It's already at its worst
At noon on March 28, we arranged a Chinese food meeting with the company's management as soon as Xiaonanguo announced its 2013 results. Company Chairman Wang Huimin attended the meeting and exchanged views on issues of interest to investors. The cold winter of 2013 in the restaurant industry. In 2013, EPS fell 99% year-on-year to RMB 0.07 points, mainly due to the decline in same-store sales and significant negative operating leverage under the severe catering industry environment. Sales increased 4% year over year to 1.4 billion yuan, mainly due to the opening of new stores in 2012-13. The company did not pay a year-end dividend for 2013.
The decline in same-store sales declined to 4% in 1Q14. In 2013, same-store sales fell 10%, mainly due to a decline in per capita consumption. The number of customers at comparable stores increased slightly by 0.7% year on year in 2013, while in 1Q14, it increased by about 2% year on year. The per capita consumption of Xiaonanguo Restaurant in Q14 is about RMB 200, which is similar to the level of the first half of 2013, but lower than 220 yuan in 1Q13. Management expects same-store sales growth to be corrected in 2Q14, partly because last year's low base began in the second quarter.
Focus on developing casual and family catering businesses. The company will not increase the number of restaurants in Xiaonangguo in 2014 (72 at the end of 2013). The company plans to open 10-12 Nankoguan restaurants in 2014, so the number of South Xiaoguan restaurants will reach 17-19 by the end of 2014. The capital expenditure in 2014 was RMB 150-200 million. Furthermore, the first small southern restaurant has recently opened, focusing on the family catering market.
Export management services to popular cheesecake brands. Xiaonanguo has obtained exclusive agents for Uncle Chushi's bakery in seven cities in the country. Currently, the company has opened 6 stores and plans to open 20 in 2014. Management said it will continue to introduce more branded food stores and restaurants to make better use of its existing business platform.
Expand e-commerce business cooperation. On Women's Day on March 8th, Xiaonanguo collaborated with Diandian to promote it. On the same day, the company's sales reached 5 million yuan, of which sales related to the TaoDiandian platform reached 750,000 yuan.
The banquet business accounted for 11% of sales in 2013. The company set up an in-house banquet business sales team in the second half of 2013, targeting markets such as wedding banquets, company banquets, and end-of-year banquets. The growth of the banquet business relieved sales pressure in the slump in market demand in 2013 to a certain extent.
There was no increase in basic wages in 2014. The cost of sales ratio increased 8.2 percentage points to 59.9% year on year in 2013, mainly due to a decline in peer-to-peer sales and an increase in the wages of frontline workers. Xiaonanguo raised the basic salary of frontline workers by 8-10% in 1H13. Furthermore, the company closed 8 restaurants in Xiaonanguo in 2013, and the corresponding closing fee was 10 million yuan. More than 10 restaurants were still at a loss in 2013. The company will close underperforming restaurants as appropriate in 2014.