The company's 1Q2024 revenue decreased 4.00% year on year, and net profit to mother decreased by 36.82% year on April 23. On April 23, the company announced its 2024 quarterly report: 1Q2024 achieved operating income of 213 million yuan, a year-on-year decrease of 4.00%, and realized net profit to mother of 15 million yuan, converted to fully diluted EPS of 0.04 yuan, a year-on-year decrease of 36.82%, resulting in net profit deducted from mother of 0.11 million yuan, a year-on-year decrease of 52.61%.
The company's 1Q2024 comprehensive gross margin decreased by 0.32 percentage points, and the cost ratio increased by 7.36 percentage points during the period 1Q2024. The company's comprehensive gross margin was 53.43%, down 0.32 percentage points from the previous year.
The 1Q2024 company's expense ratio for the period was 42.40%, up 7.36 percentage points from the previous year. Among them, the sales/management/finance expense ratios were 7.27%/37.56%/-2.43%, respectively, with a year-on-year change of +2.70/ +3.59/+1.07 percentage points, respectively.
Adhering to the “three in three” marketing idea, to shape a family consumer culture In 2023, according to the “three in three” marketing planning idea, the company takes “attracting young people to play, attracting the whole family to visit, and attracting people from all over the province to buy” as the core of its marketing work, actively connecting with social resources, brand resources, and government resources, expanding culture, sports, children's fun, and charity tracks, creating diverse scenarios, creating communication topics, and further shaping the “you+my family, ZTE Tower” family consumer culture. At the same time, the company optimizes the brand portfolio, enriches the category structure, improves the business layout, and makes every effort to create the main store, image store, flagship store and first store concept.
In terms of informatization, the company customizes and upgrades management systems such as CRM and ERP to achieve member portraits, hierarchical management, and accurate marketing through statistical analysis on big data platforms; uses information technology to improve the level of refined management. On the online side, the company digs deep into Douyin's live streaming sales potential, actively develops brand resources in Xiamen, participates in live streaming of local life, helps offline sales; strengthens applet operation and maintenance management, launches credit card sales functions, and carries out online activities such as “ZTE Flash Sale” and “Happy Season 5”. In terms of membership, the company continues to enrich member rights, strengthen the operation of the “Xingyuan Elite” community, increase member stickiness, and continue to grow the membership size.
Lower profit forecasts and maintain the “increase in holdings” rating
The company's performance fell short of our previous expectations. On the one hand, the company's employee incentive plan increased the company's management expenses to a certain extent, and on the other hand, due to increased competition in the offline retail industry, the company's marketing investment also increased. In view of the cost sharing of the employee stock ownership plan until 2025 and the possibility that competition in the industry will continue to intensify, we lowered our forecast for the company's 2024/2025/2025/2026 EPS by 45%/42%/40% to 0.19/0.22/0.25 yuan. The company has a strong competitive advantage in Shenyang and other places, continuously accelerates the digital intelligence process, optimizes the brand structure, and maintains an “gain” rating.
Risk warning: The operating conditions of major stores fell short of expectations, and competition in the retail industry in Shenyang and other regions intensified.