The company's 1Q2024 revenue decreased 6.99% year on year, and net profit to mother decreased 7.73% year on April 29. On April 29, the company announced its 2024 quarterly report: 1Q2024 achieved operating income of 8.829 billion yuan, a year-on-year decrease of 6.99%, and realized net profit to mother of 193 million yuan, equivalent to fully diluted EPS of 0.11 yuan, a year-on-year decrease of 7.73%, resulting in net profit deducted from mother 162 million yuan, a year-on-year decrease of 16.17%. 1Q2024 has received a total of 8.27 million yuan in government grants, all of which are revenue-related government grants.

The company's 1Q2024 comprehensive gross margin decreased by 0.43 percentage points, and the cost ratio decreased by 0.13 percentage points during the period 1Q2024. The consolidated gross margin of 1Q2024 was 24.63%, down 0.43 percentage points from the previous year.

The 1Q2024 company's expense ratio for the period was 19.35%, down 0.13 percentage points year on year. Among them, sales/management/finance/R&D expenses were 13.40%/6.07%/-0.15%/0.02%, respectively, with year-on-year changes of -0.07/ +0.13/ -0.16/ -0.03 percentage points, respectively.

Ole and supermarkets have achieved positive revenue growth, and the performance in the southwest region is relatively good. 1Q2024 opened 69 new stores, closed 68 stores, and plans to add 5 new stores. By business type, 1Q2024 achieved positive year-on-year revenue growth in the outlet and supermarket business, increasing 2.02% and 1.53%, respectively, but gross margin declined by 0.13 and 1.90 percentage points year-on-year, respectively. The gross margins of large supermarkets and specialty stores increased by 0.21 and 3.04 percentage points, respectively, but revenue declined by 16.83% and 14.41%, respectively. By region, 1Q2024 performed relatively well in the southwest region. Revenue increased 7.25% year over year, and gross margin increased 18.85 percentage points year over year.

On the business side, in 2023, the company's No. 1 Yaohan beauty category expanded the number of brands and upgraded its image; it focused on functional business formats such as catering to achieve a new launch of Baiwei Food Market. The First Department Store Commercial Center introduced art exhibitions, performing arts, creative bookstores, and large-scale theaters to create two-dimensional neighborhoods, etc., gathering gold and jewellery to create category advantages and reshape the atmosphere of an underground food market. In terms of deepening strategic cooperation with JBP, as of the end of 2023, the company had a total of 131 JBP brands. International luxury products are mainly first-tier luxury products, and cosmetics basically cover first-tier brands.

In terms of building a new consumer ecosystem, the company is focusing on introducing high-quality overseas brands, lifestyle, culture and art brands. In 2023, the company once again appeared in the consumer goods exhibition area of the Expo and held a sharing session for the debut of 7 new brands in China. Bailian Fashion Center - Yan Qingli held a digital fashion show to embed virtual models in the digital show.

Maintain profit forecasts and maintain “buy” ratings

The company's performance is basically in line with our previous expectations, and we maintain our 2024/2025/2026 EPS forecast of 0.30/ 0.33/ 0.35 yuan. The company's Ole business format has strong competitive strength, actively regulates department stores, and maintains a “buy” rating.

Risk warning: Consumption recovery process falls short of expectations, shopping center operations fall short of expectations after transformation