In the first "bleeding" report card after the management change, Suning Tesco admitted that the company had come to "the most difficult period in the development process of 30 years".
On the evening of October 29, Suning Tesco released the third quarter financial report: revenue fell by 64.82% year-on-year to 21.968 billion yuan, the lowest single-quarter revenue of Suning since 2012; net profit - 4.116 billion yuan, a year-on-year decrease of 676.73%. The loss in the third quarter was very close to the loss of 4.275 billion yuan for the whole year of 2020, reaching the second highest level in the seventeen years since the listing. (See also Snow Leopard Finance and Economics previously reported that "Suning Tesco ushered in the "most difficult period")
As the financial report said, Suning Tesco encountered unprecedented difficulties.
On July 12, nearly half of suning founder Zhang Jindong's shares were transferred to Jiangsu state-owned assets and industrial capital, losing the position of actual controller of Suning Tesco. The new management took office, declaring that it was "striving to get out of the darkest hour by the end of this year", but all kinds of negative news came pouring in. Since the beginning of this year, Suning Tesco's stock price has fallen by more than 40%, and the stock price in the third quarter has been down.
After changing the coach, can Suning Tesco get out of the darkest moment?
▌ Deeply trapped in the dilemma of lack of money
Since the second half of 2020, a series of financial problems such as bond maturity and tight cash flow have been plaguing Suning Tesco.
According to the financial report, in 2020, Suning Tesco's revenue fell by 6.29% year-on-year to 252.296 billion yuan; net profit fell by 143.43% year-on-year to -4.275 billion yuan, and deducted non-net profit of -6.8 billion yuan, down 19.19% year-on-year. This is the seventh consecutive year that Suning Tesco has experienced a non-net loss.
In order to achieve growth, Suning Tesco has frequently invested abroad, trying to achieve diversified operation by throwing money.
From 2015 to 2019, Suning Tesco's investment and acquisition targets involved various businesses such as department stores, sports, and entertainment, and the amount of foreign investment disclosed by listed companies alone exceeded 70 billion yuan.
However, many of Suning Tesco's investments are not profitable. Taking investment in Evergrande as an example, in the second half of 2020, Evergrande's backdoor listing plan for backdoor a-share that was delayed for 4 years failed, which means that the 20 billion yuan of convertible bonds invested by Suning in Evergrande cannot be recovered.
On the one hand, the main retail business continues to lose money, on the other hand, diversified operations occupy a lot of funds, suning Tesco is saddled with high debt.
According to the annual report, as of December 31, 2020, Suning Tesco's short-term borrowings amounted to 23.75 billion yuan, non-current liabilities due in one year were 17.67 billion yuan, and the total current liabilities were 124.6 billion yuan. In the same period, Suning Tesco only had 25.89 billion yuan of monetary funds on its account, and its current assets were 107.4 billion yuan.
In order to repay the debt, since the end of 2020, Suning has raised money everywhere, including financing the cloud network Wandian, logistics and retail cloud in the listed company system, making short-term loans through the Jiangsu state-owned assets fund, and planning to sell part of the property used as an employee apartment.
On February 25, 2021, Suning Tesco issued a trading suspension announcement saying that Zhang Jindong, a controlling shareholder holding 20.96% of the shares, intends to transfer at least one-fifth of the shares. The dilemma of Suning Tesco's lack of money has been completely unveiled.
As of the sale of the shares on July 12, 2021, of the 1.952 billion shares of Suning Tesco held by Zhang Jindong, 1.412 billion shares had been pledged and 540 million shares had been judicially frozen. The 371 million shares (3.98%) held by Suning Holding Group (controlled by Zhang Jindong) were also pledged.
When the equity pledge can no longer be effectively financed, the sale of equity and the disposal of assets have become the last move that Suning Tesco has to take.
▌ Farewell to the Zhang Jindong era
After the share transfer agreement signed with Shenzhen State-owned Assets was "lost", Suning Tesco chose Jiangsu State-owned Assets as the "White Knight".
On July 12, Suning Tesco issued an announcement that as of July 9, 16.96% of the company's shares had been transferred to the "New New Retail Fund Phase II" led by Jiangsu State-owned Assets.
After the completion of the share transfer, Zhang Jindong lost the status of the actual controller of Suning Tesco, and his own shares in Suning Holdings and Suning Electric Appliances under his control decreased from 35.62% to 20.35%. The second largest shareholder, Taobao China, remained unchanged at 19.99%, while Jiangsu New Retail Innovation Fund Phase II (Limited Partnership) and Jiangsu New Retail Innovation Fund (Limited Partnership) held 16.96% and 5.59% of the shares respectively. Suning Tesco will not have a controlling shareholder or actual controller.
On the afternoon of July 29, the general meeting of Suning's controlling shareholders passed the proposal to re-elect directors.
Zhang Kangyang, son of Zhang Jindong of the Suning department, Ren Jun, president of Suning Tesco, and Huang Mingduan and Liu Peng of the Ali department were nominated as directors. Huang Mingduan was appointed as the new chairman, and Suning Tesco bid farewell to the Zhang Jindong era.
Huang Mingduan is the founder of RT-Mart's parent company, Gaoxin Retail, which sold the company to Alibaba in 2018. In China's retail industry, Huang Mingduan is known as the "king of land warfare". Gao Xin owns two major brands, Auchan and RT-Mart, with a total of 490 stores, with sales of 106 billion yuan in 2020, ranking first in supermarket chains.
Huang Mingduan became the chairman, and Suning Tesco's intention to revitalize its main retail business is obvious. The introduction of Ali power through the management change is to use Ali's traffic.
Suning Tesco started from offline home appliance stores, but in recent years, the road to transformation e-commerce has not been smooth. After the decline of Gome, jd.com, an e-commerce platform that started from 3c, became a fierce rival of Suning Tesco. By 2015, JD.com's revenue had significantly surpassed Suning's Tesco.
Suning Tesco and Ali chose to form an alliance against JD.com. In the second quarter of 2016, Alibaba invested 28.3 billion yuan, becoming the second largest shareholder of Suning Tesco, and Suning Tesco subscribed for Alibaba shares for 14 billion yuan. With the support of Ali's traffic, Suning Tesco Tmall flagship store quickly became the "Double Eleven" single store sales leader, and Ali took advantage of this to increase its market share in the field of home appliances and e-commerce.
However, the big change of management does not mean that Suning Tesco can get out of the "most difficult period".
The 8.8 billion yuan from the sale of equity is only a drop in the bucket compared to the huge debt that Suning Tesco is carrying. Binding Ali to obtain Tmall's traffic support has achieved initial results in the past few years, and it is unlikely to grow rapidly again in the short term; the three major strategies of "doing a good job as a retail service provider, strengthening the supply chain, and optimizing the quality of operation" proposed by Huang Mingduan are not a temporary achievement.
Suning Tesco, which has been losing money in the past few years, wants to quickly stop losses and recover its vitality, which is not an easy task.
▌ Return to the main business of retail
Long before Huang Mingduan took over as chairman of Suning Tesco, Suning was already working hard to shrink its diversified investment territory and divest the marginal businesses that did not make money. After all, Suning Tesco, which is in urgent need of cash to repay its debts, also needs to maintain the normal operation of the retail supply chain and pay hundreds of thousands of employees.
In December 2020, Zhang Jindong said at the 30th anniversary conference of Suning's establishment, "As long as it is not in the retail track, away from the goods and users, we must make bold adjustments, cut what should be cut, and turn around." ”
The first to be cut is the sports sector.
At the end of February this year, Suning Holdings Jiangsu Football Club, which has been in arrears for many months, announced that it would stop operating, less than four months after it won the Chinese Super League championship. In the first quarter, Suning's pp sports could not renew the Chinese Super League due to arrears in copyright fees, and the copyright of the world's top football tournaments that Suning had spent a lot of money on was also facing renegotiation or change hands.
Also starting in February this year, Suning sought to sell the century-old Serie A powerhouse Inter Milan for 750 million euros. Italian media outlet "il sole 24 ore" reported in August that Suning was already selling the stars in the team to cash out.
The sports business is a particularly money-burning sector, and Suning is eager to get rid of the hot potato. Investing tens of billions of dollars into PP Sports and football clubs, Suning originally hoped to monetize the rights of top events and divert the flow to Suning's Tesco retail platform. However, domestic users have not yet developed the habit of paying, and the diversion effect of event broadcasting is extremely limited.
In addition to the sports sector, Suning's other investment businesses that do not make money or are not highly related to the main retail business also urgently need to return funds at the moment of lack of money.
According to the financial report, from 2015 to 2019, Suning Tesco invested a total of 71.6 billion yuan, and as of the end of 2019, there were still about 40.3 billion yuan of long-term equity investment. These include 2.2 billion yuan acquisition of pptv, 4.2 billion yuan acquisition of Daily Express, 4 billion yuan investment in China Unicom, 9.5 billion yuan in Wanda Commercial, 9.8 billion yuan in joint venture Hengning Commercial, 3.4 billion yuan investment in Huatai Securities, 2.7 billion yuan acquisition of Wanda Department Store, 4.8 billion yuan acquisition of Carrefour China, etc.
In addition, Suning's investment territory is also built by Suning Cultural Creation, Suning Investment, Suning Finance, etc. Among them, Suning Cultural Creation, which is mainly engaged in film and television business, has stopped operating due to operational difficulties.
However, it takes time to dispose of assets, and it is even more difficult to return from diversified operations to the main retail business.
"Flowing fluorescent lanterns lead the way, and thousands of horses and thousands of troops behind them." In December 2020, Zhang Jindong said at Suning's 30th anniversary celebration. Suning, which has entered the year of establishment, has defeated Gome in the "pre-e-commerce era" and experienced a painful transformation in the era of e-commerce. Today, in the vicinity of giants such as Ali, JD.com, and Pinduoduo, will Suning, whose main business is sluggish and debt-ridden, face the risk of being out?
After all, in the rapidly changing world of the Internet, there is often only a line between falling behind and getting out.