Author | Lushiming

Editor | Dafeng

Recently, ST Ebuy issued an announcement stating that its subsidiary Jiangsu Suning Logistics intends to transfer 100% of its equity and all debts related to Tiantian Express to Zhejiang Rongyue Express, with a transfer price of 10 million yuan.

Since taking over in 2016, Suning has not effectively utilized Tiantian Express as a "sharp sword" over the past eight years. Instead, its own declining development has led to this "sharp sword" rusting and deteriorating.

Suning's development has deteriorated repeatedly over the past few years.

To save itself, Suning first sold its Alibaba shares and then sold its shares to the Shenzhen State-owned Assets Supervision and Administration Commission. In 2023, it shut down its Carrefour hypermarket business, essentially walking the path of "recouping funds and paying off debts." Unfortunately, these efforts failed to stem the decline, with continued losses and a significant debt burden.

Now, by transferring Tiantian Express to others, Suning has suffered a significant loss but at least regained some financial stability, allowing it to continue struggling for a while longer.

01

Eight Years of Partnership, Sold in an Instant

Among domestic logistics companies, Tiantian Express, founded in 1994, can be considered an industry veteran. However, unlike other stable logistics enterprises, Tiantian Express has had a tumultuous journey, changing hands several times in its early stages.

From a timeline perspective, after being "sold" to Hainan Airlines and merging with STO Express, Suning can be considered Tiantian Express's "third owner."

On December 30, 2016, Jiangsu Suning Logistics, a subsidiary of Suning Tesco, acquired 70% of Tiantian Express's shares for a cash investment of 2.975 billion yuan.

Within 12 months after the completion of the transaction, Jiangsu Suning Logistics or its established express-related industry operating company would purchase the remaining 30% of the shares held by some of the transferors and Tiantian Express's A-round investors through equity transfers. Both parties agreed that based on a valuation of 100% of Tiantian Express's equity at 4.25 billion yuan, the corresponding transfer price would be 1.275 billion yuan.

According to this "Equity Transfer Agreement," Jiangsu Suning Logistics quickly acquired 70% of Tiantian Express's equity through a cash investment of 2.975 billion yuan. However, the remaining 30% of equity was not transferred promptly.

After the acquisition, Tiantian Express was highly anticipated as a means to strengthen Suning Logistics' "last-mile" delivery capabilities. However, contrary to expectations, Tiantian Express failed to achieve the expected synergies within the Suning system and instead fell into consecutive years of losses.

From the date of purchase to the end of 2017, Tiantian Express incurred a net loss of 581 million yuan. The net losses for 2018, 2019, 2020, and 2021 were 1.297 billion yuan, 1.786 billion yuan, 1.226 billion yuan, and 2.325 billion yuan, respectively. From 2022 to 2023, the cumulative net loss amounted to 339 million yuan.

By the first half of 2024, Tiantian Express's operating revenue was zero, with total assets of 207.5297 million yuan and net assets of -5.4058836 billion yuan. Amidst continuous losses, the remaining 30% equity was not transacted at the price of 1.275 billion yuan.

From 2018 to 2019, some transferors used their combined 12.57% equity in Tiantian Express to offset debts totaling 533 million yuan owed by them or their related parties to Tiantian Express and other entities. The remaining 17.4259% equity was recently transferred to Jiangsu Suning Logistics for a cash consideration of 1 yuan, completing Suning Logistics' 100% acquisition of Tiantian Express.

Subsequently, Jiangsu Suning Logistics transferred 100% of its equity and all debts related to Tiantian Express to Zhejiang Rongyue Express Co., Ltd. for a transfer price of 10 million yuan.

According to Suning Tesco's estimates, these two transactions will increase net profit by approximately 555 million yuan and 425 million yuan, respectively, for a total of 980 million yuan.

For Suning, selling Tiantian Express, although it will reduce its logistics capabilities, may not be a bad thing given its current situation. After all, in times of survival, any money could be a lifesaver or even a crucial impetus for a "turnaround."

02

Four Consecutive Years of Losses, Debt Pressures Mount

Since 2020, Suning Tesco has suffered four consecutive years of losses, each amounting to billions of yuan.

In early 2022, Suning Tesco released its 2021 financial report, which included significant write-downs and other losses as part of its efforts to survive. These losses were all recorded in the 2021 financial report, resulting in a total loss of 43.265 billion yuan for the year.

In early 2023, Suning Tesco released its 2022 earnings forecast, projecting a loss of approximately 10 billion yuan. Combined with the previous year's loss, the total losses exceeded 50 billion yuan for two consecutive years.

While this loss may not rank at the top in China's A-share history, it is still staggering. Extending the timeline further, Suning has accumulated losses exceeding 85 billion yuan over the past decade.

It is worth mentioning that Suning Tesco's current market value is only around 12.5 billion yuan, with cumulative losses over two years exceeding three times its market value.

Behind these continuous losses, Suning Tesco's management has undergone frequent changes in recent years.

In July 2021, Huang Mingduan, nominated by Alibaba, became the new Chairman of Suning Tesco, marking the end of the Zhang Jindong era at Suning Tesco. However, even under Alibaba's stewardship, Suning continued to suffer significant losses annually. In April 2023, Suning Tesco underwent another leadership change, with Ren Jun replacing Huang Mingduan, interpreted by some as Alibaba's retreat and Zhang Jindong's regaining control.

Image: Zhang Jindong

Entering 2024, Suning Group Chairman Zhang Jindong has frequently appeared in public, signaling his intention to return to the spotlight. At Suning's internal conference earlier this year, Zhang Jindong declared that "Suning Tesco has completely returned to the development trajectory led by Suning people." He set a target for Suning to achieve overall profitability in 2024.

On May 30, Suning Tesco responded to the Shenzhen Stock Exchange's 2023 annual report inquiry letter, stating that the company had gradually shut down its traditional Carrefour hypermarket business in 2023 and was accelerating asset revitalization and expanding cooperation with financial institutions to increase cash flow and reduce liquidity pressure.

Thanks to these efforts, Suning Tesco released its 2024 interim report on August 30. The announcement showed that the company achieved a net profit attributable to shareholders of listed companies of 15 million yuan in the first half of the year, with a net profit of 112 million yuan attributable to shareholders of listed companies in the second quarter, marking the first quarterly profit in 12 quarters.

However, Suning's core net profit for the first half of the year was -530 million yuan, which, although narrowed by 73.10% year-on-year, still failed to achieve profitability.

Source: ST Ebuy 2024 Interim Report

Meanwhile, Zhang Jindong must also confront a significant debt burden.

As of the first quarter of this year, Suning Tesco's asset-liability ratio reached a new high of 91.70%. By the end of the first quarter, the company's monetary funds amounted to only 13.811 billion yuan, while its short-term borrowings reached 28.047 billion yuan. Moreover, both the listed company and Zhang Jindong's family members have been involved in debt-related news from time to time.

Reducing expenses can stem the bleeding but not promote growth. Neither the sale of Carrefour shares in previous years nor the current sale of Tiantian Express is sufficient to fill the significant debt hole. Suning continues to hover on the brink of survival. Achieving self-sufficiency and growth is crucial for Suning to emerge from its predicament.

03

Instant Retail: A Failed Lifeline

While slimming down, Suning has also sought to revitalize its offline base and explore new online growth opportunities.

Offline, ahead of last year's 618 shopping festival, Suning Tesco announced its "urban and rural advancement" plan for new stores, aiming to open and refurbish 550 stores nationwide, encompassing various store formats.

After Zhang Jindong's return this year, to achieve the goal of overall profitability, Suning Tesco formulated a series of development blueprints, particularly emphasizing the stabilization of its offline base.

During the May Day holiday this year, Suning Tesco opened 17 large stores in 13 cities across the country. Recently, Suning Tesco has gradually expanded offline, opening nearly 40 influential Pro stores in major cities nationwide.

Image: Suning Tesco Pro Super Flagship Store in Jinan Quancheng Road

The accelerated expansion of Suning's offline stores is partly preparation for seeking new online growth, thereby creating an integrated online-offline advantage.

In October 2022, Suning Tesco announced a strategic partnership with Meituan, becoming the first large chain brand in the home appliance and 3C category to officially join the platform. Users can search for "Suning Tesco" on Meituan or Meituan Takeout to place orders for mobile phones, computers, and household appliances at nearby Suning Tesco stores, with delivery in as fast as 30 minutes.

In fact, this partnership represents the booming "instant retail" trend of the past two years.

It is worth noting, however, that before partnering with Meituan, Suning Tesco had already attempted something similar. Previously, the Suning Tesco app launched the "Suning Express" service, allowing users to choose delivery without shipping fees if there was a Suning Tesco store within 3 to 5 kilometers, with an average delivery time of less than one hour for 3C products.

Given the existence of the "Suning Express" service, why did Suning Tesco choose to join Meituan?

The reason lies in the fact that instant retail requires building an entire delivery system from scratch, which necessitates significant investment and time for experimentation. Clearly, Suning Tesco lacked these resources. Therefore, partnering with Meituan to operate in an asset-light model and quickly capture market share seemed to be the optimal choice for Suning Tesco at the moment.

Source: Meituan

Obviously, Suning Tesco hopes to leverage Meituan's momentum to compensate for its shortcomings in the delivery system and traffic. However, it is not just Meituan; Suning Tesco has also partnered with Ele.me and Douyin Local Life.

Nevertheless, despite appearing to be a "win-win" cooperation, in the fiercely competitive instant retail market, this partnership has failed to bring surprises to Suning's performance and requires continuous investment.

Overall, whether offline or online, Suning's current situation has not improved qualitatively. The so-called turning losses into profits is merely a string of numbers from asset sales, neither impressive nor indicative of a promising future.

Suning's road ahead remains bumpy. Whether it will continue to decline amidst setbacks or make a stunning comeback, time will tell.