CP Lotus, which has been loss-making for four consecutive years, faced another year of sharp decline in performance. On the evening of April 20, CP Lotus released its 2016 annual report. The report showed that in 2016, CP Lotus achieved sales revenue of 10.086 billion yuan, a year-on-year decrease of 5.4%; the net loss attributable to shareholders reached 538 million yuan, compared to a loss of only 18 million yuan in 2015. CP Lotus attributed the decline in sales revenue in 2016 to external factors: The sales contribution from three new stores in 2016 was insufficient to offset an 8.2% decline in same-store sales; sales in all categories declined year-on-year, closely related to the current economic slowdown, the government's anti-waste campaign, and fierce competition from online retailers. In addition, the increase in net loss was mainly due to an increase in impairment losses of 336 million yuan, a decrease in net gains on forward foreign exchange contracts and RMB exchange losses of 42.3 million yuan, and contract termination compensation of approximately 44.6 million yuan. Losses over five years exceed 1.1 billion yuan Starting from 2012, CP Lotus began to incur losses, and has been in a loss-making state for four consecutive years since then, with losses further expanding in 2016. According to a review of recent financial reports by Lianshang.com, CP Lotus lost 392 million yuan, 96.8 million yuan, 58.4 million yuan, and 18 million yuan in 2012, 2013, 2014, and 2015 respectively. Adding the 538 million yuan loss in 2016, CP Lotus's losses over the five years have exceeded 1.1 billion yuan. In 2015, CP Lotus's losses were significantly reduced, and the loss situation improved markedly. In the first half of the year, it even achieved a turnaround from loss to profit compared to the same period. This was mainly due to strategic improvements in store operations. However, the good times did not last long, and in mid-2016, CP Lotus turned from profit to loss again. Facing consecutive losses, CP Lotus had no choice but to "seek survival" from its major shareholder. On December 21, 2016, CP Lotus issued an announcement stating that the company had entered into certain loan agreements with its major shareholder, who agreed to provide a total of US$139 million in two-year loans to the company, enabling the company to fully repay the outstanding amounts under previous financing agreements and other outstanding amounts under other financing agreements entered into by a subsidiary of the company with a syndicate of banks. The previous financing agreement refers to a US$28 million seven-year term loan facility agreement entered into by CP Lotus with several Thai banks on November 29, 2011, with the outstanding principal to be repaid in 12 installments from June 2013 to December 2018. In addition, the financing agreements contained several financial covenants. CP Lotus had twice violated the agreements due to failure to meet the covenant requirements, but ultimately obtained waivers from the syndicate. In fact, as early as the end of 2013, Li Wenhai, former vice president of CP Lotus's parent company Charoen Pokphand Group, was appointed as senior vice chairman and CEO of CP Lotus. After taking office, Li Wenhai formulated a plan to increase revenue and reduce expenditure, rationalize expense attribution, transfer expenses that should not have been borne by CP Lotus to the parent company Charoen Pokphand Group, and adjust loss-making stores. At the same time, he also formulated a three-year plan to turn losses into profits: "continue to lose money in 2014, achieve breakeven in 2015, and turn losses into profits in 2016." But now it seems the plan has failed. In addition, Lianshang.com also noted that CP Lotus has been actively optimizing products and improving relationships with suppliers; improving operations and system efficiency; strengthening customer loyalty and brand awareness; and continuing store innovation. However, in the end, it failed to change the situation of expanding losses. In recent years, rumors of store closures have been constant CP Lotus's 2015 financial report revealed plans to open 6-8 stores in 2016. But in fact, according to statistics from Lianshang.com, CP Lotus opened a total of 3 new stores in 2016, located in the second- and third-tier cities of Yangjiang, Foshan, and Shantou in Guangdong Province, with a total sales area of approximately 18,600 square meters. As of December 31, 2016, CP Lotus owned and operated a total of 61 stores, with a total operating area exceeding 519,400 square meters. In addition, there was one shopping center. Furthermore, due to the owner's decision to rebuild the store location, CP Lotus closed one store in Hefei in April 2016 and one store in Xi'an in October 2016. CP Lotus also stated that the closed Xi'an store would reopen in the fourth quarter of 2017, and the Hefei store would also reopen in the fourth quarter of 2018. In addition to the two closed stores mentioned above, CP Lotus was also reported to have closed several other stores in 2016: On September 12, 2016, it was reported that CP Lotus's Chongqing Huanghua store showed signs of closing. Many shelves in the supermarket were empty, and restocking was severely insufficient. According to several supermarket staff, the store planned to close at the end of the month due to poor performance. On December 7, 2016, it was also reported that CP Lotus's two stores in Wuhan, Baofeng Road and Wuluo Road, closed on the same day without any warning. In fact, since the integration plan between CP Lotus and Wumart Group fell through, rumors of CP Lotus store closures have been constant. According to public reports, in January 2013, CP Lotus's Caoqiao store, which had been open for six years, closed; in February 2014, CP Lotus closed its Tianshan store at No. 555 West Tianshan Road in Shanghai; in June of the same year, CP Lotus's Wangjing store, which had just opened for more than a year, was suddenly "adjusted"; in 2015, rumors of the closure of CP Lotus's Liuliqiao store also circulated... After consecutive losses, will there be any major adjustments? It is still unknown. But for the new year, CP Lotus seems quite confident. CP Lotus stated that in the future, it will leverage opportunities brought by urbanization, continue to expand new stores at a steady pace, and more prudently select locations for new stores to ensure their quality and profitability; optimize processes, improve logistics and distribution and information technology systems to enhance employee productivity and supply chain effectiveness; restructure the headquarters organization, including streamlining administrative procedures to reduce office expenses and streamline staffing, and restructure the rent payment structure. It believes that operating performance will improve in 2017. Whether CP Lotus can reverse its decline in 2017 deserves attention! Source: Lianshang Supermarket Home -END-