Single-store operations continued to be optimized, and the closing of the store led to another loss in 14 years.
Renren Le 14Q1-3 achieved revenue of 9.284 billion dollars, down 3.59% year on year; Q3 revenue fell 3.13% year on year, narrower than the previous two quarters; net profit attributable to the parent company was negative 78 million, an increase in loss of 94 million over the same period last year. Mainly due to the increase in expenses brought about by closing a large number of loss-making stores again, the company's network portfolio was quickly optimized; the slight drop in revenue during the rapid closing process also reflected the stability of the company's main stores in a weak environment in the industry. 1) Q3 gross margin increased 0.77 pp to 21.63% year on year, and Q1-3 gross margin increased by 129 pp to 22.10%, reflecting not only the high quality of divesting major stores, but also the company's increasing category management and collection capabilities; 2) The Q3 sales management fee rate increased 1.79 pp to 22.26% year on year, and the Q1-3 management expenses rate increased 1.52 pp to 20.90%. The impact of handling closing operating costs was obvious; 3) Q1-3 closed stores indicated 57 million dollars, asset impairment A loss of 20 million dollars.
The company expects to close about 15 stores throughout the year (8 stores closed in 2012, losses of 90 million dollars). It is expected that the cost of closing stores in Q4 will still be rapidly increasing, and the annual loss may exceed 250 million.
Lossless stores have been drastically reduced in 2015, and the transformation of community supermarkets is worth looking forward to.
After the company went public in 2010, it accelerated the opening of stores in an extensive manner against the backdrop of a decline in the popularity of the overall retail and big sales scene. Errors in offsite location selection and management output disrupted the company's share of loss-making stores rapidly increasing, dragging down overall profits. The company is expected to return to the short-term equilibrium point of about 1% after drastically closing loss-making stores in December and '14, and the net interest rate is expected to return to a short-term equilibrium point of about 1% in 2015. At the same time, the company has begun to gradually transform into a community store with a smaller area (about 3,000 square meters), more convenient (covering only 1-2 communities), and prominent in categories other than e-commerce (daily necessities, fresh products, etc.). At the same time, electronic shelves that are separate from store display products and have in-store pickup functions are also being rapidly promoted in stores, which are worth paying attention to.
Profit forecasts and investment recommendations.
In the early stages, the company greatly expanded its hypermarkets against the backdrop of a downturn in the retail industry/big-box sales market, causing too many loss-making stores to drag down performance. The company entered the market 14 years younger after a sharp shutdown, and the net interest rate is expected to return to the short-term equilibrium point of about 1%. In line with the trend of the industry, the company is transforming into a community supermarket with a smaller area, more convenience, and highlighting categories such as daily necessities and fresh food, etc., and is also gradually promoting omni-channel integration. At the same time, it is gradually promoting omni-channel integration. The progress of the transformation is worth focusing on. Due to the surge in store closing costs in '14, the EPS forecast for 14-16 was adjusted to -0.63, 0.27, and 0.32 yuan, and was given a “ownership” rating.
Risk warning: Terminal sales declined sharply, the share of loss-making stores exceeded expectations, and transformation fell short of expectations.