xinwenjie｜behind the 6.3 billion “bottom-fishing”: miniso has ambitions in mind, yonghui supermarket moves forward under pressure
2024-09-26
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one is a retail giant that is currently in the limelight, and the other is once the most promising supermarket chain in the country. on the evening of september 23, miniso (9896.hk) and yonghui superstores (601933.sh) announced that they would "join hands."
miniso believes that the current price of yonghui supermarket is at a low point, and after the adjustment by pang donglai, the turning point of the business model is approaching. it plans to become its largest shareholder with 6.3 billion yuan to improve its layout in the offline retail field. in its vision, the two companies will work together to create a "chinese version of sam's club". yonghui supermarket has lost 8 billion yuan in the past three years. this year, some stores have undergone pang donglai's adjustment, and customer flow and turnover have increased significantly. however, in the view of the industry, the adjustment method and effect of the remaining 800 stores need to be observed in the long term.
plans to buy yonghui supermarket at a low price of rmb 6.3 billion
on the evening of september 23, miniso disclosed that it plans to acquire 29.4% of yonghui superstores' equity for rmb 6.3 billion, including 21.1% held by dairy farm and 8.3% held by jd.com. after the transaction is completed, miniso is expected to become the largest shareholder of yonghui superstores.
yonghui superstores participated in the store adjustment (source: company website)
it should be noted that despite becoming the largest shareholder, miniso does not intend to seek actual control. miniso chief financial officer zhang jingjing said in a conference call, "we do not expect to control the majority of seats on the board of directors. therefore, we will not be the controlling shareholder or actual controller of yonghui city, nor will we consolidate the financial statements. this is a judgment made based on the current situation. the transaction is expected to be completed in the first half of 2025, and every important node during this period will be disclosed to everyone."
regarding the investment in yonghui supermarket, zhang jingjing explained that, first, from a retail perspective, miniso is optimistic about the restructuring prospects of yonghui supermarket and believes that this business has a promising future; second, yonghui supermarket's current valuation is attractive, with a low premium on investment costs and a high safety margin. after miniso enters, it will be able to help yonghui supermarket optimize its current shareholder structure and governance structure, support its existing business direction, and better leverage the integration advantages of both parties in channel upgrades and supply chains.
on the announcement date, yonghui supermarket closed at only 2.25 yuan per share
in addition, zhang jingjing mentioned that this investment will increase the use of debt in miniso's capital structure and optimize miniso's capital structure. according to reports, miniso currently has 15 billion yuan in assets, including 7 billion yuan in cash, which has lowered the company's roe (return on equity). if the new investment generates income in the future, it will increase the company's overall roic (return on capital).
although miniso gave multiple reasons for the acquisition, the capital market is not optimistic about it. on the evening of september 23, miniso opened with a sharp drop of 19.5% to $13.26 per share, and its total market value evaporated by $1 billion (about rmb 7 billion). as of the close, miniso's us stocks fell by more than 16%; on the same day, jefferies downgraded miniso's rating from buy to hold. on september 24, miniso's hong kong stocks opened with a drop of more than 36%, and finally closed down 23.86%.
miniso's offline retail layout
behind the huge investment to become the largest shareholder of yonghui supermarket is miniso’s ambition to improve its offline retail layout.
in the first half of 2024, miniso achieved revenue of 7.759 billion yuan, a year-on-year increase of 25%; and achieved an adjusted net profit of 1.242 billion yuan, a year-on-year increase of 17.8%. excluding the impact of exchange gains and losses, the adjusted net profit increased by 25.5% year-on-year. in terms of regions, the growth rate overseas was significantly higher than that in china, with revenue from the mainland increasing by 17.2% to 5.027 billion yuan, and revenue from overseas markets increasing by 42.6% to 2.732 billion yuan.
the high overseas growth rate is due to the company's continuous "going overseas" and playing the "cost-effective" card in the blank overseas market. as of the end of june 2024, miniso has 2,753 stores in overseas markets. at the same time, miniso also stated that starting from 2024, it plans to open about 550 to 650 new stores overseas each year.
miniso chengdu flagship store (source: company website)
however, returning to the domestic market, although the number of stores and total store gmv (gross merchandise volume) have continued to grow, the same-store gmv has shown signs of fatigue. during the reporting period, the total gmv of miniso stores was 7.097 billion yuan, a year-on-year increase of 15.59%; but the same-store gmv dropped from 28.1% in the same period last year to -1.7%; the total gmv of top toy stores in the first half of the year was 521 million yuan, a year-on-year increase of 41.2%, but the same-store gmv growth rate was 13.6%, also lower than the 23.2% in the same period last year.
in response, in addition to continuing to invest in ip, miniso has also tried to explore other retail formats, such as instant retail, and launched a "24-hour super store". this type of store is positioned as a forward warehouse rather than a store, and only serves the instant needs of consumers within 3 to 10 kilometers who place orders online and have their products delivered within one hour. currently, more than 200 stores have been opened.
the "24-hour super store" has just started, and miniso has set its sights on yonghui supermarket. in the view of ye guofu, founder and ceo of miniso, as a chinese retail brand with rapid global development, the combination of miniso and yonghui is expected to create a "chinese version of sam's club". in addition, there is another important point, "yonghui's prices are the lowest now."
the effectiveness of yonghui supermarket's reform remains to be seen
as ye guofu said, yonghui supermarket's share price on the announcement date was only 2.25 yuan per share. behind the low price is the dismal performance of a loss of 8 billion yuan in three years. as the "first fresh food stock", yonghui supermarket was once the most promising supermarket chain in china. at its peak in 2019, the number of stores reached 1,440, with revenue close to 100 billion yuan, and a maximum net profit of 1.8 billion yuan a year.
however, starting from 2021, affected by the macro situation, the impact of e-commerce and changes in accounting standards, yonghui supermarket began to suffer losses, with a huge loss of 3.944 billion yuan that year.
faced with the crisis, yonghui supermarket has tried to transform itself many times, such as closing some of its remaining stores, promoting omni-channel digitalization, improving store operating efficiency and store optimization, etc. however, the effectiveness remains to be seen. after all, the losses in the past two years still exceeded 2.7 billion yuan and 1.3 billion yuan respectively.
until 2024, yonghui supermarket has joined the top domestic supermarket chain "pang donglai". on may 31, pang donglai officially launched a comprehensive adjustment of yonghui supermarket's zhengzhou xinwan plaza store. influenced by this news, yonghui supermarket hit the daily limit for two consecutive trading days.
on the morning of june 19, after 19 days of closure and adjustment, zhengzhou xinwan plaza store resumed normal business, with sales on the first day reaching 1.88 million yuan, 13.9 times the average daily sales before the adjustment, and customer flow reaching 12,926 people, 5.3 times the average daily customer flow before the adjustment. after that, pang donglai adjusted yonghui supermarket zhengzhou hanhai haishang store, and xi'an zhongmao store became yonghui supermarket's first store in the country to learn from pang donglai through independent adjustment.
yonghui supermarket's first batch of stores that made voluntary adjustments (source: company website)
without exception, these stores have achieved significant increases in customer flow and sales after the adjustments, which is one of the reasons why miniso decided to take action. at the exchange meeting, miniso said frankly, "the performance of the three adjusted stores has improved significantly, which makes us feel that we can replicate it to other parts of the country." however, yonghui supermarket currently has more than 800 stores. pang donglai has stated that yonghui supermarket will mainly rely on independent adjustments in the future. in the industry's view, how large-scale adjustments will be carried out and what the long-term results will be remains to be further tested.
compared with miniso, the situation is like "ice and fire". on september 24, yonghui supermarket's stock price hit the daily limit.
(qilu evening news·qilu one point client huang shougeng)
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