Yonghui’s net profit fell again. It is difficult to profit behind the rapid expansion.

On November 1st, a few days ago, Yonghui Supermarket released the third quarter report of 2018. The report showed that the company achieved operating income of 52.692 billion yuan in the first three quarters, an increase of 21.67% over the same period of last year; net profit attributable to shareholders of listed companies was 1.018 billion. Yuan, a decrease of 26.90% compared with the same period last year.

In fact, since 2018, Yonghui has faced the dilemma of falling profits. According to financial report data, in the first quarter of this year, Yonghui achieved a net profit of 748 million yuan, a slight increase of 0.56% year-on-year; in the first half of this year, Yonghui realized Net profit was 933 million yuan, down 11.54% year-on-year; while in the first three quarters, Yonghui’s net profit fell further, with a year-on-year decline of 26.90%. Yonghui said that the company’s cost increase in the first half of the year was on the one hand the increase in the salary costs of the continuous introduction of high-end management, technology and business-oriented talents, and the provision of 358 million yuan of equity incentive fees in the current period. The expenses increased year-on-year.

From the financial data, its third-quarter sales expenses increased by 40.37% year-on-year, mainly due to the increase in new store opening expenses; management expenses increased by 76.20% year-on-year, mainly due to the increase in employee compensation (including equity incentives). And this may be related to the overall strategy of Yonghui Supermarket. During the reporting period, the cost increased significantly year-on-year, and the salary cost increased due to the introduction of a large number of high-end management, technology, and operational talents.

In recent years, Yonghui has been in a state of rapid expansion. During the reporting period, 25 new green label stores, 137 Yonghui life stores and 10 super species were newly opened. There are 34 green label shops, 138 Yonghui life stores and 19 super species. In addition, during the reporting period, 191 stores were signed, including 34 green label stores, 138 Yonghui life stores and 19 super species. Under the crazy expansion of the store, the cost can be imagined. Even though the net profit attributable to shareholders of the parent company totaled 1.02 billion yuan in the first three quarters of this year, Yonghui Supermarket’s net profit for the quarter was -35 million, down 111% year-on-year. The number of stores that continue to expand further pushes up expenses, which in turn reduces profit margins.

Since last year, Yonghui has expanded the number of small-scale stores such as super-species and Yonghui, but these formats are not yet profitable. Super-species and Yonghui Yunchuang, which belongs to Yonghui Life, according to the financial report for the first half of 2018, its revenue is 905 million yuan, the total expenditure is 1.294 billion yuan, and the net profit loss is 389 million yuan. The impact of Huiyang’s net profit reached 191 million yuan. Analysis of the data shows that the new retail business of Yonghui Supermarket has not only made it profitable, but has become an obstacle to the decline of the company’s performance.

This is not the first time that Yonghui Yunchuang has suffered losses. In fact, Yonghui Yunchuang has been in a state of being difficult to profit in recent years. In 2016 and 2017, Yonghui Yunchuang’s loss amount was 116 million yuan and 267 million yuan respectively, and the amount of losses is increasing year by year. Yonghui Yunchuang has always been unable to make money, which is related to the speed of its own scale expansion. Under normal circumstances, the rapid expansion of a company’s stores will lead to a rapid increase in operating costs. Before the emergence of a profitable model, the rapid spread of the model will only lead to the company’s dilemma.

However, according to the business plan, Yonghui will open 135 new Bravo stores, 100 super-species and 1000 Yonghui life stores this year, and the industry is fiercely competitive. Boxma Fresh is also constantly deploying offline stores, and the expansion of Yonghui Supermarket The speed will only gradually increase. Under this situation, the funding gap of Yonghui Supermarket will become larger and larger. The rapid expansion requires profit as a support. If Yonghui is still blindly expanding, it will face increasing financial pressure.