Suning, as an extremely large offline retail giant, has been trapped in the duality of “selling equity” and “revenue falling sharply” in recent years In trouble, according to the latest news: “Suning Appliance negotiated the sale of Suning shares with the state holding company REDD. The success of the sale may help Suning repay a total of 17.2 billion yuan (2.7 billion US dollars) of bond debt this year.” This article is from WeChat public account:< /span>Juchao Business Review (ID: tide-biz), the article was first published on January 7, 2021, author : May, editor: Yang Xuran, head picture from: Visual China


“China’s retail history, half of it looks at Suning.”

Thirty years ago, Zhang Jindong, who was only 27 years old, rented a 200-square-meter facade house in Nanjing with a capital of 100,000 yuan, starting Suning’s entrepreneurial road.

Since then, Suning has followed the tide of the times and has gone through the entire process of transformation in China’s retail industry. From an air-conditioning store specializing in air-conditioning, it has developed into a retail giant with 250,000 employees and annual sales of over 330 billion, spanning online and offline.

But after 2020, Suning, who has entered the year of its establishment, left the deepest impression on the outside world as “lack of money.”

Since November last year, Suning has repeatedly fallen into rumors of debt default and capital chain problems. Zhang Jindong and his son pledged all the shares of Suning Holdings to Taobao. The turmoil of borrowing 1 billion yuan has not yet subsided, and a new wave of turmoil has begun. Recently, Zhang Jindong pledged his 65% stake in Suning Real Estate to Taobao China.

Faced with the ensuing public doubts, Suning’s response was “untrue, reported case” and “equity pledge is a normal business cooperation”.

Compared with the statement of one party, the audited financial statements of Suning.com are more convincing: Since 2014, its net profit attributable to non-deductions has been negative for 6 consecutive years.

1. Foreshadowing “Buy”

Long-term The various acquisitions of Suning are responsible for the huge debt pressure on Suning.

In the early 1990s, the home appliance market, especially air conditioners, was in short supply for a while, and Suning became the first group to build the market and enjoy the dividends of the times.

In the next few years, Suning raced and expanded wildly to gain a firm foothold in the domestic appliance market.

When the e-commerce wave hit, Suning was quickly disrupted by JD.com and Taobao. Zhang Jindong tried to learn the so-called “Internet thinking” and proposed to “rebuild Suning” in 2011, planning to 2020(that is, last year), making Suning Tesco the number one in the e-commerce industry.

The later story is that Taobao and JD.com have been in the leading positions for many years, and e-commerce platforms such as Meituan and Pinduoduo have also risen rapidly. Although Suning Tesco’s revenue is also growing, the potential energy gap is huge.

The business model design of “Wal-Mart + Amazon” has not been effective yet, but the earning power of the main business has declined drastically.

In order to transform and maintain growth capabilities, Suning Appliance and Suning.com’s subsidiary Suning.com (002024) has expanded through acquisitions, involving e-commerce and logistics , Finance, real estate, sports, technology and other fields:

  • In 2012, Suning Appliance wholly acquired the maternal and infant platform Redbaby for US$64 million;

  • In 2019, Suning Tesco first acquired 37 Wanda Department Stores for RMB 2.7 billion, and then spent RMB 4.8 billion to purchase 80% of Carrefour China.

Suning also marchedRetail-related express delivery industry.

In 2017, Jiangsu Suning Logistics Co., Ltd., a subsidiary of Suning Yunshang, completed the acquisition of Tiantian Express for 4.25 billion yuan. After being acquired, Tiantian Express has fallen into losses for years.

Cultural entertainment is also one of Suning’s strengths, and it has made heavy acquisitions over the years.

In 2013, Suning Culture Investment Management Co., Ltd. under Suning spent US$250 million to acquire PPTV;

In 2016, Suning’s Sports Property Group acquired 68.5% of the Italian Inter Milan Football Club for a price of 1.96 billion yuan;

In the same year, Suning Juli (formerly PPTV) under the group acquired Dragon Ball Live for US$320 million.

Of course, the diversified layout cannot fall into real estate. In the past few years, Suning has continued to develop commercial real estate projects such as Suning hotels and office buildings, and has strategically invested 20 billion yuan in Evergrande Real Estate. In the course of this round of equity pledge, Suning Land pledged 65% of its shares to Taobao.

In the past few years, Suning Appliance level + listed company level has invested more than 40 billion yuan in accumulative investment. The scale of sales continues to expand, and the business type is more like an Internet company, but it is inevitable to lose money. From 2014 to 2019, the deduction of non-net profit was always negative.

Under the general trend of online and offline integration, Suning’s way of fighting with a group army is not wrong. Alibaba, Tencent, JD.com and others have broadened their boundaries through similar investments and acquisitions.

Including Ali’s acquisition of RT-Mart, Gaoxin Retail, and holding of Intime Department Store, Tencent’s equity investment in Yonghui Supermarket, Gaoxin Retail, Hailan Home, etc., in order to access more offline consumption scenarios in the retail industry.

The outside world has always had concerns about Suning’s multi-field layout, including the lack of cross-border management talents and industriesResources and the lack of traffic support in the system, not only failed to bring Suning the expected benefits, but also increased the financial burden.

The financial burden is formed after the acquisition. The most typical case is PPTV. Two years after being acquired by Suning, PPTV lost more than 1 billion yuan, for which Zhang Jindong had to separate it from the main body of Suning’s listed company.

Tiantian Express also lost money year after year. According to Suning’s financial report, its acquisition of Tiantian Express had a loss of more than 4 billion within three and a half years. In the first half of 2020, it will hit a new high of 552 million.

The frantically expanding Suning shop failed to realize its previous expectations. As an entry point for offline traffic, Suning once tried to open up its full-link ecology, including Suning Finance, Suning Real Estate, and so on. Therefore, Suning.com did not hesitate to spend a lot of energy to open stores nationwide.

At the end of 2017, there were only 23 Suning shops. By the end of June 2019, it had soared to about 5,400.

Each store has invested millions of dollars in cost, and after Ali, JD.com and others have personally left the market, the competition in offline stores has become more brutal and losses are serious. In the end, Xiaodian did not escape the fate of being stripped like PPTV.

The massive expansion has seriously affected the company’s cash flow. Suning began to use bond issuance to improve cash flow. Since 2018, it has issued a total of 100 billion yuan of bonds through platforms such as the parent company Suning Appliance and Suning. This is also an important reason why the size of bonds maturing within one year exceeds 22.3 billion, which the industry has recently questioned.

Second, selling profit

Getting book profits by selling assets has become the norm for Suning.com in recent years.

In the first three quarters of 2020, Suning.com’s listed company achieved revenue of 180.86 billion yuan. Through Suning.com’s recent financial reports, we found that in the past seven quarters, total operating income has always been lower than total operating costs, that is, the company Has been at a loss.

How is the profit data on the financial statements realized? The actual situation is that Suning.com keeps selling assets to obtain book profits.

In 2019 alone, Suning.com disposed of 19.6 billion yuan in assets. Including Suning Convenience Supermarket with 3.59 billion yuan, Shaanxi Suning Yida with 160 million yuan, 4 logistics companies with 720 million yuan, Suning Financial Services with a value of 15.56 billion yuan, and 3 asset management companies.

In the past six years or so, Suning.com has been selling its assets, and the net profit attributable to the company has also turned positive.

  • In 2014, the sale of stores to China Capital Capital gained 1.9 billion yuan;

  • In 2015, once again sold stores to China Capital Capital and sold PPTV equity to overseas companies, gaining 1.7 billion yuan;

  • In 2016, the sale of warehousing and subsidiary Jingchao Suning Appliance gained 1.8 billion yuan;

  • In 2017, it sold Alibaba shares again, benefiting about 4.3 billion yuan;

  • In 2018, Suning sold Alibaba’s shares, benefiting about 13.9 billion yuan;

  • In 2018, it sold all the equity of its 5 companies to “Suning Shenzhen Venture Capital-Yunxiang Warehousing and Logistics Facilities Phase I Fund”.

The one with the largest amount and the most attention was when Suning bought Alibaba stock for about 14 billion yuan in 2015. Starting from 2017, it sold Alibaba’s equity in three times, obtaining a net profit of over 14 billion yuan.

The profit obtained by cashing out this transaction alone is more than the sum of money earned by Suning for many years. This has become one of the most important sources of Suning’s performance profits from 2017 to 2019.

The cooperation with Ali is therefore considered by the outside world to be the most correct move among all the investment layouts of Suning.

Suning Xiaodian did not escape the fate of being sold. In 2019, Suning.com sold 100% of Suning Xiaodian to a company under Zhang Kangyang, the son of Zhang Jindong. While contributing to the company’s net profit of 3.57 billion yuan, it also divested Suning Xiaodian, a long-term loss-making sector.

It can be seen that Suning.com’s takeovers of these businesses are mostly affiliated companies of Suning Appliance or Zhang Jindong and his son. Assets are dumped from listed companies in order to give listed companies a more “good-looking” financial statement.

After using similar methods to produce a “looks beautiful” financial report, investors don’t seem to buy it.

In 2015, Suning.com released an employee stock ownership plan. The announcement shows that the second phase of the employee stock ownership plan to subscribe for the company’s 2015 non-public offering of approximately 65.92 million shares, accounting for 0.71% of the company’s total share capital after the issuance, lock-up period of 12 months, duration of 48 months.

But several years later, the employees who participated in this part of the shareholding plan did not sell this part of the stock, and carried out a duration extension in 2020.

The reason is nothing more than Suning’s stock price is not strong. At that time, the subscription price of the employee stock ownership plan was 15.17 yuan, but Suning Tesco’s stock price has already fallen. Except for rare rises, it has been hovering around 9-12 yuan for many years. At the close of trading on January 6, 2021, Suning.com reported 7.58 yuan, with a current market value of 70.5 billion yuan.

In order to boost the stock price, Suning.com has been repurchasing shares since 2018, and continues to increase its size.

Data shows that in 2018 and 2019, Suning.com paid 145 million yuan and 999 million yuan for share repurchase. The share repurchase that began in November 2019 has been completed in August 2020, and the cumulative amount has reached 1.01 billion yuan.

These, together with long-term foreign investment, have brought huge debt pressure to Suning.

3. “Deduction of non-profits” is difficult to sustain

The “deduction of non-pre-profit” model for many years has made it difficult for investors to maintain confidence in listed companies.

Suning’s development and expansion are realized through the benefits of issuing bonds, selling Ali stocks, and divesting subsidiaries. In this case, it is difficult for investors to continue to maintain confidence in listed companies.

Reviewing Suning’s stock price trend in recent years, since the 2015 bull market, the stock price has been in a downward channel. Since 2015, the stock price has fallen by nearly 70% and hit a new low of 7.34 yuan in December 2020.

Suning Tesco’s share price performance (January 2015 ~ January 2021)

In most cases, the rise or fall of stocks has a direct and positive relationship with the company’s earnings. From 2015 to 2020, Suning.com’s revenue increased from 135.5 billion to 270 billion (estimated for 2020). The revenue scale has doubled, but The deduction of non-net profit is always negative.

In terms of industry competition, Suning.com’s revenue growth rate is not superior to other e-commerce platforms. According to data from Ping An Securities, the growth rate of operating income of Suning.com’s online business is slowing sharply.

These two factors have become two big mountains weighing on Suning’s stock price, and the stock price can only go down.

From the financial data disclosed by Suning.com, it is obvious that the company’s profitability in the first three quarters of 2020 is further declining:

  • The first quarter of 2020: revenue fell by 7.07%, non-profit deduction -500 million;

  • The second quarter of 2020: revenue fell 17.63%, non-profit deduction -245 million;

  • The third quarter of 2020: revenue fell 4.58%, deducting non-profits-255 million.

For this reason, the company explained that there were two main reasons for the decline in net profit in the first half of 2020. First, the loss of Suning Xiaodian in the first half of the year dragged down its performance; second, the company sold some Alibaba shares in 2018 to achieve a net profit of 5.601 billion Yuan, so the year-on-year data on net profit appears to be very small.

In the first half of the 2.3 billion profit, the transfer of Suning Xiaodian’s equity alone contributed a net profit of 3.428 billion yuan to the listed company. The profit of the listed company is the loss of the company under the takeover party Zhang Kangyang. Excluding this transaction, Suning.com posted an operating loss of 1.128 billion yuan in the first half of the year.

In 2019, the company’s return on net assets was only 10.7%. Ping An Securities predicts that this indicator will only be around 2% after 2020.

For some time, the bonds of Suning-related companies have fallen sharply, and the rumors triggered by the pledge of Suning’s holding shares to Taobao have all intensified market concerns.

In the eyes of the outside world, the pledge of all equity indicates that Suning has an urgent need for capital turnover. Many investors rely on this to judge Suning’s debt burden.

According to the data, as of the first three quarters of 2020, Suning.com’s short-term loans reached 28.1 billion yuan, and the non-current liabilities, long-term loans and bonds payable due within one year were 4.616 billion yuan, 6.248 billion yuan, and 7.995 billion yuan. , The total current liabilities amounted to 109.967 billion yuan.

But Suning.com is still expanding rapidly. Since Suning set a new retail strategy in 2017, the crazy offline store opening has continued, and currently has a total of 12,329 self-operated and franchised stores.

Suning.com’s capital chain has therefore been in a highly tight state. The opportunity in Zhang Jindong’s eyes is also a risk in the judgment of many investors.

Under the “pre-profit deduction” model for many years, Suning’s development and expansion are realized through the issuance of bonds, the sale of Ali stocks, and the divestiture of subsidiaries. In this case, it is difficult for investors to continue to maintain confidence in listed companies.

Four, write at the end

Suning is still a huge offline retail giant, but for the current more complex Chinese retail industry, offline alone is obviously not enough—the competitors’ ambitions are too big and their actions are too fast.

In addition to conquering the sinking market, JD.com, which was listed for the second time, has already entered Suning’s traditional advantage area. In July 2020, it once again won 54% of the equity of Wuxing Electric, and plans to “make another JD home appliance offline.”

Even Gome, an old rival, is making a comeback and has a stronger helper.

In May, JD announced a strategic investment in Gome. Pinduoduo, which has entered the game strongly, also announced that it has reached an in-depth strategic cooperation with Gome. All the products of Gome retail will be put on the shelves. “Online” and “service” have become Gome’s new keywords, and these are the businesses Suning has been working on in recent years.

Suning was in full swing in the fierce battle of the Soviet-American hegemony. No one would have thought that when Suning was 30 years old, this would be the situation.

Note: The K lines in the text are all from Eastern Fortune. This text is from the WeChat official account:巨 tide Business review (ID: tide-biz) , author: May, editor: Yang Ran