---
title: "Yonghui Superstores: Contracting for the Winter"
description: "After the heavy snow, winter truly arrives, and animals are busy storing food. Business tycoons are no different, weaving a complex network of friendships. On December 12, Wanda announced a reinvestment agreement with PAG and other major investors, trading absolute control for relief, while also selling stakes in Wanda Film and some Wanda Plazas. Yonghui Superstores, facing its own downturn, sold its 1.43% stake in Wanda Commercial Management for 4.53 billion yuan, shifting from expansion to contraction to hoard cash."
author: "徐霁"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-12-21"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/i4u867ic0vOkix4u80XjnQ"
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---

# Yonghui Superstores: Contracting for the Winter

> After the heavy snow, winter truly arrives, and animals are busy storing food. Business tycoons are no different, weaving a complex network of friendships. On December 12, Wanda announced a reinvestment agreement with PAG and other major investors, trading absolute control for relief, while also selling stakes in Wanda Film and some Wanda Plazas. Yonghui Superstores, facing its own downturn, sold its 1.43% stake in Wanda Commercial Management for 4.53 billion yuan, shifting from expansion to contraction to hoard cash.

After the heavy snow, winter truly arrives, and animals are busy storing food for the cold season. Business tycoons are no different; these big names, who rarely intersect, have woven a complex web of friendships.

On December 12, Wanda announced that, at the cost of giving up absolute control, it reached a reinvestment agreement with PAG and other major investors in Wanda Commercial Management, terminating the repurchase agreement due at year-end. Additionally, it transferred control of Wanda Film (002739.SZ) and sold some Wanda Plazas to buy breathing room.

Some investors in Wanda Commercial Management, unwilling to wait longer, wanted to cash out quickly. After all, their own situations were not great. Examples include Country Garden (02007.HK) and Yonghui Superstores.

On December 14, Country Garden announced it would transfer its 1.79% stake in Wanda Commercial Management to a party designated by Wanda for 3.069 billion yuan. Just two days earlier, Yang Huiyan stated that the family would sell everything to support the company, and four top executives voluntarily cut their salaries to 120,000 yuan per year.

On the same day, Yonghui Superstores (601933.SH) announced it would transfer its 1.43% stake in Wanda Commercial Management to Dalian Yifang Group, owned by Wang Jianlin's old friend Sun Xishuang, for 4.53 billion yuan.

In December 2018, Yonghui Superstores invested 3.531 billion yuan to acquire this stake from Yifang Group. Five years later, selling it back yields a net profit of 612 million yuan. More importantly, the investment has been converted into cash.

Back then, Yonghui's investment in Wanda Commercial Management was for expansion, to grow its supermarket business.

Wanda Plaza is not just a shopping mall; it's a hub of offline consumer power. Through its commercial management business, Wanda cultivated consumer brands like Wanda Cinema, Kid's Place, and Da Wan Jia, but lacked a supermarket format. If every Wanda Plaza's supermarket could be Yonghui, it would be a win-win strategic cooperation.

Now, Yonghui chooses to sell its stake to contract, hoard cash, and weather its downturn.

Thirty years east, thirty years west. The former "Light of Chinese Retail" has lost its former vitality.

Zhang Xuansong, a young Fujian man who didn't finish high school, worked his way up from the bottom, entered the retail business through beer distribution, and opened the predecessor of Yonghui Superstores, "Gule Weili" supermarket, in 1995.

In its early days, Yonghui was no different from its peers, with slow business progress. It wasn't until it found fresh food as a lever that it expanded to 156 stores over nearly a decade, with total operating area exceeding one million square meters, and listed on the Shanghai Stock Exchange in 2010.

During that period, the industry crisis in offline retail was brewing, with leading players like Xin Yi Jia, Nonggongshang Supermarket, Trust-Mart, and Tesco exiting one after another. Yonghui, however, rose as a dark horse, swimming against the tide in the bleak offline retail landscape, leveraging its listing to grow, increasing its store count nearly tenfold in ten years, and firmly entering the top three Chinese supermarket chains.

Having completed its initial accumulation, Yonghui's ambitions went further. It took stakes in Zhongbai Group, partnered with Lianhua Supermarket and Hongqi Chain, and invested in supply chain partners like Guolian Aquatic, Minwei Industrial, and Xingyuan Agriculture, forming a unique "Yonghui system" in the retail world, with business spanning retail, supply chain, and finance.

Even when the new retail wave emerged, Yonghui did not lag behind, adapting to the times by establishing Yonghui Yunchuang to operate new retail businesses like Super Species, Yonghui Life, and Yonghui Home.

In 2014, Dairy Farm International, a globally renowned retailer, invested 5.7 billion yuan in Yonghui, becoming its single largest shareholder. In subsequent years, Yonghui received investments from JD.com and Tencent, injecting internet genes into this traditional supermarket.

At this point, Yonghui reached its glory days, with a market cap peak of 117.9 billion yuan.

However, no matter how dazzling the business models or how adept in capital markets, the essence of offline retail cannot change: low gross margins, high expense ratios, and facing disruptive attacks from internet players.

Yonghui grew increasingly strained, with revenue declining year after year from 2021 to 2022, posting losses of 3.944 billion yuan and 2.763 billion yuan respectively. Half of the company's losses came from its core supermarket business, and the other half from impairment losses in its investment portfolio—for instance, just its stake in Yihai Kerry (300999.SZ) resulted in losses of tens of millions in 2022.

Under multiple pressures, Yonghui's stock price never returned to its highs, with a latest market cap of only 26.862 billion yuan, nearly 80% below its peak.

Yonghui's grand ambitions began to crumble, shifting from expansion to contraction.

The new retail business has receded overall, no longer appearing in the company's financial reports. Meanwhile, Yonghui has been adjusting its store portfolio, closing long-term loss-making stores and cautiously opening new ones. As of the end of June 2023, the company operated 1,008 stores, below the levels of previous years.

At its peak, Yonghui had four business segments: "Yunchao," "Yunchuang," "Yunshang," and "Yunjin." Now, this structure no longer exists. For the financial segment, the company's 2022 annual report stated it was "actively shrinking scale."

Based on a comprehensive contraction strategy, leveraging supply chain advantages to promote private labels and improve gross margins, and using digital tools to enhance operational efficiency, Yonghui finally achieved a major turnaround in 2023.

In the first nine months of this year, Yonghui's revenue fell 12.44% year-on-year to 62.088 billion yuan, with net profit attributable to shareholders of 52.2912 million yuan, finally turning profitable—though a net margin of 0.08% is barely better than nothing.

The once-mighty "Yonghui system" is now disintegrating. It exited Lianhua Supermarket, cleared its stake in Guolian Aquatic, reduced its holding in Zhongbai Group (000759.SZ), and now transferred its Wanda Commercial Management stake.

Recently, Hongqi Chain (002697.SZ) is planning a control transfer, possibly to introduce a stronger capital partner. Will Yonghui, as the second-largest shareholder, take the opportunity to sell its stake?

It's worth noting that after consecutive asset sales, Yonghui's cash and cash equivalents stood at 6.661 billion yuan as of the end of September. Adding the 4.53 billion yuan from the Wanda stake sale, its cash reserves will reach around 10 billion yuan.

Additionally, Yonghui holds several billion yuan in various financial assets. Given the current trend, these could all be put on the shelf and converted to cash.

In times of distress, rumors circulated in August that Yonghui would be acquired by JD.com (09618.HK), but both parties denied it. Now, JD has its own challenges and likely lacks the energy to deal with Yonghui's affairs.

Will Yonghui, armed with its 10 billion yuan cash reserve, bide its time to pursue business upgrades or transformation, avoiding the fate of Suning.com (002024.SZ)?

Yonghui has had no actual controller for years, and founder Zhang Xuansong has been continuously reducing his stake. These issues may need to be considered by Dairy Farm International, Tencent (00700.HK), and JD.com in the future.


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