Due to the adjustment of business strategy, Shanghai New World Co.Ltd(600628) department store decided to officially close the 16 year old Chengdu store on March 20, 2022.
For the placement of personnel, on February 20, Shanghai New World Co.Ltd(600628) Department Store Service Department officials told the reporter of Securities Daily: “the company will give corresponding compensation in accordance with the regulations.”
This is not the first time that Shanghai New World Co.Ltd(600628) department stores have closed in the mainland. In the past three years, Shanghai New World Co.Ltd(600628) department stores have successively closed many poorly managed stores in Dalian, Shenyang, Wuhan and so on. In fact, Shanghai New World Co.Ltd(600628) has two physical department store brands: Shanghai New World Co.Ltd(600628) department store and Shanghai Paris spring. After the closure of Chengdu stores, Shanghai New World Co.Ltd(600628) will have only about 28 physical stores left, more than 43 stores compared with the peak, reducing by more than 30%.
From glory to dusk, the super halo of high-end chains is no longer. Layoffs, store withdrawals, mergers and acquisitions have become the fate that many department store giants can’t avoid in recent years.
profit decline, close stores
As the head department store Shanghai New World Co.Ltd(600628) in China, it has been in a dilemma of development in recent years.
Shanghai New World Co.Ltd(600628) department store was established in 1993 and landed on the main board of Hong Kong six years later. After listing, it expanded on a large scale in the mainland and acquired a large number of property assets and land use rights.
However, when the highlight moment is no longer, the performance is low and the privatization ends without any trouble, Shanghai New World Co.Ltd(600628) department stores have to fight for “survival”.
In fact, Shanghai New World Co.Ltd(600628) department store closed its Taizhou store as early as 2013, Qiaokou store of Wuhan Shanghai New World Co.Ltd(600628) department store closed in 2014, and Dalian Shanghai New World Co.Ltd(600628) department store closed in 2017. Then in 2018, it closed Yancheng Shanghai New World Co.Ltd(600628) department store, Wuhan Hanyang store and Shenyang Zhonghua Road store in one go in only half a year, of which Hanyang store was the shortest opening time of Shanghai New World Co.Ltd(600628) department store in Central China The store with the largest total floor area. In 2019, it successively closed six stores in Wuhan, Shenyang, Shanghai and Anshan. Since then, Shanghai New World Co.Ltd(600628) department stores have been closed one after another.
According to the financial report of Shanghai New World Co.Ltd(600628) department store in 2021, as of June 30, 2021, Shanghai New World Co.Ltd(600628) operated 21 ” Shanghai New World Co.Ltd(600628) ” brand department stores and 8 “Paris spring” brand stores in China, with a total of 29 physical stores. After the closure of stores in Chengdu, the number of stores decreased to 28, a decrease of 35% compared with more than 43 in the previous peak period.
“The intensified market competition and epidemic situation have made Shanghai New World Co.Ltd(600628) department stores face the dilemma of transformation and upgrading. There are apparent reasons such as the expiration of the lease for the closure of its stores, but the essence is that it alleviates the financial crisis by closing the projects with poor operating performance, but the closure of the projects can not solve the aging problem of department stores.” Chao Chenglin, business expert and director of industrial space researcher, told the reporter of Securities Daily.
In fact, under the impact of e-commerce and Internet tide, the performance of Shanghai New World Co.Ltd(600628) department store has been sluggish for many years since 2015.
According to the financial report, the profit of Shanghai New World Co.Ltd(600628) department store in fiscal year 2014 was HK $521 million, down 18.85%, and the profit of the next year fell sharply by 86.6%. Over the past two years, the company’s performance has fallen into a state of loss. Its net profit in fiscal 2020 and fiscal 2021 lost HK $484 million and HK $229 million respectively.
In order to make up for performance and obtain cash flow, Shanghai New World Co.Ltd(600628) is still selling assets. Shanghai New World Co.Ltd(600628) department stores sold some property assets such as brand management, equity of distribution companies and Juling. The announcement shows that since fiscal year 2020, Shanghai New World Co.Ltd(600628) department store major shareholder Shanghai New World Co.Ltd(600628) group has sold more than HK $10 billion of non core assets. The company said it would continue to sell its non core business at an appropriate time in the future, with a target amount of more than HK $15 billion. There are many assets such as hotels, properties and department stores.
However, Shanghai New World Co.Ltd(600628) department store reported that the loss narrowed in fiscal year 2021, partly due to the closing of stores and the sale of property, plant and equipment.
can de department stores save themselves successfully?
Shanghai New World Co.Ltd(600628) behind the frequent closing of stores is the helpless move of sharp decline in profits. Looking at the whole department store industry, the adversity of department stores does not form overnight. With the development of e-commerce and other channels, the risk of single channel of department stores has increased, “de department store” has become a trend.
In the first mock exam, brand association was once the mainstream of China’s department stores, but with the rapid development of commercial complex, this mode gradually collapsed and changed to self run mode.
“The most important form of self operation is the net operating profit, but Shanghai New World Co.Ltd(600628) Due to historical reasons, department stores have excessively strengthened their dependence on suppliers, resulting in large capital occupation and high inventory risk, which has brought many shackles to the development of self-supporting model. Expanding the proportion of self support will touch the interests of agents. The lack of talents, high training costs and difficult cost control in the procurement process have formed a situation of no difference, which is difficult to change in the short term. ” Yuan Shuai, Deputy Secretary General of the Rural Revitalization and Construction Commission, believes that.
When the new retail era comes, it is difficult to get rid of the traditional joint venture mode and fail to seize the opportunity of Wuxi Online Offline Communication Information Technology Co.Ltd(300959) integration, which makes Shanghai New World Co.Ltd(600628) department stores miss the best opportunity for transformation again.
As early as 2017, in order to adapt to the market, it once launched the self operated e-commerce platform “new flash purchase”, but the activity and purchasing power of this platform were mediocre. The reporter noted that the number of orders for products on the platform is in single digits.
Yuan Shuai told reporters: “department store enterprises can’t survive by closing stores and breaking their arms for a long time. The transformation is to live from death. They need to do precision marketing guided by the needs of consumers, rather than continue to follow the traditional commercial leasing and joint venture model.”
In addition to the change in the mode, in recent years, Shanghai New World Co.Ltd(600628) department stores and other enterprises have also upgraded and transformed their business formats and accelerated the “de department store”.
According to Bai Wenxi, chief economist of IPG China, “It is inevitable that the department store industry, which adheres to the original business mode and form without adjustment and refuses to change with the trend of the times, will decline day by day and even withdraw from the historical stage, and Shanghai New World Co.Ltd(600628) department stores are no exception. Therefore, taking the road of specialization, scene, experience and socialization is the new road for the department store industry and even the retail industry to ‘save the nation and survive’.”
In this context, mergers and acquisitions of the department store industry will also emerge. An Guangyong, an expert of the credit management committee of quanlian M & A Association, said: “in the new retail era, enterprises should actively save themselves and put themselves into ‘new water’ before they can be revitalized. With the integration of the two lines and the prominent offline value, more Internet giants will aim at the real industry and find opportunities to copy the bottom. M & A in the department store industry will continue to appear in the next few years.”
