Over a year since his return to the frontlines, Zhang Jindong's efforts to save and transform Suning have been comprehensive, and his strategy can be summed up in four words:

Defend and Counterattack.

[Significant Cost Reduction and Efficiency Improvement Achievements]

On August 30th, Suning Tesco released its 2024 semi-annual report, showing revenue of 25.783 billion yuan for the first half of the year, a year-on-year decrease of 24.26%. Net profit attributable to shareholders was 15 million yuan, while net profit excluding non-recurring items was -530 million yuan, narrowed by 73.10% from the same period last year.

Notably, Suning Tesco's net profit attributable to shareholders for the second quarter was 112 million yuan, marking the company's first quarterly profit in 12 quarters.

Revenue declined, but profits grew, indicating that Zhang Jindong's cost reduction and efficiency improvement measures are beginning to bear fruit.

The financial report shows that Suning Tesco's various expenses decreased across the board in the first half of the year. Sales expenses were 3.247 billion yuan, down 31.59% year-on-year; administrative expenses were 1.088 billion yuan, down 18.58% year-on-year; financial expenses were 1.571 billion yuan, down 4.5% year-on-year; and R&D expenses were 128 million yuan, down 45.69% year-on-year.

On the asset side, Zhang Jindong has also continued to consolidate operations.

On August 27th, Suning announced the sale of its logistics asset Tiantian Express. Jiangsu Suning Logistics Co., Ltd. transferred its 100% equity interest in Tiantian Express, along with all debts owed to Tiantian Express by Jiangsu Suning Logistics and its subsidiaries, to Zhejiang Rongyue Express 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.

From 2012 to 2018, Zhang Jindong invested over 70 billion yuan in external investments, which later significantly dragged down Suning's financial statements. However, with a series of closures, mergers, and asset sales, the risks on Suning Tesco's asset side are rapidly being cleared.

In the first half of this year, changes in the value of Suning Tesco's trading financial assets and other non-current financial assets, combined with reduced impairment losses, led to improvements of 46.63% and 80.19% in the company's "fair value changes loss" and "asset impairment loss" accounts, respectively.

Meanwhile, due to increased debt restructuring gains and long-term equity investments accounted for using the equity method, Suning Tesco's investment income in the first half of the year reached 5.566 billion yuan, a year-on-year surge of 282.04%. Of this, investment income from Suning's securities investments in China Unicom amounted to nearly 300 million yuan. Jiangsu Suming Bank, in which Suning holds a 30% stake, achieved an operating profit of 4.475 billion yuan in the first half of the year, bringing substantial investment income to the company.

Whether through cost reduction and efficiency improvement or asset sales, the essence is defense, but for Suning at present, defense alone is clearly not enough.

[Expanding Territory in Full Swing]

In 2024, Suning Tesco readjusted its offline market strategy and pace, proposing to open large and high-quality stores.

In April, Suning Tesco successfully acquired Beijing's iconic landmark commercial complex, the Beijing Central Television Tower Store, known as "Asia's No. 1 Store" in the home appliance industry, aiming to create Beijing's first Suning Tesco Max super experience store spanning over 20,000 square meters. During the May Day and 618 periods, Suning Tesco opened a series of benchmark stores such as Max and Pro in key cities across the country.

As of the first half of this year, Suning Tesco had 124 Max and Pro stores covering 54 cities nationwide. According to financial reports, an additional 97 stores are expected to open or undergo renovations in the third quarter.

Focusing on both high-tier cities and lower-tier markets.

Suning Tesco continues to prioritize its retail cloud network in county, township, and rural markets this year, but with a strategic adjustment from focusing solely on quantity to balancing quantity and quality. In the first half of the year, Suning Tesco's retail cloud began implementing a large-store strategy, opening 740 new franchise stores. Retail cloud stores now cover tens of thousands of townships in 31 provincial administrative units across the country, entering over 85% of county-level markets.

In May of this year, Suning Tesco's retail cloud secured a new round of strategic investment from CITIC Financial Asset Management Co., Ltd.'s Jiangsu Branch for 480 million yuan. While the amount may not be substantial, reopening financing channels is of great significance to Suning at present. At the Retail Cloud Partner Conference held in July, Suning Tesco set a goal of deploying 30,000 stores by 2025.

In fact, the reason why Suning dares to expand aggressively offline this year is directly related to national policies.

In March of this year, the State Council issued the "Action Plan for Promoting Large-Scale Equipment Upgrades and Consumer Goods Trade-Ins," clearly stating the need to carry out trade-ins for automobiles and home appliances and provide subsidies for consumers purchasing green and smart home appliances.

In July, the government introduced the "Several Measures to Strengthen Support for Large-Scale Equipment Upgrades and Consumer Goods Trade-Ins," once again proposing support for home appliance trade-ins.

On August 25th, the Ministry of Commerce and three other departments issued another round of new policies, with trade-in subsidies for home appliances reaching a new high.

As a designated home appliance retail platform for government subsidies, Suning Tesco is at the forefront of the trade-in initiative. In addition to government subsidies, the company has also proactively joined forces with brand factories and banks to increase resource investments. Combined, these five layers of subsidies can offer discounts of up to 40%, stirring up considerable excitement in the consumer market.

According to data disclosed by Suning Tesco, on the first day of the launch of the Chongqing home appliance trade-in subsidy program on August 26th, sales at Suning Tesco stores in Chongqing surged tenfold year-on-year.

In the process of defense, Suning seeks to advance, leveraging national policies to aid its expansion. After many twists and turns, Suning has finally returned to the right development path.

In July 2021, due to the introduction of external investment, Zhang Jindong was forced to step down as Chairman of Suning Tesco, and Huang Mingduan, representing the "Ali Group," took over the helm. It was initially believed that Ali's involvement would quickly turn the tide, but reality proved far harsher. In 2021 and 2022, Suning Tesco failed to reverse its declining trend, and Ali's rescue efforts ultimately failed.

In April 2023, Ren Jun, a Suning veteran and Zhang Jindong's "trusted lieutenant," succeeded Huang Mingduan as Chairman and CEO of the company. Around the same time, Zhang Jindong began to frequently appear in public as Chairman of Suning Group, attending events and negotiating partnerships with suppliers. By this point, Zhang Jindong had effectively returned to the center of power at Suning.

At an internal conference earlier this year, Zhang Jindong, who had regained control of Suning, could not conceal his excitement:

'Suning Tesco has fully and completely returned to the development track led by us Suning people. Regardless of whether the road ahead is smooth or rugged, we must firmly grasp our own destiny. The development of Suning Tesco ultimately depends on us.'

These are not empty words. When it comes to feelings for Suning and control over the company, no one can compare to Zhang Jindong.

Born in 1963, Zhang Jindong is now 61 years old, but he is still willing to go all in for the future of the company, even risking everything. Regardless of the outcome, we should applaud such courage in the face of adversity.

Disclaimer

This article contains information about listed companies based on the author's personal analysis and judgment based on information disclosed by the companies in accordance with legal obligations (including but not limited to interim announcements, periodic reports, and official interaction platforms). The information or opinions in this article do not constitute any investment or other business advice. Market Value Observer shall not be held responsible for any actions taken as a result of this article.

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