was the largest loss since Sun Art Retail went public in 2011.

Among them, the retail sales revenue of goods was 69.431 billion yuan, a decrease of 11.104 billion yuan from the 2023 fiscal year, a year-on-year decrease of 13.8%.

In the face of the huge losses in performance, Sun Art Retail explained that the main reasons were negative cash flow stores, asset impairment of closed stores and stores to be opened, and goodwill impairment. At the same time, business adjustments and the decline of customers' hoarding mentality led to a decline in average order value.

Tide of store closures

In the past year, RT-Mart has experienced large-scale store closures.

According to the financial report, during the reporting period, the company closed 20 hypermarkets. As of the end of March 2024, the company has 472 hypermarkets, 32 medium-sized supermarkets and 3 M member stores, with a total operating area of more than 13.5 million square meters.

With the large-scale store closures, Sun Art Retail's number of employees has been significantly reduced. According to the financial report, the number of employees of the company has decreased from 107785 at the end of March 2023 to 86,226, saving more than 500 million yuan in employee expenses.

In terms of same-store sales growth, a key indicator of the retail industry, Sun Art Retail's same-store sales growth in FY2024 (calculated by goods sales excluding home appliances and sales of shared inventory on Taocaicai and Tmall) fell by 6.6%, which is a decade of decline in a row, and the decline seems to be accelerating.

This may mean that RT-Mart's hypermarket stores are rapidly becoming less attractive to consumers.

In addition, there are red flags from Sun Art Retail's cash flow. According to the financial report, the company's net cash flow from operating activities in fiscal year 2024 was 926 million yuan, a significant decrease of 78.5% from 4.302 billion yuan in the same period last year.

As of the end of March this year, the company's net cash (including cash and cash equivalents, financial assets, time deposits, etc.) was 16.504 billion yuan, a significant decrease from 19.449 billion yuan in the same period last year. During the same period, the company's equity-liability ratio was 0.76, compared to 0.80 in the same period last year.

A series of financial indicators reflect that RT-Mart, as a leader in the hypermarket format in China, is facing increasing challenges in its business model.

Reflected in the stock price level, as of the latest close, Sun Art Retail's share price is only HK$1.62, a cumulative decline of 87% compared with the high point in June 2020, and the latest total market value is 15.359 billion yuan.

The glory of yesteryear is gone

Looking back on history, RT-Mart is one of the legends in the history of Chinese supermarkets. As early as 1997, RT-Mart opened its first large-scale modern supermarket, taking the route of a boutique mass merchandiser, and then began to expand wildly.

It took only 12 years to become the retail champion in Chinese mainland. In 2010, RT-Mart surpassed the foreign supergiant Carrefour for the first time with sales of 40.4 billion yuan, ranking first in China's supermarket sales.

In 2011, RT-Mart's parent company, Sun Art Retail, successfully landed on the Hong Kong Stock Exchange and became the "most profitable supermarket".

What's more worth mentioning is that RT-Mart has never closed a store for 19 consecutive years, and has become a legendary supermarket in the hearts of consumers.

At its peak, Sun Art's retail share price reached a maximum of HK$13.4, and its total market value was once as high as HK$127.8 billion.

In 2020, RT-Mart ushered in a critical moment. At that time, Alibaba invested HK$50 billion to successfully control Sun Art Retail as an important part of its new retail strategy.

In the face of Alibaba's acquisition, RT-Mart founder Huang Mingduan seemed quite sentimental, saying at the time, "I won all my opponents, but I lost to the times; When the times abandon you, they won't even say goodbye."

But Alibaba's attitude is completely different, then Alibaba CEO Daniel Zhang said: RT-Mart is different because of Ali, and Ali is different because of RT-Mart.

After the acquisition, Alibaba attached great importance to Sun Art Retail, giving money, transferring people, and throwing resources, and RT-Mart was also labeled as "new retail".

However, the situation is not to be helped, and the retail model of offline hypermarkets is being abandoned by the times. In the face of low-price competition in e-commerce, the price advantage of hypermarkets is no longer there.

At the same time, the rise of new retail formats such as community group buying, front-end warehouses, and membership-based supermarkets has further reduced RT-Mart's market share.

Alibaba failed to put Sun Art Retail on the road to revival, but its business deteriorated, and eventually fell into a performance crisis.

RT-Mart, where to go

As RT-Mart's traditional business declines and its operating conditions deteriorate, Alibaba seems to be retreating.

In the latest earnings call, Alibaba Group Chairman Joe Tsai said that there are still some traditional brick-and-mortar retail businesses on Alibaba's balance sheet, which are not core focused businesses, and Alibaba's exit is reasonable, but given the current market conditions, the exit may take time to achieve.

Subsequently, Sun Art Retail issued a personnel change announcement, saying that Lin Xiaohai, an airborne executive of Alibaba, resigned as CEO of Sun Art Retail, and Auchan Shen Hui took over as CEO of Sun Art Retail.

From the perspective of performance, RT-Mart seems to have become Alibaba's "oil bottle".

According to Alibaba's latest financial report, the revenue of the "all other" category (including Sun Art retail and other businesses) fell by 3% year-on-year, and the loss also widened, with adjusted EBITA of -2.818 billion yuan.

This series of signals has triggered speculation in the market that Alibaba will withdraw from Sun Art Retail.

Recently, there was news in the market that Ali has basically decided to sell RT-Mart and Hema to COFCO, with RT-Mart estimated at about 10 billion yuan and Hema estimated at about 20 billion yuan.

In this regard, the relevant person in charge of Hema responded: "Fake". RT-Mart also said that the above news about the sale was false.

However, some analysts said that Sun Art Retail's net cash (including cash and cash equivalents, financial assets, time deposits, etc.) is as high as 16.504 billion yuan, and it also has more than 4.5 million square meters of its own store properties; Alibaba spent 50 billion Hong Kong dollars on the acquisition of Sun Art Retail, and it is likely that it will not be sold at a price of 10 billion yuan.

In the face of the current passive situation, Sun Art Retail seems to be still looking for a breakthrough. Among them, RT-Mart Super Store and M Club Store are expected to be high.

Up to now, Sun Art Retail's M Club has opened 3 stores in Yangzhou, Nanjing and Changzhou, and another 4 stores are in the pipeline.

In FY2024, the number of paid members of the first M Club store has exceeded 60,000, and the total number of members has exceeded 110,000.

However, at present, the number of member stores is still very low, which is not enough to support the transformation of Sun Art Retail's huge volume.

The series of signals released by the latest financial report means that there may not be much opportunity and time left for RT-Mart.

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