news

interface news reporter | lu yibei

jiemian news editor | xu yue

"it's right that no one can understand it. if everyone can understand it, i will have no chance." at 8 pm on september 23,minisofounder, chairman and ceo ye guofu left this message on his wechat moments.

on the evening of september 23, this retail giant, which mainly focuses on daily necessities, announced on the hong kong stock exchange that it would acquireyonghui supermarket29.4% of the shares, including 21.1% held by dairy farm andjd.comholds 8.3% of yonghui superstores shares; after the completion of the transaction, miniso is expected to become yonghui superstores' largest shareholder.

one hour after the announcement was made, the u.s. stock market opened and miniso's share price fell by about 18%. ye guofu left the opening sentence on wechat moments.

miniso held a conference call on the evening of the announcement to explain the transaction.

zhang jingjing, chief financial officer of miniso, said in a conference call that miniso is not expected to control the majority of seats on the board of directors. therefore, miniso will not be the controlling shareholder or actual controller of yonghui superstores, nor will it consolidate financial statements. it will use the shareholding ratio to calculate the amount to be recognized.investment incomethe transaction is expected to be completed in the first half of 2025.

in addition, the current miniso management team, including miniso founder and ceo ye guofu, will continue to focus on the core business of the miniso group. miniso still maintains the five-year strategic plan and goals made at the investor day earlier this year, and also maintains the full-year growth target for 2024.

image source: miniso

but miniso also hopes that this acquisition can bring greater synergy.

the announcement shows that after the acquisition, miniso can provide support to the target group through business cooperation, and yonghui can use miniso's advantages to develop higher-quality self-branded products at a lower cost, which is expected to enhance the differentiated competitiveness of the target group; with the help of yonghui's approximately 850 store system and supply chain, the two parties can further enhance economies of scale and optimize the cost structure; in addition, as the acquisition will expand miniso's investment and operating channels in the daily necessities retail business, the group will be able to diversify cyclical business risks.

zhang jingjing further explained in the conference call that the signing is still in a relatively early stage, but both parties have room for imagination in supply chain and product development. at present, the household goods category of yonghui supermarket is not very differentiated and has a low gross profit margin, and miniso is good at this; miniso and yonghui supermarket have synergy opportunities in channels. currently, only about half of yonghui's more than 855 stores have miniso within a radius of two kilometers.

founded in 2001, yonghui supermarket was once a giant in the industry. in 2010, it was successfully listed on the a-share market with the halo of "the first fresh food stock". in the era when there was no community group buying, "fresh food +" was still a new concept, and yonghui supermarket was highly sought after by the capital market. in terms of revenue data, when it was listed in 2010, yonghui supermarket's revenue was 12.318 billion yuan. by 2020 before the epidemic, yonghui's revenue scale had skyrocketed to 93.199 billion yuan.

but today, yonghui supermarket is besieged on all sides. the financial report shows that yonghui supermarket achieved operating income of 78.642 billion yuan in 2023, a year-on-year decline of 12.71%, and a net profit of -1.329 billion yuan. in the past three years, yonghui supermarket's cumulative losses have exceeded 8 billion. the semi-annual report it released not long ago is not good either. in the first half of 2024, the company achieved operating income of 37.779 billion yuan, a year-on-year decrease of 10.11%. the net profit attributable to shareholders of listed companies was 275 million yuan, a year-on-year decrease of 26.34%.

as both revenue and net profit fell, yonghui is stopping losses by closing stores. in the first eight months of 2024, yonghui closed 136 stores. minus the 63 stores closed in the first half of the year, yonghui closed 73 stores in just two months from july to august.

image source: interface gallery

however, ye guofu believes that this is an opportunity to "buy at the bottom".

zhang jingjing said at the meeting that from a retail perspective, miniso is optimistic about the prospects of yonghui supermarket's restructuring and believes that this business has a future; in addition, yonghui supermarket's current valuation is attractive, with a low premium on investment costs and a high safety margin. he also mentioned that this investment will increase miniso's use of debt in its capital structure and optimize miniso's capital structure. if yonghui supermarket starts to make a profit after the restructuring in the future, this investment will greatly optimize miniso's return on investment.

taking over yonghui supermarket, which once had a market value of over 100 billion yuan and a revenue of over 90 billion yuan, at a price of 6.3 billion yuan seems to be a deal that is almost a good deal, but the question is whether yonghui supermarket has really reached the turning point that ye guofu has always dreamed of.

in recent years, yonghui supermarket has been trying to gain a respite through adjustments and reforms. since june this year, yonghui has focused its adjustments and reforms on "learning from pang donglai."

in june and july this year, yonghui supermarket began to carry out pangdonglai-style adjustments and reforms in two stores in zhengzhou. in terms of products, 70% of the products were removed from the shelves, and the product structure was reorganized with reference to pangdonglai, and pangdonglai's own products were introduced, including pangdonglai jiangmi noodles, dl juice, dl craft wheat beer, dl oatmeal and dl laundry detergent, etc. at the same time, the remuneration of front-line employees was improved.

yonghui’s second adjusted store, zhengzhou hanhai haishang store, opened on august 7. as of august 22, its average daily sales were 1.08 million yuan, 8.2 times the average daily performance before the adjustment, and customer flow increased nearly 10 times.

what touched ye guofu was this new "pang donglai version of yonghui".

not long ago, on july 30, ye guofu went to henan to see the restructured yonghui supermarket for the first time. during the few days he visited the stores, even at 2 p.m. on thursday, which was a quiet time, the two yonghui supermarkets were still crowded. in august, he went to henan again for inspection.

"i was thinking, how nice it would be if this store was mine," ye guofu recalled in a conference call.

as for the reason for investing in yonghui supermarket, ye guofu said that china's offline supermarkets are facing a structural opportunity that only comes once in 20 years.

"over the past decade, i have traveled around the world and seen various retail formats and models. i discovered that a retail model that is better than costco, sam's club and trader joe's is in china, and that is the pang donglai model. in fact, i believe that the pang donglai model is the only way out for chinese supermarkets," said ye guofu.

he believes that compared with sam's club and costco, the similarity between the donglai model and the model is that they attach great importance to product strength. the difference is that they pay more attention to customer experience, respect employees more, and do not have a membership system. traditional supermarkets are more interested in making quick money than studying goods, services and consumers, thus deviating from the essence of retail.

at the meeting, many analysts "didn't understand". someone asked that yonghui supermarket had experienced several transformation attempts, including new formats and store adjustments, but apart from the few stores that pang donglai has helped to adjust, what other opportunities did ye guofu see? others pointed out that from the perspective of investors, the retail format of supermarkets and hypermarkets is not optimistic. in the past period of time, many listed companies have performed mediocrely, and pang donglai has never left henan.

"you said that investors are not optimistic about chinese supermarkets now. so do they think china's costco and china's sam's club are promising? now there is a better model than sam's club. there is no reason not to be optimistic. it's just that everyone should not look at the past, but look to the future. no one would be optimistic about chinese supermarkets in the past." ye guofu replied, "why didn't i do it in the past, but now? because i see a new future, a new model, and a new prospect."

the success of the pang donglai model has set off a major change in china's supermarket industry. after the pang donglai adjustment, yonghui has achieved breakthroughs in sales, customer flow and other dimensions. but whether it can truly revive yonghui supermarket remains unknown, even though ye guofu has made a resolute bet.

during the conference call, zhang jingjing said before his official speech, which was rare, "make fewer predictions and read more history. buffett said that the vision of market forecasters will fill your ears but not your wallet, so this is why we have to communicate openly today."

"i hope everyone can be patient and i hope everyone can believe in my vision. i look at the retail industry not only in china, but also globally. i may make mistakes in other areas, but i will never make mistakes in retail." ye guofu also said at the meeting.