Based on the regional scale effect, Horizon Supermarket has gradually extended its retail business from the C-end to the B-end wholesale business, and also tried to outline the second growth curve through the prefabricated food business.
Author: Xu Chenghao Editor: Lv Xinyi
出品：零售商业财经 ID：Retail-Finance
Following Wumart's impact on the listing, after three years, another retail company launched an onslaught on the capital market, and the protagonist of this story is the "Hongxin Long" brand (hereinafter referred to as "Hongxin Supermarket") in a corner of the country.
In addition to being well-known to consumers in Jiangsu, the market popularity of Horizon Supermarket is not high. After all, since its establishment 19 years ago, it has never left Jiangsu Province, and even most of its stores are located in Yangzhou City. According to the prospectus, as of June 18, 2024, Horizon Supermarket operated 51 supermarkets and 109 convenience stores in Jiangsu Province. Among them, 49 supermarkets and 108 convenience stores are located in Yangzhou City, and two supermarkets and one convenience store are located in Taizhou City.
According to the prospectus data, in terms of sales, Horizon Supermarket will rank second among Yangzhou supermarket operators in 2023, with a market share of 9.1%. In the central region of Jiangsu, it ranks fifth among supermarket operators in the region in 2023, with a market share of 2.3%.
According to the prospectus, the annual revenue of Horizon Supermarket in the past three years was 1.43 billion yuan, 1.329 billion yuan and 1.4 billion yuan respectively, and the net profit in the past three years was about 35.08 million yuan, 51.065 million yuan and 51.602 million yuan.
Source: Prospectus
Behind the double increase in revenue and profit, based on the regional scale effect, Horizon Supermarket has gradually extended from C-end retail business to B-end wholesale business, and even its tentacles have extended to the prefabricated food track. On the basis of opening up the closed loop of C-end + B-end business, Horizon further consolidates its local competitiveness.
However, although Horizon Supermarket is in the "first echelon" in Yangzhou City, it has not been among the "top 100 clubs" in the industry. According to the 2024 list of China's Top 100 Chain Stores and China's Top 100 Convenience Stores released by the China Chain Store & Franchise Association, all retail formats under Horizon Supermarket are not listed, nor have they been on the list before.
Horizon Supermarket, which has not yet been able to lay out on a national scale, is still sticking to its hometown in Yangzhou, so what hole cards does it have to pry open the door of the Hong Kong Stock Exchange?
01 Core retail business revenue declined, 240 stores were closed in three years
"Looking for money" may be the biggest appeal of Horizon Supermarket's listing, after all, it is now facing a double-sided impact between expansion and financial pressure.
Horizon Supermarket was established in 2005 and its core business includes retail, wholesale, leasing, supply and sale of meals. Among them, the main sources of revenue are retail business and wholesale business, which account for 98.7% of the revenue.
The retail business is based on the main brand of "Horizon Dragon", which operates supermarkets and convenience stores. The wholesale business mainly sells grains, oils, food and other products to distributors and other retailers, including other supermarket and convenience store operators and catering operators.
Source: Prospectus
Horizon Supermarket, which started with its retail business, is facing a decline in performance, with revenue from this business falling from 888 million yuan in 2021 to 688 million yuan in 2023.
The decline seems to be related to the failure of Horizon Supermarket to seize the opportunities of the times, and retail companies are now fully turning to an omni-channel business model. Online sales have become an indispensable channel, and Horizon Supermarket has also launched mini programs "Dragon Club Tesco" and "Horizon Dragon Same-Day Delivery", and cooperated with Douyin, JD.com and WeChat. However, in the 2021-2023 fiscal year, its e-commerce revenue contribution will be 1.0%, 0.6% and 1.6%, respectively.
In comparison, Yonghui's online revenue in 2023 will be 16.1 billion yuan, accounting for 20.5% of the company's total revenue in the current period. In the same period, Jiajiayue's online business sales accounted for 5.98%. It can be seen that whether it is the contribution of internal revenue or the horizontal comparison of external proportion, Horizon Supermarket has failed to show the competitiveness of online channels.
In the face of weak basic revenue, Horizon tried to boost its performance through scale expansion. According to the prospectus, from 2025 to 2028, Horizon Supermarket plans to expand 42 stores, of which 30 are convenience stores.
However, judging from its financial data, it seems that it is difficult for Horizon Supermarket to support its expansion through its own cash flow. During the reporting period, the current liabilities were 6.83 million, 7.96 million and 8.19 million respectively, and with the increase of current liabilities, Horizon Supermarket faced greater short-term debt repayment pressure.
Source: Prospectus
What's more, Horizon Supermarket is also facing the "store closure phenomenon".
According to a December 2020 report by Yangzhou News Broadcasting, Hongxinlong Supermarket has more than 400 stores in six counties and cities in Yangzhou, as well as Taizhou, Anhui Tianchang and other places. According to the comparison of 51 supermarkets and 109 convenience stores in the prospectus as of the end of 2023, Horizon Supermarket has reduced its number of stores by more than 200 stores from 2021 to 2023. This is accompanied by a continuous decline in the number of employees. According to the prospectus, at the end of the reporting period, the number of employees of the company was 1,974, 1,829 and 1,696 respectively.
It is foreseeable that Horizon Supermarket will still be at risk of store closure in the future, and it has entered into 167 lease agreements with 157 retail stores, of which 13, 31 and 22 lease agreements for retail stores will expire in the years ending 31 December 2024, 2025 and 2026 respectively. "If we are unable to renew the lease agreement on commercially acceptable terms, or if the lease agreement is terminated for any reason before expiry, we will need to close or relocate the relevant retail stores," Vision said in the prospectus. ”
On the one hand, if Horizon Supermarket wants to expand rapidly, it urgently needs sufficient financial support to grasp market opportunities and further expand its business territory. On the other hand, its core retail business segment has suffered from declining performance, and current liabilities have also increased significantly, which not only affects the stability of overall revenue, but also exacerbates the company's financial pressure. And the potential risk of store closure is even more obvious and cannot be ignored.
It can be inferred that listing and financing at this moment is the best strategy for Horizon Supermarket to solve the problem and achieve sustainable development.
02 Layout prefabricated dishes to find a way across borders
At this moment in front of the capital market, Gao Feng, chairman of Jiangsu Horizon Supermarket Chain Co., Ltd., and through his wholly-owned Ruichuanda Investment, control a total of about 29.68% of the voting rights. With 13.42% of the shares, the fund is the second largest shareholder. Jiangdu Fund holds 10.2% of the shares, making it the third largest shareholder.
Although the core business is on a downward trend, Horizon Supermarket's prospectus still reveals a new story to strengthen its overall competitiveness.
According to the prospectus, from 2021 to 2023, the proportion of wholesale business revenue of Horizon Supermarket will gradually increase. They accounted for 36.7%, 38.6% and 49% of total revenue, respectively.
Source: Prospectus
The wholesale business of Horizon Supermarket is mainly for distributors, other retailers, overseas customers, as well as distributors and retailers. In addition to general consumers, the retail business also provides bulk sales services to customers, including enterprises and government entities.
In fact, the ability to do a good job in the wholesale business is also due to the influence of Horizon Supermarket in the region in the early stage.
On the one hand, the regional characteristics of Horizon Supermarket give it the advantage of a high degree of business concentration, which enables the company to have a higher market share and stronger control in a specific region. However, this high regional concentration also reflects the limitations of Horizon Supermarket in business expansion, and it may face a large growth bottleneck.
In addition to the wholesale business, the new focus of Horizon Supermarket is "prefabricated dishes".
In 2023, Horizon Supermarket successfully achieved significant growth in its pre-made food business, with sales reaching RMB 1,500 million. The B-end is an important sales channel for prepared food at Horizon Supermarket, which leverages its ability to source and supply high-quality fresh food ingredients to operate a central kitchen that produces meals and delivers them primarily to local businesses, schools or government entities.
Due to the outstanding performance of its prefabricated food business, the outside world has described Horizon Supermarket as a "supermarket dressed in prefabricated dishes", but in fact, Horizon Supermarket's prefabricated dishes rank fourth in the Yangzhou market, with a market share of only 1.2%.
It can be seen that there is still a lot of room for deep cultivation in the prefabricated food business of Horizon Supermarket. This is exactly what Horizon Supermarket does, emphasizing in its prospectus the potential of its prefabricated food business and planning to expand the supply chain of prefabricated food.
It mentioned in the prospectus that it plans to acquire 130 million square meters of land to build a new central kitchen and distribution center, with an estimated capital expenditure of 74.8 million yuan. This shows that Horizon Supermarket has a clear need for market expansion and infrastructure construction.
It is foreseeable that Horizon Supermarket will further increase its investment in the prefabricated food business, regard it as a new track to promote the company's development, and strive to build a new growth curve.
Although the diversified business system built by Horizon Supermarket has brought the company richer sources of income and broader market prospects, it has also put forward a higher demand for funds, requiring the company to invest more funds to support the development of various business segments.
It is worth mentioning that the company has implemented the plan of joining supermarkets and convenience stores, but the sales revenue of franchisees during the reporting period was limited, which were 7.1 million, 1.3 million and 300,000 yuan respectively, accounting for less than 0.5% of the annual revenue. During the same period, the franchise fee income was 341,000, 78,000 and 279,500 yuan. Franchisees can use the "Hongxinlong" trademark, but it is not compulsory to purchase the company's products. In view of the low income from trademark protection and franchising, the company terminated the franchise program in 2023.
Whether it is the increase in the contribution of the wholesale business, the new starting point of prefabricated dishes, or the termination of the franchise plan, it shows that Horizon Supermarket is actively exploring a non-traditional retail enterprise development path.
It has achieved remarkable results in the B-end market, which constitutes the core competitiveness of Horizon Supermarket and lays the foundation for its listing road.
epilogue
From the perspective of the industry, when regional leaders such as BBK and Zhongbai tried to find solutions through Fat East, Horizon Supermarket's impact on the IPO at this time did bring a certain boost to the industry.
For Horizon, the IPO has built a solid and sustainable financing platform that can inject strong momentum into the company's long-term development. At the same time, the impact of the listing has enabled Horizon to gain a high degree of attention in the capital market and public view, which has greatly enhanced the company's brand influence and market awareness, and its brand awareness has also been widely disseminated from the regional market to the whole country.
As far as the industry is concerned, Horizon Supermarket has provided reference and reference for other enterprises in the industry by deeply cultivating specific regional markets and laying out diversified business models in advance. If it is successfully listed, it will attract more capital into the retail industry and promote the rapid development and overall prosperity of the industry.
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