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Traditional retail enterprises have released their first-half 2019 report cards. Among 18 retailers, who performed better?

RT-Mart: Reconstructing People-Goods-Scenes

On August 7, RT-Mart announced its 2019 interim results, achieving growth in both revenue and profit. Data shows that RT-Mart's total sales revenue (cash generated from hypermarket sales) was RMB 54.396 billion, up 0.6% year-on-year; gross profit was RMB 13.188 billion, up 2.1%; profit attributable to equity shareholders was RMB 1.766 billion, up 5.0%; basic earnings per share were RMB 0.19, with no dividend declared.

According to the financial report, operating costs in the first half of 2019 were RMB 9.561 billion, up 0.6% from the same period last year, mainly due to the continued expansion of the hypermarket network and B2C business development.

The report noted that RT-Mart's B2C business, mainly Taoxianda, has been on track, with the "one-hour delivery to home" model working, achieving an average daily order volume of 700. This also reflects Alibaba's new retail "deepening" into RT-Mart's Dazhong and Auchan stores.

RT-Mart stated that the B2C model has become a competitive advantage. In the second half of the year, its goal is to accelerate scale expansion and increase daily order volume. According to the latest report from Kantar Worldpanel, RT-Mart's market share among major retailers in the modern channel was 8.2% in Q2, ranking first.

Yonghui Superstores: First-half revenue of RMB 41.176 billion, up 19.71%

On August 28, Yonghui Superstores released its 2019 interim report. According to the financial disclosure, first-half revenue was RMB 41.176 billion, up 19.71% year-on-year; net profit attributable to the parent company was RMB 1.369 billion, up 46.69%; non-GAAP net profit was RMB 11.63 billion, up 40.78%.

Yonghui Superstores stated that the revenue increase was mainly due to the continuous increase in new store openings, along with an increase in average transaction value at existing stores, leading to steady sales growth.

The announcement showed that in the first half of 2019, the company added 84 new supermarket stores (including former ParknShop Guangdong stores, excluding Yonghui mini stores, Yonghui Life, and Super Species), covering an area of 508,000 square meters; a total of 791 stores were in operation, covering 24 provinces and municipalities directly under the central government, with same-store sales growth of 3.1%; 72 new stores were signed during the reporting period, covering an area of 476,000 square meters, with a cumulative total of 249 signed but not yet opened stores, covering an area of 1.83 million square meters.

In terms of home delivery business, in the first half of 2019, supermarket home delivery services covered 109 cities in 22 provinces, with 518 stores providing delivery services, achieving sales of RMB 1.33 billion, with a monthly average growth rate of 7.1%, and online sales accounting for 3.4%, up 111% year-on-year. Among them, JD Daojia connected 407 supermarket stores, adding 112 new ones.

In logistics, the announcement showed that during the reporting period, Yonghui Superstores' logistics centers covered 18 provinces and cities, with a total operating area of about 450,000 square meters and over 2,300 employees; logistics centers are differentiated by temperature zones, including 17 ambient temperature distribution centers (including transfer warehouses) and 9 temperature-controlled distribution centers (mainly for fruits, vegetables, frozen, and chilled goods); distribution volume in the first half was RMB 23.046 billion.

Lianhua Supermarket: Store expansion, profit of RMB 43.965 million in the first half

On August 29, Lianhua Supermarket released its interim results for the six months ended June 30, 2019. During the reporting period, turnover was RMB 13.488 billion, up 3.1% year-on-year. Gross profit was RMB 1.822 billion, down 3.4% year-on-year. Gross margin was approximately 13.51%. Comprehensive yield was 25.61%. Profit was RMB 143 million, with net profit attributable to shareholders of RMB 43.965 million, up 11.67% year-on-year.

Lianhua Supermarket stated that during the reporting period, same-store sales decreased by approximately 0.40% year-on-year, with hypermarket format down about 0.78%, supermarket format up about 1.20%, and convenience store format down about 1.81%. During the reporting period, the group opened 124 new stores, including 4 hypermarkets; 104 new supermarket stores, of which 38 were directly operated and 66 franchised; and 16 new convenience stores, of which 5 were directly operated and 11 franchised.

Better Life: First financial report after Wang Tian's return, net profit of RMB 247 million

On August 28, Better Life released its 2019 interim report summary. This is also the first semi-annual report after Chairman Wang Tian resumed the role of CEO. The interim report showed operating revenue of RMB 10.1 billion, up 3.16% year-on-year; net profit attributable to listed company shareholders of RMB 247 million, up 1.2% year-on-year. Basic earnings per share were RMB 0.2859. The company's latest distribution plan is no distribution and no conversion.

Better Life is mainly engaged in commodity retail, providing retail services to consumers through supermarkets, department stores, and other retail formats. The company was listed on June 19, 2008. In the first half of 2019, it opened 42 new supermarket stores and 1 department store, while closing 2 stores that had no hope of turning around within 2-3 years or whose properties could not be renewed. As of June 30, 2019, the company had 381 stores of various formats (329 supermarket stores and 52 department stores).

As of the interim report, Better Life had 13 million digital members, with member sales accounting for 71%, and monthly repeat purchase rate up 30% year-on-year; the company had over 200 stores with digital operations, with online transaction volume of nearly RMB 700 million. In department stores, as of the end of June 2019, Better Life had four provincial central parks in Hunan, Guangxi, Jiangxi, and Sichuan, with a total of 29 warehouses of various types including ambient, fresh-keeping, frozen, chilled, and bonded; vegetable standard parts reached 98.29%, and fruit standard parts reached 86.49%, greatly improving the quality of fruits and vegetables. Currently, the company is vigorously promoting palletized distribution and launching smart logistics construction to achieve efficient, high-quality distribution across the entire supply chain. During the reporting period, Better Life opened 42 new supermarkets and 1 department store in the first half, expanding chain operations to 14 prefecture-level cities in Hunan and some cities in Jiangxi, Guangxi, Sichuan, and Chongqing. As of the end of the reporting period, the company had 381 stores of various formats. Better Life's Changsha Meixi New World project, which has the largest investment, richest formats, and most concentrated scenes, achieved single-month profitability in May and June this year. During the reporting period, the project achieved GMV (gross merchandise volume) of over RMB 1 billion, up 25% year-on-year; foot traffic of 14 million, up 10% year-on-year.

Tianhong Co., Ltd.: First-half net profit of RMB 503 million

On August 16, Tianhong Co., Ltd. released its 2019 interim report. The company achieved operating revenue of RMB 9.676 billion, up 1.61% year-on-year; net profit of RMB 503 million, up 3.65%; non-GAAP net profit of RMB 451 million, up 4.49%.

During the reporting period, the company developed online group buying for supermarkets, where customers group buy online and pick up in store, with a cross-selling rate exceeding 50%; as of the end of the reporting period, supermarket "Tianhong Daoda" sales increased 46% year-on-year. Store counters launched the enterprise WeChat function for shopping guides, allowing brand guides to use enterprise WeChat to add customer WeChat for online membership management, order management, and user marketing; department store group buying mini-programs were in trial operation; the number of counters served by the micro-mall increased, with sales growing over 200% year-on-year.

The company vigorously promoted category management, further deepening strategic core products such as domestic and international direct sourcing, private labels, and service products. Among them, international direct sourcing sales increased 43.2% year-on-year; fresh direct sourcing sales increased 23.2%; private label sales increased 32.1%; to meet the needs of urban white-collar workers for convenience, health, and speed, the company vigorously developed 2R (Ready to Cook & Ready to Eat) products and processing and cutting services, with 2R product sales increasing 53% year-on-year.

Zhongbai Group: First-half revenue of RMB 7.95 billion

On August 28, Zhongbai Group released its 2019 interim report, with both revenue and operating profit growing. The interim report showed revenue of RMB 7.95 billion, up 1.64% year-on-year; net profit attributable to listed company shareholders of RMB 36.37 million, down 92.08% year-on-year. Basic earnings per share were RMB 0.05. The company added 87 new commercial outlets, bringing the total number of stores to 1,274.

The company focused on the Wuhan area and penetrated advantageous business districts and blank areas outside the city, increasing new store development and network reserves; five stores opened successively: Fanhai City Plaza, Tongxue Plaza, Houhu Oriental Pearl, Optics Valley K11, and Shishou Jiangnan Xincheng; the pilot of a new community small fresh supermarket format achieved initial results; completed renovations of two stores in Yangxin and Shouyi Road, and accelerated renovation projects for nine old stores in Jiangxia, Changqing, etc. Second, accelerate the upgrading of convenience stores. The company focused on accelerating the development of neighborhood fresh green-label stores, adjusting store fresh business categories, traffic flow planning, and equipment and props configuration, renovating 16 green-label stores, developing 18 new green-label stores, bringing the total number of neighborhood fresh green-label stores to 150, while accelerating the adjustment and upgrade of red-label stores, renovating and upgrading 28 red-label stores.

Jiajiayue: First-half profit of RMB 230 million, same-store revenue growth

On August 25, Jiajiayue released its 2019 interim report. The company achieved total operating revenue of RMB 7.265 billion in the first half, up 16.68% year-on-year; consolidated net profit attributable to listed company shareholders of RMB 226 million, up 16.85% year-on-year.

During the reporting period, Jiajiayue continued to accelerate network development, actively expanding into new markets such as Zhangjiakou and surrounding areas and western Shandong, while further improving mature regional networks. During the reporting period, 40 new stores were added, including 11 stores already in operation from Hebei Jiajiayue included in the consolidated statements on the merger date; among the new stores, 18 were hypermarkets, 19 were comprehensive supermarkets, and 3 were other formats. At the same time, the company adjusted and optimized the network layout in the region, closing or relocating 14 stores with terminated contracts or unreasonable layouts, bringing the total number of stores to 758 at the end of the reporting period.

Liqun Co., Ltd.: First-half net profit of RMB 170 million, down 39.5% year-on-year

On August 28, Liqun Co., Ltd. (601366) released its 2019 interim report. The announcement showed that during the reporting period, revenue was RMB 6.519 billion, up 15.91% year-on-year; net profit attributable to listed company shareholders was RMB 170 million, down 39.49% from the same period last year; basic earnings per share were RMB 0.2, compared to RMB 0.33 in the same period last year.

It is understood that in the first half of 2019, the company's net profit attributable to listed company shareholders decreased 39.49% year-on-year, mainly due to losses from newly opened Liqun Times stores. Liqun Times stores achieved operating revenue of RMB 764 million in the first half of 2019. Due to the short time since store opening, the market cultivation period required for new stores is longer, and early-stage expenses are relatively high, resulting in losses for Liqun Times in the first half of 2019, but the loss margin is gradually narrowing, with some stores already profitable, and store operations continuously improving.

Hualian Supermarket: First-half net profit of RMB 55.79 million, up 35% year-on-year

On August 28, Hualian Supermarket (600361) released its 2019 interim report. The announcement showed that during the reporting period, revenue was RMB 6.097 billion, down 0.62% year-on-year; net profit attributable to listed company shareholders was RMB 55.7889 million, up 35.04% from the same period last year; basic earnings per share were RMB 0.08, compared to RMB 0.06 in the same period last year.

The report stated that the decline in revenue was mainly due to a decrease in store foot traffic. The increase in net profit attributable to the parent company was mainly due to improved sales gross margin and reduced non-operating expenses during the reporting period.

From the 2019 first-half financial report, Hualian Supermarket has been increasing its focus on fresh food operations. In operations management, it focuses on fresh food sales, increasing foot traffic, improving store productivity, emphasizing group buying and strengthening major holiday promotions, while improving operating systems and strengthening supervision and evaluation systems; in product management, it optimizes product structure, product differentiation, strengthens fresh food management, accelerates the introduction of best-selling and new products, and eliminates low-productivity and slow-moving categories; for fresh and regionally distinctive products, it adopts a regional unified procurement model to reduce operating costs. In innovative services, it vigorously promotes electronic membership, enriches electronic membership service functions, and adds community group buying services.

Beijing Jingkelong: Total operating revenue of RMB 5.885 billion

On August 23, Beijing Jingkelong released its 2019 interim report. The company achieved total operating revenue of RMB 5.885 billion (RMB, same below), up 2.77% year-on-year; net profit attributable to the parent company was RMB 30.1337 million, up 3.78% year-on-year. Wholesale business main business revenue increased about 11.3%. Gross profit was RMB 776 million, up about 5.2% year-on-year, with a gross margin of 14.6%.

During the reporting period, the company's main business revenue increased about 3.6%, of which retail main business revenue decreased about 5.9%, mainly due to a decrease in same-store sales of about 5.03%; the impact of increased promotions in the face of fierce competition in the retail market; and sales reductions from stores closed in 2018.

The gross margin of direct-operated retail business (excluding department stores) increased from 16.2% in the same period to 16.9%, mainly due to: optimizing product structure, increasing the proportion of buyout, customized, and private label products; strengthening supply chain management to reduce procurement costs; and increasing direct sourcing from fresh food bases to reduce fresh food loss.

Lotus: Net profit down 70.9%

On August 21, Lotus announced its 2019 interim results. The company achieved revenue of RMB 5.265 billion, up 0.2% year-on-year; profit attributable to shareholders was RMB 40.065 million, down 70.9% year-on-year. Regarding the decline in net profit, Lotus stated that it was mainly affected by the adoption of Hong Kong Financial Reporting Standard 16 and the fact that new stores have not yet achieved profitability.

Data shows that the impact of adopting HKFRS 16 was a total profit of RMB 79.35 million, accounting for 57.6%; at the same time, sales and product profits from new store expansion have not yet fully covered the operating costs of new stores. In addition, Lotus's same-store sales data was not ideal, down 5.3% year-on-year, but Lotus stated that revenue from 8 new stores opened in the second half of 2018 and another 8 new stores opened in the first half of 2019 overall balanced the impact of the decline in same-store sales.

According to the interim report, in the first half of 2019, Lotus opened 8 new stores, including 5 hypermarkets in Shandong Province, increasing the number of hypermarkets in Shandong to 6. To further explore new formats, it opened 1 neighborhood convenience store in Beijing, 1 boutique supermarket in Xi'an, and 1 fresh supermarket in Guangdong. As of June 30, 2019, Lotus owned and operated a total of 87 retail stores and 3 shopping centers in China, including 79 hypermarkets, 4 boutique supermarkets, 1 fresh supermarket, and 3 neighborhood convenience stores.

Renrenle: Revenue down 6.59% year-on-year

On August 23, Renrenle announced its 2019 first-half results. The company achieved revenue of RMB 3.988 billion, down 6.59% year-on-year; net profit attributable to listed company shareholders was RMB -38.5217 million, down 257.52% from the same period last year.

During the reporting period, the company, based on its main retail business, aimed to consolidate core competitive advantages, strengthen regional operating capabilities, and continue steady and sustained expansion as its overall strategic direction. Through measures such as continuing to promote the transformation and upgrading of business formats, management structure reform, store structure optimization and adjustment, and deepening category supply chain construction, the company achieved sustainable and healthy development. As of June 30, 2019, the company had opened 140 self-operated stores, with 4 new stores added and 2 closed in the first half of 2019.

Hongqi Chain: Net profit of RMB 237 million, up 52.93%

On August 18, Hongqi Chain Co., Ltd. released its 2019 first-half financial report. The company achieved operating revenue of RMB 3.829 billion, up 5.89% year-on-year; net profit of RMB 237 million, up 52.93%; non-recurring items deducted net profit of RMB 230 million, up 48.21%.

The report pointed out that Hongqi Chain, in accordance with its established development strategy and operating plan, operated steadily. During the reporting period, with the joint efforts of all employees, various businesses progressed steadily and orderly. The company achieved commodity sales revenue of RMB 3.829 billion, up 5.89% from the same period last year; net profit attributable to shareholders was RMB 237 million, up 52.93%. In addition, value-added business revenue in the first half of 2019 was RMB 3,068,861,900, down 0.15% from the same period last year.

In the first half of 2019, Hongqi Chain adhered to the strategic development policy of "centered on Sichuan, with Chengdu as the core," accelerated market expansion, further deepened network layout, and consolidated and enhanced its leading position in the convenience store industry in Sichuan. As of June 30, 2019, the company had 2,958 stores. During the reporting period, the company opened 168 new stores and closed 27 stores. The company mainly operates convenience stores, with an average store area of about 200 square meters. The impact of individual new openings or closures on the company's operating performance is not significant. While vigorously expanding new stores, the company accelerated the upgrading and renovation of some stores to meet more consumer shopping needs and enhance the shopping experience.

Xinhua Du: First-half loss of RMB 121 million, down 1826.84%

On August 17, Xinhua Du Shopping Plaza announced its 2019 interim report. The report showed that in the first half of this year, Xinhua Du Shopping Plaza achieved total operating revenue of RMB 3.002 billion, down 12.4% from the same period last year; net loss of RMB 121 million, with net profit attributable to listed company shareholders down 1826.84%. Xinhua Du stated that the main reason for the decline in performance was to reduce the impact of loss-making stores on the company's performance and long-term development, optimize store structure, and prudently dispose of or close 48 stores whose leases were about to expire, were long-term loss-making, and had no hope of turning around after adjustments, resulting in compensation losses, one-time amortization of renovation long-term deferred balances, etc., totaling approximately RMB 161 million, affecting the semi-annual performance. The report showed that Xinhua Du closed 48 stores in the first half, including 5 stores with expired leases and 43 stores that were long-term loss-making and had no hope of turning around after adjustments, and during these six months, Xinhua Du did not open any new stores. The number of stores nationwide was only 95.

Liyang Retail: Group revenue of approximately HK$2.704 billion, up 5%

Liyang Retail (00831-HK) announced that for the six months ended June 30, 2019, the group's revenue was approximately HK$2.704 billion, up 5% year-on-year; profit attributable to shareholders was approximately HK$82.426 million, up 22.4% year-on-year; basic earnings per share were HK$10.8 cents; an interim dividend of HK$6 cents per share was proposed.

The announcement stated that the 22.4% increase in net profit was mainly due to the effective "online-to-offline" business model of OK Convenience Stores and the depreciation of the RMB, which reduced production costs at Saint Honore.

In the first half of 2019, driven by a significant 4.4% increase in comparable same-store sales compared to the same period last year, the group's convenience store business turnover increased 6% to HK$2.185 billion. The bakery business turnover decreased slightly by 2.7% to HK$508 million, due to single-digit growth in comparable same-store sales in Hong Kong and Macau and a reduction in the number of stores in Guangzhou. Turnover from developing businesses increased 71% to HK$53 million due to the expansion of the Zoff store network.

Sanjiang Shopping: Net profit up 97% year-on-year

Sanjiang Shopping disclosed its interim report on August 30, 2019. The company achieved total operating revenue of RMB 2.09 billion in the first half of 2019, up 0.9% year-on-year; net profit attributable to the parent company was RMB 110 million, up 97% year-on-year; earnings per share were RMB 0.2. During the reporting period, the company's gross margin was 24.7%, up 0.8 percentage points year-on-year, and net margin was 5.4%, up 2.6 percentage points.

During the reporting period, non-recurring items totaled RMB 47.871 million, significantly impacting net profit. After deducting non-recurring items, net profit attributable to the parent company was RMB 64.313 million, up 44.7% year-on-year.

Xinhua Department Store: First-half revenue of RMB 3.95 billion

Xinhua Department Store disclosed its interim report on August 10, 2019. The company achieved total operating revenue of RMB 3.95 billion in the first half of 2019, down 0.2% year-on-year; net profit attributable to the parent company was RMB 170 million, up 19.7% year-on-year; earnings per share were RMB 0.74.

In addition, non-recurring items totaled RMB 25.533 million, significantly impacting net profit. After deducting non-recurring items, net profit attributable to the parent company was RMB 140 million, up 6.6% year-on-year.

As of June 30, 2019, Xinhua Department Store's net assets attributable to listed company shareholders were RMB 2.291 billion, up 7.8% from the end of the previous year; net cash flow from operating activities was RMB -35.0156 million, compared to RMB 155 million in the same period last year.

It is understood that Xinhua Department Store's modern logistics continuously improves working methods, innovates management models, and enhances profit space. It fully implements supplier grade evaluation, no-open-box direct-through business, etc., vigorously promotes logistics standardization, successfully completes the launch of procurement and sales platforms and special industry systems, and extensively applies smart elements such as全域 eagle-eye monitoring, face recognition, and intercom, which not only saves costs but also doubles work efficiency. In the first half, distribution volume exceeded RMB 1.2 billion, up 5.15% year-on-year.

Nanjing Xinbai: Revenue of RMB 5.2 billion in the first half, down 46.3%

Nanjing Xinbai disclosed its interim report on August 28, 2019. The company achieved total operating revenue of RMB 5.2 billion in the first half of 2019, down 46.3% year-on-year; net profit attributable to the parent company was RMB 980 million, compared to RMB -1.31 billion in the same period last year, up 174.96% year-on-year, turning losses into profits; earnings per share were RMB 0.76. During the reporting period, the company's gross margin was 49.4%, up 7.8 percentage points year-on-year, and net margin was 20.7%, up 33.7 percentage points.

The report showed that its semi-annual operating costs were RMB 2.63 billion, down 53.5% year-on-year, higher than the 46.3% decline in operating revenue, with gross margin up 7.8%. The expense ratio was 17.7%, down 13.7% from last year, showing significant cost control effects. Operating cash flow was negative in both recent periods, at RMB -76.823 million this period and RMB -1.47 billion in the previous period.

Summary

  • Highest revenue: RT-Mart (RMB 54.396 billion)
  • Highest revenue growth: Yonghui Superstores (19.71%)
  • Largest revenue decline: Xinhua Du (-12.40%)
  • Highest net profit: RT-Mart (RMB 1.766 billion)
  • Highest net profit growth: Nanjing Xinbai (174.96%)
  • Largest net profit decline: Xinhua Du (-1826.84%)

Financial Report Commentary:

Overall, the 18 companies' total revenue in the first half of 2019 exceeded RMB 190 billion, with RT-Mart and Yonghui leading significantly, accounting for half of the total.

In terms of revenue, 13 companies saw year-on-year growth, accounting for 70%. Renrenle and Xinhua Du suffered serious losses. RT-Mart maintained its leading position in revenue, while Yonghui Superstores had the highest growth.

In terms of net profit, Nanjing Xinbai had the highest growth, reaching 174.96%. Five companies reported net losses: Zhongbai Group, Liqun Co., Ltd., Lotus, Renrenle, and Xinhua Du.

Overall, in the first half of 2019, the growth rate of retail sales of key national retail enterprises slowed, and the situation facing physical retail is still severe. As the post-90s and post-00s generations become the main consumer groups, physical stores must provide better shopping experiences and higher operational efficiency for the new main consumer groups.

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