Sun Art Retail (06808.)HK) has sparked speculation about its recent moves.
Entering 2024, RT-Mart, a well-known supermarket under Sun Art Retail, will continue to close stores, and stores in Deyang, Huanggang, Zhuzhou and other places will withdraw one after another. According to incomplete statistics, since January 2023, at least 13 RT-Mart stores have closed or announced their closures.
Sun Art Retail told Times Finance that everything in the company is in normal operation, and the closure of RT-Mart is a normal business adjustment, "part of the transformation to 2."0 stores and M member stores, partly due to property expiration, etc. ”
Since 2024, Alibaba's transformation has spread to the new retail field. At the beginning of February, there was a report that Ali was considering Intime Department Store; At the earnings report on February 7, Alibaba Group Chairman Joe Tsai also mentioned that the traditional brick-and-mortar retail business is not Alibaba's core business, "It is reasonable to withdraw from this type of business, but it will take time to achieve it slowly according to market conditions." ”
On February 19, a research report by UBS said that Ali may ** its stake in Sun Art Retail, or will accelerate the adjustment of Sun Art's retail business, including the closure of loss-making stores. This adds some confusion to Sun Art's stay in the Alibaba system.
Regarding the rumors of Ali ** Sun Art Retail, Sun Art Retail officially responded that it would not comment. According to the analysis of Times Finance, Sun Art Retail was already the main body of a Hong Kong listed company when it made a strategic investment in Alibaba, and it had a set of standards and codes for the listing of independent companies that needed to be followed, and any major changes were under the framework and constraints of listed companies.
Open a store while adjusting
Amid the suspicions, Sun Art Retail unveiled its new expansion plans to the outside world on February 26.
Sun Art Retail announced that its RT-Mart, RT-Mart SUPER, and M member stores will open a total of 21 new stores nationwide, and will renovate RT-Mart stores that are more than 10 years old, and are expected to complete 2 stores of 90 stores0 version refactored. And in January, Sun Art Retail just opened 12 new stores in 10 cities across the country.
Sun Art Retail said that the company is currently in a period of adjustment, and the opening of new stores and the closure of stores are based on some adjustments made based on changes in the market, customer demand and the company's strategy.
In fact, the restructuring of old stores and the expansion of new business formats have been the key strategies of Sun Art Retail since last year. Since the first store of M Club in Yangzhou in April 2023, it has successively opened stores in Changzhou and Nanjing. Last month, the ninth store of M members was located in Taizhou and a signing ceremony was held.
RT-Mart SUPER stores, which together with M Club stores, form Sun Art's second growth curve, are also accelerating their expansion, opening their first store in 2021 and reaching 19 stores as of September 2023. According to industry insiders, this may be because the new format was in a period of exploration before, and there is currently an acceleration of store opening, indicating that the profit model has basically run through.
As of September 2023, Sun Art Retail has completed the restructuring of 8 stores and more than 50 projects and partial renovations.
In response to Sun Art Retail's recent actions, senior retail expert Wang Guoping analyzed the times of finance and economics, RT-Mart super store and M member store direction is no problem, the core is to see whether the content side construction can keep up, "* chain reform determines its success or failure, but the first chain reform touches the interests of all parties, it is difficult to promote, at this time enterprises need iron-fisted managers, if there is no big action in personnel, it may be difficult to have a big breakthrough." ”
Since being acquired by Alibaba, Sun Art Retail has not been on a high trajectory, with its interim results as of September 30, 2023, showing revenue of 3576.8 billion yuan, down 119%；The loss attributable to the owners of the company was 35.9 billion yuan.
In the three years since becoming the controlling shareholder, the market value of Sun Art Retail has also shrunk significantly. On October 19, 2020, Alibaba became the controlling shareholder of Sun Art Retail by increasing its holdings, and the latter's stock price rose by more than 20% intraday, with a market value of nearly HK$100 billion. As of February 27**, Sun Art's total retail market capitalization was 1240.2 billion Hong Kong dollars, evaporating more than 70 billion Hong Kong dollars.
Will Ali sell Sun Art Retail?
In the past, Sun Art Retail was a trump card for Ali to expand offline.
In 1997, RT-Mart entered the mainland market for the first time, and under the leadership of Huang Mingduan, its performance has been booming. According to a report by the China Chain Store & Franchise Association, RT-Mart recorded a revenue of 24 billion yuan in 1999, and in 2009, it replaced Carrefour as the retail champion in Chinese mainland with a revenue of 40.4 billion yuan. And the fact that a store has not been closed for 19 years has made RT-Mart once a legend in the supermarket industry.
In 2016, RT-Mart Dalian Weiyi Square store closed to break this record. Behind this is the dilemma faced by the entire industry, that is, the cost of rent, as well as the impact from e-commerce companies such as ** and JD.com.
In November of the following year, Sun Art Retail joined hands with Alibaba, China's largest e-commerce group, and the two sides issued a joint announcement that Ali's subsidiary, **China, planned to sell 161HK$3.1 billion acquisition of Sun Art Retail 2602% equity interest, and intends to take 6HK$50 shares, priced at 62HK$9.3 billion acquisition of Sun Art Retail's major shareholder Jixin 199% equity, after the completion of the acquisition, ** directly and indirectly holds 3616% of the shares, becoming the second largest shareholder.
In 2020, Alibaba further increased its shareholding in Sun Art Retail, and in May of that year, Lin Xiaohai of Alibaba joined Sun Art Retail. In October, Ali issued an announcement saying that **China will take 8After the completion of the transaction, Alibaba and its related parties will hold a total of about 72% of Sun Art Retail, and Alibaba will become the actual controller of Sun Art Retail. In the same year, RT-Mart ranked first in the "Top 100 Supermarkets List" released by the China Business Association.
In May of the following year, Sun Art Retail made major personnel adjustments, and Executive Director Lin Xiaohai replaced Huang Mingduan as the company's CEO, and Alibaba officially took over. Lin Xiaohai has worked for Procter & Gamble China for nearly 20 years, joined the company in 1995, became the president of P&G Greater China Sales in August 2014, and then joined Alibaba in 2016 as assistant to Daniel Zhang, successively serving as vice president of Alibaba Group and general manager of the retail communication business unit.
In fact, in addition to the positive growth of Sun Art's retail revenue in the year of its acquisition by Alibaba, its performance has been declining in the past two years. For the fiscal year 2022 (April 1, 2021 to March 31, 2022), the company generated revenue of 8813.4 billion yuan, down 53%；The loss attributable to the owners of the company was 73.9 billion yuan, which is also its first loss since its listing in 2011. In the "Top 100 Supermarkets List" that year, it was overtaken by Wal-Mart and Yonghui and ranked third.
In the half-year ended September 2023, Sun Art Retail has not yet turned around its losses.
However, Wang Guoping's analysis of Times Finance and Economics shows that even if Ali wants to ** Sun Art Retail, there may not be a suitable buyer, "The domestic head supermarket is 'difficult to protect itself' and has no ability and energy to integrate;."On the manufacturing side, COFCO had the idea of grafting its own products through acquisition channels in the early days, but later it stagnated because there was no suitable purchase target; Douyin and Meituan have not shown the demand for supermarket channels, and it depends on whether the strategy changes in the later stage. ”
He said that at present, Sun Art Retail is not a "hot potato" for Alibaba, but it lacks a suitable exit channel, and now Sun Art Retail's stock price is low, and it is not necessarily the right time to make a move.