Wal Mart closed its stores frequently in China and Carrefour, Asia’s largest, closed. Traditional stores struggled to maintain their current share under the repeated squeeze of online supermarkets, fresh e-commerce and community group buying.
In order to alleviate the pressure, recently, China Resources Vanguard reported the news of listing in Hong Kong, and multipoint has also reported IPO in Hong Kong for many times. For a time, landing in the capital market seems to have become the consensus of traditional retail.
However, large supermarkets, including Wal Mart, are facing the “black swan” of the epidemic. The market is becoming more cautious.
On the evening of May 17, Wal Mart released the first quarter results of fiscal year 2023, and the operating profit and other data were lower than the market expectation. As of the close, Wal Mart’s US stocks fell 11.4%, the largest one-day decline since 1987. Wumart technology, which had previously tried to IPO in Hong Kong stocks, has gradually “stranded”.
China Resources Vanguard IPO in Hong Kong
In fact, this is not the first time that China Resources has been listed in Hong Kong.
In May 2021, it was reported that China Resources Group planned to consider allowing China Resources Vanguard to conduct an initial public offering in Hong Kong or raise US $2 billion. The IPO may be carried out as early as 2022.
Recently, it has been pointed out that China Resources Vanguard raised US $400 million in the round of financing before the US $2 billion Hong Kong IPO. Country garden is reported to lead the investment in this round of pre IPO Financing of China Resources Vanguard, with the participation of Agricultural Bank of China International, Bank of China international and CICC capital.
However, country garden did not reply to the news. The relevant person in charge of China Resources Group also told the media that there were market rumors and would not comment. Public information shows that China Resources Vanguard is 67.02% owned by China Resources Vanguard (Hong Kong) Co., Ltd., 31.69% owned by overseas enterprise commitment Investment Co., Ltd. and 1.27% owned by Taiwan enterprise Wenxin Investment Co., Ltd.
In 2015, China Resources Vanguard acquired Tesco in the UK, but the development effect was not ideal, and its performance plummeted. It was stripped from the entrepreneurship of the listed company China Resources, closed the stores with poor efficiency on a large scale, and began to layout medium and high-end retail, with the representative brands of OL é and so on.
On the whole, after many mergers and acquisitions, China Resources Vanguard, as an old retail enterprise, ranks among the top in China in terms of overall scale.
However, in recent years, in order to meet the challenges of e-commerce and epidemic, the scale of China Resources Vanguard has also been shrinking. From 2015 to 2019, the sales volume of China Resources Vanguard fell from 109.4 billion yuan to 95.1 billion yuan. According to the “top 100 supermarkets in China in 2020” released by China chain operation association at the end of July 2021, the sales volume of China Resources Vanguard is 87.8 billion yuan, and the data has fallen further.
traditional supermarket dilemma
In fact, Wal Mart, Yonghui Superstores Co.Ltd(601933) and other leading brands are also experiencing similar scale decline.
According to the results of the first quarter of fiscal year 2023 released by Wal Mart on May 17, Wal Mart pointed out in its financial report that the growth of the Chinese market was “lower than expected” due to the covid-19 epidemic and limited logistics delivery.
Specifically, the growth rate of sales in the Chinese market is lower than that in “Mexico and Central American countries”. The growth rate of same store sales is the slowest in the existing market of “Wal Mart international”. The growth rate of same store transactions is only 0.2%, which is far lower than the growth rate of 6.2% and 10.6% in “Mexico and Central American countries” and Canada.
At the same time, Wal Mart also lowered its operating profit and earnings per share performance guidelines for fiscal year 2023 Yonghui Superstores Co.Ltd(601933) 2021 gross profit margin decreased by 2.38% and recorded a loss for the whole year.
“The problem of China Resources Vanguard is similar to that of other offline supermarkets, that is, when passively arranging online channels, the time point is late and the ability is insufficient.” Ling Feiyu, a retail industry analyst, believes that China Resources Wanjia app has not accumulated effective consumers since it was launched, and the daily life scale is small, which can not change consumers’ shopping habits on meituan, hungry and other platforms.
However, it can be seen from the quarterly report of Yonghui Superstores Co.Ltd(601933) 2022 that its online layout has initially shown results. During the reporting period, the self operated home business “Yonghui life” of the user supermarket achieved sales of 7.1 billion yuan, a year-on-year increase of 21.1%.
Wal Mart has also occupied the minds of consumers in first tier cities with Sam’s club business. According to the above financial report, the sales of Sam’s Club reached US $19.6 billion, an increase of 10.2% over US $16.7 billion in the same period last year and a year-on-year increase of 17.4% in the two years; Revenue from members increased by 10.5%.
With the increasing concentration of traditional stores, the large-scale layout of Yonghui Superstores Co.Ltd(601933) , Wal Mart and Wumart metro also put pressure on China Resources Vanguard and began to try multi brand strategy. At present, it has many brands such as China Resources Vanguard, vanguard city, vanguard mart, vanguard life, Suguo, ol é and BLT.
industry changes difficult to register Hong Kong stocks
Although Wal Mart, Yonghui Superstores Co.Ltd(601933) , Wumart and others are seeking to develop through new business formats, Wu Junsheng, founder of supermarket help, a retail consulting organization, still believes that 2022 may be the year when traditional supermarkets close their stores most.
The direct reason for the closure of most stores is that the lease term has expired, the renewal rent is high, and the cost cannot be covered.
According to the practitioners of supermarkets, the lease term of general stores is between 10-20 years, and the lease is gradually expiring in recent years. China Resources Vanguard is also facing the same problem. Closing stores represents further shrinking scale and difficult valuation. Opening stores can not make profits in a short time, affecting performance.
Nowadays, there are many queuing enterprises in Hong Kong stocks, including many catering enterprises whose performance was also damaged during the epidemic. Since 2021, fast food chain brands such as rural base, green tea restaurant and Hefu Laomian; Spicy hot brand Yang Guofu; Guangdong hotpot chain restaurant Laowang; Pizza brand domino has handed in tables one after another, but so far it has failed to successfully land in Hong Kong stocks.
Wumart Technology (Wumart, Metro, etc.) that submitted the form in March 2021 has been applying for listing for six months, and the listing process is “invalid” on September 29. According to the prospectus, as of December 31, 2020, Wumart technology has 426 Wumart stores and 97 Metro stores. From 2018 to 2020, Wumart’s operating revenue was RMB 21.378 billion, 22.747 billion and 39.064 billion respectively, and its net profit was RMB 226 million, 394 million and 726 million respectively.
Gaoxin retail (06808. HK), the parent group of RT mart, which is also listed in Hong Kong stocks, has lost 22.04% since the beginning of the year.
At present, the scale of China Resources Vanguard has fallen from the first place, less than Yonghui Superstores Co.Ltd(601933) , RT Mart.
According to the report on the operation of chain supermarkets (2021), RT mart and Yonghui Superstores Co.Ltd(601933) anti surpass China Resources Vanguard, occupying the top two of the top 100 supermarkets in China respectively, and China Resources Vanguard retreated to the third.
“For traditional retail enterprises, 2022 is not a good node for IPO.” Some brokerage analysts believe that although the scale of China Resources Vanguard has shrunk, it still maintains the head position of the top three, but the valuation may not be ideal.
However, the industry hopes that country garden, the investor of China Resources Vanguard, can help China Resources Vanguard get a better position at a lower rent.
Haitong Securities Company Limited(600837) analysts believe that small and medium-sized, community-based and close to users are the main development trend of supermarkets in the future. It is necessary to select SKUs for brands, go deep into the community and even layout private traffic operations. In this trend, country garden has certain advantages.
