---
title: "Auchan Awaits Rescue"
description: "Last year, Auchan's parent company Gaoxin Retail turned from profit to loss, and has been in the eye of the storm for years. Controlling shareholder Alibaba has repeatedly indicated it wants to exit traditional physical retail, and even business collaboration between the \"father and son\" has decreased. However, the rumored change of ownership has yet to materialize. Unable to wait for external rescue, the company must save itself. Can mass closures of traditional hypermarkets and a shift to membership stores, aiming to become China's version of Costco and Sam's Club, be Auchan's lifeline? Auchan's crisis: Since 2023, the retail industry has been recovering overall, but Auchan remains mired in difficulties."
author: "徐霁"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-05-24"
language: "en"
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# Auchan Awaits Rescue

> Last year, Auchan's parent company Gaoxin Retail turned from profit to loss, and has been in the eye of the storm for years. Controlling shareholder Alibaba has repeatedly indicated it wants to exit traditional physical retail, and even business collaboration between the "father and son" has decreased. However, the rumored change of ownership has yet to materialize. Unable to wait for external rescue, the company must save itself. Can mass closures of traditional hypermarkets and a shift to membership stores, aiming to become China's version of Costco and Sam's Club, be Auchan's lifeline? Auchan's crisis: Since 2023, the retail industry has been recovering overall, but Auchan remains mired in difficulties.

Last year, Auchan's parent company Gaoxin Retail turned from profit to loss, and has been in the eye of the storm for years.
**Controlling shareholder Alibaba has repeatedly indicated it wants to exit traditional physical retail,** and even business collaboration between the "father and son" has decreased. However, the rumored change of ownership has yet to materialize.
**Unable to wait for external rescue, the company must save itself.** Mass closures of traditional hypermarkets and a shift to membership stores, aiming to become China's version of Costco and Sam's Club, can this be Auchan's lifeline?
**Auchan's Crisis**
Since 2023, the retail industry has been recovering overall, but Auchan remains mired in difficulties.
On the evening of May 21, Auchan's parent company Gaoxin Retail (06808.HK) disclosed its latest annual results for the period from April 1, 2023, to March 31, 2024.
The company's revenue was 72.567 billion yuan, a year-on-year decrease of 13.3%, marking several consecutive years of revenue decline; net profit was -1.605 billion yuan, compared with 109 million yuan in the same period last year, the largest loss since Gaoxin Retail's listing in 2011.
Operating revenue decreased by more than 10 billion yuan, which the company attributed to the contraction of supply guarantee business and the decline in average customer transaction value due to the fading of customers' stockpiling mentality; of course, the most important factor was store closures.
**In the past year, Gaoxin Retail closed 20 hypermarkets.** As of the end of March 2024, the company operated 472 hypermarkets, 32 medium-sized supermarkets, and 3 M membership stores, with a total operating area exceeding 13.5 million square meters.
Affected by store closures and workforce optimization, the number of employees decreased from 107,785 at the end of March 2023 to 86,226. The workforce was reduced by more than 20,000, saving over 500 million yuan in employee expenses.
A few days ago, Alibaba (09988.HK) disclosed its Q1 2024 results, and people joked that Alibaba had again contributed 14,000 talents to society. In fact, the main workforce reduction was at Auchan.
However, the drastic internal reforms have still failed to improve Gaoxin Retail's business performance. **Same-store sales growth, the most important indicator in the retail industry, has been declining for more than ten consecutive years, with the latest annual figure at -6.6%.**
The business crisis has led to losses, impacting cash flow. In the latest fiscal year, net cash flow from operating activities was 926 million yuan, a decrease of 78.5% from 4.302 billion yuan in the same period last year.
As of the end of March 2024, Gaoxin Retail's net current liabilities increased from 900 million yuan in the same period last year to 3.14 billion yuan. The company's net cash (including cash and cash equivalents, financial assets, time deposits, etc.) was 16.504 billion yuan, a significant decrease from 19.449 billion yuan in the same period last year. During the same period, the company's debt-to-equity ratio was 0.76, compared with 0.80 in the same period last year. Pressure has begun to emerge.
In addition, Alibaba has been signaling that it is preparing to sell off traditional retail-related assets. Therefore, the market has been rife with rumors of a change in ownership of Gaoxin Retail. The latest rumor is that COFCO will acquire it for 10 billion yuan.
At that time, skeptics argued that Gaoxin Retail has over 10 billion yuan in cash and more than 4.5 million square meters of self-owned store properties; Alibaba spent 50 billion Hong Kong dollars to acquire Gaoxin Retail, so it is impossible to sell it for 10 billion yuan.
But considering Gaoxin Retail's business value, debt scale, and debt-to-asset ratio, as well as Alibaba's eagerness to divest and optimize its own balance sheet, anything is possible.
**External Rescue and Self-Rescue**
In 1997, Auchan opened its first large modern supermarket fully designed, planned, operated, and managed by Chinese, following a refined bulk retail route. In 1998, Auchan entered the mainland market and immediately began aggressive expansion.
In 2005, it entered the China Chain Store Top 100 list for the first time, ranking in the top ten. Since then, it has consistently ranked at the forefront of the chain store top 100 list. In 2011, its parent company Gaoxin Retail listed on the Hong Kong Stock Exchange, becoming a leading listed supermarket company, known as the "most profitable supermarket."
However, a few years after listing, vicious industry competition and the impact of e-commerce arrived as expected. The first wave of closures in the chain supermarket industry began, with local leading brands like Xin Yi Jia disappearing and several weak foreign supermarkets bidding farewell to the Chinese market.
Auchan also awaited a new owner. In 2017 and 2020, Alibaba invested a total of 50 billion Hong Kong dollars in two installments to take control of Gaoxin Retail, making it an important part of its offline retail strategy.
Regarding this transaction, Auchan founder Huang Mingduan was quite sentimental, saying, **"I won against all competitors but lost to the times; when the times abandon you, they don't even say goodbye."**
Alibaba's attitude was completely different. The then-leader Daniel Zhang (Xiaoyaozi) said: **"Auchan is different because of Alibaba, and Alibaba is different because of Auchan."**
Alibaba, the internet super giant with the strongest retail genes, placed great importance on Gaoxin Retail, providing funds, personnel, and resources.
However, Alibaba and the manager it sent, Lin Xiaohai, did not lead Gaoxin Retail on a path to revival; instead, the business deteriorated and eventually fell into a performance crisis.
In fact, this outcome has little to do with Alibaba or Lin Xiaohai. After all, the situation is greater than the individual.
**The retail industry is facing a fundamental crisis** — with the deepening of O2O models and the increasing strength of new offline forces, how can traditional retail improve its business value?
To answer this question, Yonghui Superstores (601933.SH) and Bubugao have paid a heavy price; Alibaba and Lin Xiaohai have also failed to provide a good answer.
**Given that Alibaba is not prepared to continue increasing investment, letting go may be the most dignified exit and the best arrangement for Gaoxin Retail.**
Traditional supermarkets, especially the hypermarket model, are almost no longer necessary. In recent years, industry and capital assistance to traditional retail can be divided into three levels:
Suning took over Carrefour China, solving only the money problem, but the business could not achieve profitability, eventually affecting the entire system;
Wumart used its industrial accumulation to solve the business problems of Metro China, but the listing process of Wumart Technology remains difficult;
Pangdonglai seems to be able to bring temporary new vitality to individual stores of Bubugao (002251.SZ), but the effect of systematic transformation has yet to be tested.
In the absence of strong external support, Gaoxin Retail can only seek its own breakthrough. The existing paths of retail luminaries—supply chain, O2O, and ultimate service—must choose one. Gaoxin Retail wants to become China's version of Costco and Sam's Club.
As of now, the company has opened 3 M membership stores in Yangzhou, Nanjing, and Changzhou, with 4 more in preparation. During the fiscal year, the first M membership store's paid membership exceeded 60,000, with total membership exceeding 110,000, and membership fees alone brought in 21 million yuan. However, these 3 membership stores are not enough to support Gaoxin Retail's transformation.
The most urgent task now is to stabilize the traditional business and secure sufficient resources, time, and space for business transformation.
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