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Zebra Consumption Xu Ji

After multiple rescue efforts, emergency blood transfusion, long-term rest, and self-recovery, Suning.com was finally able to transfer the patient from the ICU to a general ward.

In the first half of this year, the company has seen a glimmer of hope for turning losses into profits, but this is the result of assistance from non-recurring gains and losses, and the company's main business has not yet fully recovered.

More importantly, the company's tight financial pressure and liquidity alarm have not been completely lifted.

The dawn of profitability

ST Yiguo (002024.SZ) disclosed its semi-annual performance forecast, and the company’s more than 200,000 investors finally saw a glimmer of hope.

From January to June this year, the company expects to achieve a net profit attributable to the parent company of -50 million yuan to a profit of 45 million yuan. Within this range, no matter what the final audited result is, it will be a significant improvement compared with the loss of 1.93 billion yuan in the same period last year.

In fact, at the beginning of this year, the company's operating situation was still unclear. In the first quarter, the company achieved operating income of 12.58 billion yuan, a year-on-year decline of 20.68%; the net profit attributable to the parent company was a loss of nearly 100 million yuan, with no obvious improvement.

At the beginning of the second quarter, the company continued to focus on reducing costs and increasing efficiency, improving management and operating efficiency, and brought about a month-on-month improvement in labor efficiency and floor efficiency. During the period, the company seized the policy opportunity of old-for-new home appliances and relied on its own store network advantages to go deep into new and old communities and acquire customers accurately based on user needs; on the other hand, it expanded store customer acquisition channels with the help of local life platforms such as live broadcasting and instant delivery.

At the same time, the company moderately accelerated the expansion and upgrading of stores in core business districts, improved the shopping experience and the scale of single stores, and sales improved on a month-on-month basis.

Data shows that in Q2, the company's comparable store sales revenue of home appliance, 3C and home life specialty stores in mainland China increased by approximately 20.1% month-on-month.

After the above adjustments, the company turned losses into profits in the second quarter, and it is expected to achieve a net profit attributable to shareholders of RMB 47 million to RMB 142 million.

Although it is only a single quarter profit forecast, it is a good sign for Suning.com, a company that continues to bleed heavily. Since 2020, the company has suffered huge losses in net profit attributable to its parent company for four consecutive years, with a total loss of more than 67.8 billion yuan.

However, it should be pointed out that the obvious improvement in ST Yiguo's performance does not mean a full recovery in the company's main business. In the first half of the year, the disposal of subsidiaries and debt restructuring brought an impact of about 500-600 million yuan. Therefore, the company's net profit after deducting non-recurring items for the current period is expected to still be a loss of 500-600 million yuan.

In fact, Suning.com has been operating at a loss for ten consecutive years, with a total loss of more than 85.7 billion yuan, since 2014.

The company has been able to stay in the capital market by relying on superb capital maneuvers and extreme use of rules. In 2015, Suning.com and Alibaba formed an alliance to exchange shares, which was one of Zhang Jindong's few wise decisions. In the following years, Alibaba's shares saved Suning.com's life many times.

Can't relax yet

After long-term bleeding, Suning.com finally encountered a liquidity crisis in 2021.

At that time, due to the inability to pay suppliers on time, Suning.com's various channels were in short supply of goods, and even had no goods to sell. This is how the name "Wuhuo Ning" came about.

Under the heavy pressure, Zhang Jindong, as the founder and head of the company, could no longer bear it alone. Jiangsu Province, where the company's headquarters is located, lent a helping hand.

In July 2021, Jiangsu State-owned Assets led the New Retail Fund II to acquire Zhang Jindong and other shareholders' 16.96% stake in Suning.com at 5.59 yuan per share, with a total consideration of 8.825 billion yuan. Zhang Jindong lost control of the listed company. Immediately, Zhang Jindong resigned from all positions including chairman, and only served as honorary chairman, continuing to provide advice and suggestions for the company.

Alibaba, the largest shareholder of Suning.com, sent veteran Huang Mingduan to take over. Huang has been in charge of Sun Art Retail for a long time and has rich experience in the chain retail industry.

As soon as Huang Mingduan took office, he carried out drastic reforms on Suning.com. In just over a year, the company decisively closed down the heavily loss-making Redbaby maternity and baby stores, Carrefour supermarkets, and home appliance 3C home life specialty stores, totaling more than 600 stores. In 2019, Suning.com acquired Carrefour China, which had more than 200 stores. By the end of 2023, there were only 4 stores left.

While closing stores, the company is accelerating the opening of new stores in areas such as home appliances and 3C, where it has advantages.

In April 2023, the board of directors of Suning.com was replaced. Huang Mingduan, then 68 years old, stepped down and handed over the important task of revitalizing Suning to the younger "Suning people".

Ren Jun, born in 1977, was elected as the new chairman and concurrently president. He is an old Suning employee, having joined the company at the age of 22. He was once the youngest vice president of Suning and has served as secretary to the board and director. He is very familiar with the company's situation.

Under the leadership of Ren Jun, in 2023, Suning.com's net profit attributable to shareholders of the parent company was a loss of 4.09 billion yuan, a significant narrowing from -16.22 billion yuan in the same period last year.

This is the result of strategic contraction and return to core business.

Excluding the impact of the closure of Carrefour's large supermarket business, the company's operating income for the year increased by 2.239 billion yuan compared with the previous year. At the same time, the company focused on the construction of the value chain of special products and improved profitability. The gross profit margin increased from 18.85% in 2022 (the comprehensive gross profit margin after excluding the increase in procurement costs) to 20.62%.

But from a financial perspective, it is far from time for Suning.com to relax.

As of the end of March this year, the company's asset-liability ratio was still as high as 91.70%. Short-term loans and non-current liabilities due within one year totaled 40.8 billion yuan, while cash and cash equivalents in the same period were only 13.81 billion yuan, facing huge short-term repayment pressure.

As of December 31, 2023, the principal and interest of bank loans that had triggered default and early repayment events amounted to RMB 19.138 billion; as of March 31 this year, overdue payables amounted to RMB 32.789 billion.

Since the beginning of this year, ST Yiguo's stock price has continued to fall, hitting a historical low of 1.12 yuan per share on June 25. On the same day, the company held a board meeting and urgently issued a repurchase plan. It plans to invest 80 million to 100 million yuan in the next three months to repurchase the company's shares at no more than 2.04 yuan per share.

A few days before this, 31 directors, senior executives and key business personnel of the company had already put forward a plan to increase their holdings. Although the total amount of 5 million yuan for the increase in holdings is only a drop in the bucket, it is still a positive attitude.