Behind the decline in Gaoxin's retail performance is the anxiety that there is no "advantage bottom card" in the future.
Text/Daily Earnings Report Lu Mingxia
In the post-epidemic era, in addition to the recurrence of prevention and control, the national consumption structure is still on the way to upgrading. Due to the impact of online networks, the traditional retail industry is facing various "play" challenges. Different companies have different approaches, some people pursue the community to go home, open up the "last mile" with consumers; some people are demanding quality, strict classification, to meet all consumer needs in their own fields; and some people use new media and other technologies to achieve brand curve overtaking with the help of hot spots. Under the fierce competition, on the one hand, the industry has been promoted, and on the other hand, enterprises, including some established retail brands, have been forced into corners.
On the evening of November 1, Gaoxin Retail (06808.hk) released its semi-annual report for fiscal 2022 as of September 30. During the period, the company achieved revenue of 41.534 billion yuan, down 5.0% year-on-year, and net profit of 112 million yuan, down 87.6% year-on-year. At the same time, the company's gross profit margin also decreased from 26.9% to 26.3%.
In terms of business, in the first half of Gaoxin Retail's fiscal year 2022, the revenue from the sale of goods was 39.761 billion yuan, a year-on-year decrease of 5.3%. Among them, same-store sales fell by 7.4% year-on-year, Gao Xin Retail said that the sales of the company's offline business (mainly contributed by hypermarket revenue) were full of challenges due to fierce market competition, while the b2c business (mainly through Taoxianda and Tmall platforms) achieved substantial growth and made up for the Group's sales business.
For the interim results, Lin Xiaohai, CEO of Gaoxin Retail, said, "The challenge is still there, but we believe in the value of long-termism and have confidence in future growth." Hit by the significant deterioration of medium-term earnings, Gaoxin Retail's stock price fell sharply, and the stock price fell nearly 12% at one point. As of the close of trading on November 3, Gaoxin Retail's share price was reported at HK$3.68.
Gao Xin and Ali are difficult to say "matched"
Founded in 2011, Gaoxin Retail is the largest physical retailer in China, and its business mainly includes two major brands, Auchan and RT-Mart. In July of the same year, Gaoxin Retail landed on the Hong Kong Stock Exchange.
In the past few years, with the development trend of the industry, under the reality of the online market competition for passenger flow, traditional hypermarkets have embarked on the road of transformation and strive to seek living space, while Gaoxin Retail has chosen the transformation road to develop online business. In 2017, Gaoxin Retail and Alibaba "married", Alibaba Group strategically invested in Gaoxin Retail, with HK$22.4 billion in exchange for 36.16% of Gaoxin Retail's shares. In 2020, Ali once again increased its stake to 72% and completed the holding, after which Gaoxin accelerated the pace of online retail.
Along with this, the management of Gaoxin Retail is also changing. According to Gaoxin Retail's 2020/2021 annual report, Lin Xiaohai became the new CEO of Gaoxin Retail and formed a new generation of management team. It is reported that Lin Xiaohai once served as the general manager of Alibaba Retail And Technology, and the vice president of the sales department of Procter & Gamble (China) Marketing Co., Ltd. in Greater China.
What is more interesting is that at the end of 2017, when Ali "won" Gaoxin Retail, in 4 months, Gaoxin Retail's stock price as a whole rose, from 7 Hong Kong dollars / share in early November to nearly 10 Hong Kong dollars / share in early March, and the market value soared by more than 30 billion Hong Kong dollars. However, in 2020, when Ali announced another 28 billion Hong Kong dollars, Gaoxin Retail's stock price continued to weaken. On October 19, 2020, on the day of Ali's increase in holdings, Gaoxin Retail's stock price rose by 19.17%, closing at HK$9.2 per share. Since then, the overall decline in the stock price has been less than HK$4.
It is reasonable to say that with the blessing of the top Internet e-commerce in China and even in the world, Gaoxin's business and stock price should soar all the way. Because in terms of business, the head advantages of offline brands RT-Mart and Auchan can be transplanted online, opening up the online market, and when their online and offline are intertwined, there is a high probability that they can sit firmly in the first place in Chinese stores.
But reality did not do so. When the two are deeply "linked", although there are online results, they still can't make ends meet, dragging down the overall revenue. In 2019, Gaoxin's total retail sales revenue increased by 0.5% year-on-year; in 2020, retail sales revenue increased by 0.14% year-on-year, and in this financial report, the growth was negative 2.01%, that is, in the first quarter of this year, the revenue contraction was even greater.
Even in this year's financial performance, the performance still did not have a qualitative jump, but further weakened. For the performance of the latest financial report, Lin Xiaohai pointed out that at the beginning of the year, it was indeed not expected that the competition for community group buying would be so fierce, nor did it expect that the CPI would fall so badly and the epidemic would be repeated, so at that time, a high double-digit growth was proposed, but the changes in the operating environment in the first half of the year made the group's performance decline in low units.
Of course, the reality is on the one hand, but the performance of the transition period is still barely acceptable to investors, but in the face of the continuous decline in Gaoxin's retail performance today, it is inevitable for the outside world to judge: Alibaba and Gaoxin Retail, I am afraid it is really "inappropriate".
Food safety has repeatedly "overturned"
It is worth noting that at the same time as the results of the first half of the 2022 fiscal year were released, Gaoxin Retail announced that all 497 stores of RT-Mart across the country participated in Double 11, "allowing consumers to experience a pyrotechnic double 11, during which fresh fruits, baked cooked food, rice flour grain and oil, daily household qing, clothing department stores, etc. up at 50% off."
Consumers who enjoy the double 11 discount online and offline can directly go to the store to "hoard goods", and can also place orders through the RT-Mart Youxian app, Tmall supermarket, Taoxianda, Ele.me and so on, and experience one-hour delivery to home service. According to the semi-annual report of fiscal 2022, the online order volume from RT-Mart Youxian App, Taoxianda, Ele.me and Tmall supermarkets increased by 25% year-on-year, and the average daily order volume of stores increased to 1400.
With the continuous increase of new retail renovation stores, the efficiency of Gaoxin's retail supply chain has been further improved. According to the financial report data, RT-Mart has built 3 fresh processing centers, the number of fast picking warehouse stores covers 490, the number of stores with hanging chains has reached 370, and about 150 stores have opened up Tmall supermarkets to share inventory.
But what cannot be ignored is that RT-Mart's black history has also accompanied its development process. The last time RT-Mart sparked public outrage was in November 2020, because the "Women's Size Recommendation Table" was suspected of discriminating against women. In less than 1 year, the RT-Mart Jinan Province Bo store sales of "overnight meat" incident on the hot search, once again ignited consumer anger.
(Source: Jinan Market Supervision and Administration Bureau official website)
Accordingly, the Jinan Municipal Bureau of Market Supervision issued an administrative punishment decision to the company and relevant personnel in accordance with the law, warned the company, confiscated 17,900 yuan of illegal gains, confiscated relevant meat, fined 1,371,500 yuan, and fined a total of 1,389,400 yuan, and ordered to correct the illegal acts.
After further understanding, the "Daily Financial Report" found that in fact, complaints about the quality and safety of RT-Mart food are not limited to one Bodian in Jinan Province.
For example, in June 2021, RT-Mart was confiscated and fined by the Shanghai Municipal Market Supervision and Administration Bureau for "producing and selling unqualified products to pass off as qualified"; on July 22, the Haikou Municipal Supervision Bureau released statistics showing that in the second quarter of 2021, RT-Mart ranked first in the black list with 57 complaints, and even exceeded nearly 50% of the complaint volume than the second-ranked WantHo.
On the complaint platform "Black Cat Complaints", there are not many complaints about RT-Mart, with a total of 452 complaints as of November 2, most of which are related to food safety issues.
In fact, it is easy to feel that although the epidemic situation and CPI data and community group buying in the past two years are not conducive to Gaoxin Retail, but in addition to environmental factors, as a retailer, the brand image is the first after all, and any operation away from the brand image is tantamount to standing still. The most fatal thing at this stage is probably that Gaoxin Retail does not have too many bottom cards to take out and occupy an advantage in the competition with other companies on the same track.