The stock price has plummeted by 75%, 300 stores are about to be shut down, and the founders and husband are no longer the richest people in Singapore... What happened to Haidilao?
On the evening of November 5, Haidilao issued an announcement that the Group has decided to gradually close about 300 Haidilao stores with relatively low passenger flow and less than expected operating performance by December 31, 2021 (some of which will be temporarily closed and reopened at the opportunity, with a maximum rest period of no more than two years).
Haidilao said the stores did not meet expectations, mainly due to the company's rapid expansion strategy formulated in 2019. In the announcement of the official Weibo, Haidilao also wrote a sentence in small font: "The current bitter fruit can only be swallowed by ourselves." ”
(Photo note: Screenshot of Haidilao's official Weibo)
In addition, Haidilao also said that in order to improve its operating performance, the board of directors decided to launch the "Woodpecker Program" led by Ms. Yang Lijuan, executive director and deputy chief executive officer.
The main contents of the "Woodpecker Plan" include: continuing to pay attention to stores with poor operating performance, including overseas stores, and taking corresponding improvement measures; rebuilding and strengthening some functional departments and restoring the regional management system; continuing to convey corporate culture and the values of "changing fate with both hands" to employees, and vigorously advocating the dedication of love and trust as the core; timely shrinking the Group's business expansion plan, if the average turnover rate of Haidilao stores is less than 4 times / day, in principle, new Haidilao stores will not be opened on a large scale.
In fact, since 2017, the expansion of Haidilao stores has accelerated. The number of stores increased from 176 at the end of 2016 to 1298 at the end of 2020. In just four years, the number of Haidilao stores has increased by 1122, and the expansion rate can be seen.
In the first half of this year, Haidilao is still accelerating its store opening. As of June 30, 2021, the number of Haidilao stores worldwide reached 1597, a net increase of 299 in the first half of the year alone.
Haidilao's expansion strategy is to increase the density of stores in first- and second-tier cities and sink to third-tier cities and below. First-tier cities refer to the north, Shanghai, Guangzhou, and Shenzhen; second-tier cities refer to all municipalities and provincial capitals except first-tier cities, plus Qingdao, Xiamen, Ningbo, Dalian, Zhuhai, Suzhou, and Wuxi; the rest are third-tier cities and below.
Behind the rapid expansion is the weakness of Haidilao's performance growth, especially since 2020.
In 2020, Haidilao's operating income was 28.614 billion yuan, an increase of only 7.8% over 2019; profit during the year was 310 million yuan, down 86.8% from 2019; net profit attributable to company owners was 309 million yuan, compared with 2.345 billion yuan in the same period last year.
In the first half of 2021, Haidilao's operating income was 20.094 billion yuan, an increase of 105.9% over the same period in 2020; profit was 0.97 billion yuan, up 110.0% from the same period in 2020, and the same period last year was a loss.
The increase in the number of operating days, the recovery in foot traffic, and the increase in the number of stores were the main drivers of Haidilao's overall revenue growth in the first half of the year.
However, in the first half of the year, Haidilao's overall turnover rate was 3.0 times / day, compared with 3.3 times / day in the same period in 2020, Haidilao said, "the operating results did not meet the expectations of management, reflecting the company's internal management and operations need to be adjusted and improved".
Since 2018, the average overturning rate of Haidilao has no longer increased, and it has declined since 2019, with the average overturning rate of only 3.5 times per day in 2020.
In fact, rapid store expansion is not a panacea for growth. When the store opens to a certain number, it is not necessary, and even has the opposite effect. Because the number of stores increases to a certain extent, it will affect the turnover rate - the greater the density of stores, the lower the turnover rate.
In other words, expansion also has to consider the balance between the number of stores and the effectiveness or turnover rate. In other words, reaching the optimal number of stores is the right expansion. Obviously, the optimal number of stores is less than the maximum number of stores.
In addition, even if it expands rapidly, management has to keep up. As Haidilao said, "managers at all levels can not understand and are tired of running, the number of excellent store managers is insufficient", in the period of accelerated expansion, there is a high probability that such problems will occur, but due to the epidemic and the impact of the environment, these problems have been exposed earlier and more obviously.
Behind the closure of stores, Haidilao is no longer favored in the capital market.
On February 17, Haidilao's closing price hit a record high of HK$83.55 per share. As of the close of trading on November 5, the share price has fallen to HK$21.05 per share, which is nearly 75% from February 17.
As of the close of trading on November 5, Haidilao's total market capitalization was HK$114.9 billion.
In addition, in the List of Singapore's Richest People released by Forbes in August, Haidilao founder and chairman of the board of directors Daniel Zhang and his wife Shu Ping ranked fourth with a wealth of US$16 billion, losing the throne of Singapore's richest man.
(Photo note: Screenshot of Forbes official website)
In the 2020 Forbes China 400 Rich List, the wealth of Daniel Zhang and Shu Ping was 174.82 billion yuan, and the list was released in November 2020, when Haidilao's stock price had experienced a sharp rise since the second half of 2020.
However, in the 2021 Forbes Chinese mainland rich list, the wealth of Daniel Zhang and Shu Ping is 90.2 billion yuan. The list was released on November 4, a full year after Forbes released the 2020 China 400 Richest List. In this year, the wealth of Daniel Zhang and Shu Ping shrank by 84.62 billion yuan.
In the past two years, Haidilao is also looking for growth possibilities outside the hot pot business, and some new businesses have been exposed, such as Eighteen Yan, Bai Bran Private Room Noodles, Laopai Noodles, New Qin Pie Noodle Restaurant, and Hi Lao Tavern. However, at present, it seems that these new businesses have not brought much effective contribution to performance.
Zhu Danpeng, an analyst in the Chinese food industry, told the city that haidilao's broken arm survival should be a more correct approach. As for haidilao's future growth, what will it rely on? "Maximize sales, profits, and efficiency of a single store." Zhu Danpeng said, "After closing 300 stores, there are about 1300 stores, and it is actually a very difficult thing to run these 1300 stores well."
It is worth mentioning that in June this year, at an exchange meeting, Daniel Zhang said: "Everyone mythologized Haidilao, and I am very disgusted... We are also facing the difficulties faced by all catering enterprises; we still have not solved the problems that all catering enterprises cannot solve. ”
When asked if Haidilao would continue to grow, Daniel Zhang replied: "As the largest shareholder of Haidilao, I have no hope... No business will continue to grow. Enterprises are organizations and have the same vitality as people. A good year is not necessarily a good year; a bad year is not necessarily a bad year. ”
(Author| Lei Yanpeng, Editor| Liu Xiaoying)