Can it return to the high ground of value?
For a long time, Suning has been synonymous with “lack of money”, “selling”, “losing” and “not making money in the home appliance retail business”, but now Suning seems to be rejuvenated.
*In the first quarter of 2021, Suning.com’s revenue was 54.05 billion yuan, and its net profit reached 456 million yuan;
*Suning Retail Cloud breaks through 9,000 stores, accelerating the pace of sinking to third- and fourth-tier cities;
*With a market share of 22.1%, Suning.com continued to rank No. 1 in the home appliance market.
From a “retailer” to a “retail service provider”, Suning is trying to open the second growth curve with a new identity in transformation. With the home appliance retail chassis on the one hand and the transformation into a retail service provider on the other hand, Suning, which has continuously received state-owned investment from Shenzhen and Jiangsu to supplement “ammunition”, will it return to the high ground of value?
“Change” Suning: not a retailer, but a retail service provider
2021 is a year of brand-new transformation for Suning.
At the New Year’s reunion meeting in February this year, Zhang Jindong, Chairman of Suning Group, stated: “In 2021, Suning will focus on four profit points of home appliances, independent products, low-efficiency business adjustments, and various cost control, and strengthen easy Four sources of scale growth: buyer site, retail cloud, B2B platform, and Maoning.”
It can be seen that Suning’s future development strategy is to “focus on the main retail business and vigorously tap new business growth points.”
In fact, in the middle of last year, Suning gave itself a brand new positioning, transforming itself from a “retailer” to a “retail service provider.” The retail service provider, namely Suning, will no longer serve the C-end users as a retailer, but will serve the B-end market as a service provider, helping more companies to open up the sinking market of the third and fourth tiers and below.
So far, Suning Retail Cloud has broken through 9,000 stores, and it is expected to open 12,000 stores by the end of 2021. The rapid expansion of retail cloud stores reflects that Suning’s identity as a service provider has gradually opened up online service channels and will serve more Of small and medium-sized home appliance retail companies.
However, behind Suning’s pursuit of change and transformation is the company’s losses over the years.
Financial report data, 2In 020, Suning’s operating loss was 6.06 billion, an increase of 141.3% year-on-year; the net loss attributable to listed companies was 3.913 billion, a year-on-year decrease of 139.75%.
It is worth noting that since 2014, Suning’s net profit has been at a loss after deducting non-profits. From 2016 to 2020, net profit losses after deduction of non-profits reached 1.108 billion yuan, 88.391 million yuan, 359 million yuan, 5.711 billion yuan and 6.807 billion yuan respectively.
Therefore, in order to find a second growth curve to save the performance decline, Suning has made a lot of efforts: (1) Cut off the complicated business and shift the focus The main retail business; (2) Selling surplus business so that funds can be returned to circulation; (3) After being acquired by Shenzhen state-owned assets, the transformation and development of Suning attracted more capital investment.
Among them, Suning’s “selling oneself” has a very “selling point”.
In February last year, Suning was acquired by Shenzhen state-owned assets at a price of 14.8 billion yuan, which contributed a lot to the company’s recovery and filling of the seven-year loss loophole. After transforming into a “retail service provider” and backed by Shenzhen state-owned assets, Suning was able to attract a lot of state-owned investment, including Jiangsu State-owned Assets and Nanjing Municipal State-owned Assets and Suning signed a framework agreement to establish a new retail development fund in May this year. , The total scale of investment reaches 20 billion yuan.
It can be seen that Suning, who is more than 30 years old, has regained the importance of capital, which also means that it will use more capital to find the second growth curve. But is Suning now on the right track?
Continuously release positive signals: cash flow is back to positive, ranking first in the home appliance industry
From a “retailer” to a “retail service provider”, Suning’s cash flow has begun to recover. The home appliance retail market has a solid foundation and new business continues to improve.
(1) Net profit and cash flow turn positive, and business continues to improve
Suning’s net loss last quarter was as high as 4.822 billion yuan. The turnaround in net profit in the first quarter of this year is a positive signal.
According to the financial report, in Q1 of 2021, Suning.com realized operating income of 54.05 billion yuan, and net profit attributable to shareholders of listed companies reached 456 million yuan.
At its root, one is the promotion of Suning’s online business.
In November last year, Suning announced the introduction of the cloud network Wandian strategy, and at the same time completed the A round of financing with a financing amount of 6 billion yuan. In terms of sales volume, online sales have accounted for nearly 70%. In 2020, Suning.com’s online platform product sales reached 290.335 billion yuan, an increase of 21.60% year-on-year.
The other is that the company implemented cost reduction and efficiency enhancement. This year, it cut down marketing investment to increase user conversion rate. The financial report shows that for the whole year of 2020, Suning’s total expense ratio decreased by 2.61% compared with the same period. Among them, sales expenses dropped by 23.43%, financial expenses dropped by 12.16%, and administrative expenses dropped by 5.77%.
In March of this year, Suning.com’s sales expenses dropped by 11.84% year-on-year, and the conversion rate of APP users increased by 2.4% year-on-year.
Based on this, Suning’s cash flow has also improved with the steady increase in Suning’s online sales and the company’s implementation of cost reduction and efficiency enhancement. In the first quarter of 2021, Suning.com’s net cash flow reached 468 million yuan.
(2) The chassis is relatively stable, ranking first in the home appliance industry again
According to the “Report on the First Quarter of China’s Home Appliance Industry in 2021”, in the first quarter of 2021, among all channel types, Suning.com continued to rank first in the home appliance market with a market share of 22.1%, while JD.com, Tmall and Gome respectively Obtained 16.9%, 11.0% and 5.7% of the shares.
Suning’s ability to rank first in the home appliance market is due to its advantages in bulk logistics and delivery services. So far, Suning Logistics has put into operation 50 logistics bases in 41 cities, covering 351 prefecture-level cities across the country.
It is also related to the company’s cutting off redundant business and focus on the main retail business. At this year’s New Year’s reunion, Suning Chairman Zhang Jindong once again stated, “For those who are not on the main retail track, we must take the initiative to subtract and shrink the front line.
For this reason, after Suning Group cut off Suning Sports, the market has recently rumored that the company will sell Inter Milan acquired for 1.96 billion yuan, which may give Suning more funds to return to consolidate its position in the main business.
(3) New business retail cloud service performance continues to grow
From “retailer” to “retail service provider”, Suning’s new business cloud network Wandian plan is developing steadily. It is reported that,Suning Cloud Net Wandian contains six major businesses: Suning Retail Cloud, Suning Store, Suning Purchase, Suning Inventory, B2B, and overseas purchase.
Among them, the company’s key retail cloud business is growing steadily. In Q1 of 2021, Suning Retail Cloud opened 584 new stores, and its sales volume increased by 69% year-on-year. In addition, Suning Retail Cloud has now surpassed 9,000 stores, and the company is accelerating its sinking to third- and fourth-tier cities.
It can be seen that Suning’s online retail network covering the whole country is becoming more and more perfect.
In general, Suning seems to be rejuvenated in terms of performance, but how far is it from the company’s return to the high ground of value?
Can you return to the high ground of value?
The currentSuning still has a long way to go back to the high ground of value.
According to “Songguo Finance” observations, as of the close of Shanghai and Shenzhen on May 20, Suning.com’s share price was 6.74 yuan, a 70% drop from the historical high of 23.14 yuan; the market value was 62.75 billion yuan, compared with The high point is 115.1 billion, which is over 40%.
What cannot be questioned is that Suning’s performance is gradually becoming more formal, and the future stock price and market value have a chance to return to rationality.
First of all, the domestic appliance retail market has begun to pick up. According to the “Report on the First Quarter of China’s Home Appliance Industry in 2021”, the overall recovery growth trend of the industry in 2021 is relatively obvious. In the first quarter, the total domestic home appliance market sales reached 164.2 billion yuan, an increase of 40.1% year-on-year.
As the No. 1 home appliance market, Suning will continue to move towards the fast lane in the future with the favorable environment for sales and performance growth in the future.
But this is not the point. The point is that Suning, as mentioned above, has transformed into a “retail service provider.”
Under the current intensified homogeneity competition in the retail industry and intensified price wars, the industry has already entered the stock market. Players are vigorously looking for an incremental market. At present, the population of counties and towns in our country accounts for 70% of the country’s total population, and the debt ratio is low, the consumption base is small, and the growth rate is much faster than that of cities and towns. So this is a stable stock market.
Suning’s brand-new “retail service provider” identity is the focus of this market. What does the retail service provider mean, that is, Suning will not be limited to serving C-end users, but will serve B-end users, and will step into the more sinking third- and fourth-tier markets and below?
In April of this year, Suning Tesco Retail Cloud completed the A round of financing. CPE and Andafu Fund participated in the investment, and they are veryMay move towards independent listing. It can be seen that the retail cloud is exactly the project that Suning will focus on after its transformation.
At present, Suning retail Yunmen stores are also steadily expanding and sales are increasing. Recently, Suning retail cloud gate stores have exceeded 9,000, and this year it plans to open 600 new retail cloud gate stores in the southwest region, and the number of stores will exceed 2,000. In addition, in the first quarter of this year, Suning’s retail cloud sales increased by 69% year-on-year.
This road is not without resistance.
Because the retail Yunmen store is a business of resource reorganization and integration of the upstream and downstream of the industrial value chain, that is, using Suning’s smart retail platform to serve the submerged users and merchants at the county, town and township level below the third and fourth tiers. , To build a modern commerce and trade circulation system of quality and efficiency.
In layman’s terms, Suning has created a smart service platform to better serve the sinking retailers who have a high degree of fragmentation and lack of management and operational difficulties.
This means that Suning will go down the road in the future and help more retailers to open up the market below the third and fourth tiers. On this road, there is an old player of JD.com as a “blocker”. Since 2016, JD.com has begun to deploy the offline market and vigorously promote the market sinking of sales channels.
As of July last year, the number of JD home appliance stores has reached 15,000, covering 2.5 townships and 600,000 administrative villages across the country. It can be seen that Suning Retail Cloud, which has just exceeded 9,000 stores in scale, does not have a big advantage.
Furthermore, Suning’s online retail sales account for less than 70%, and it has transformed from a traditional offline retail company to an online retail service provider. It is also more difficult to compete with JD.com, which is one of the Big Three in e-commerce.
So, the newly positioned Suning has both “risks” and “opportunities”. “Dangerous” means that JD.com is on the track and challengers will continue to enter the game. The “opportunity” is that Suning has found the second growth curve to drive it. The company’s performance is improving, subsidizing year-round loss loopholes, and then continuously obtaining financing to supplement “ammunition”, Suning may also be able to tell this new story for a long time.
Author of this article: Ye Xiaoan
The source of the article: Songguo Finance, please indicate the source for reprinting