Zhang Yong fell in the position of “the richest man”.
As of the close of Hong Kong stocks on June 22, Haidilao’s share price was at HK$37.65 per share, with a total market value of HK$19,945 million. Compared with February 15 this year, Haidilao’s share price rose to 85.8 Hong Kong dollars, and its total market value exceeded 450 billion Hong Kong dollars-in just four months, the company’s market value had evaporated by more than 240 billion Hong Kong dollars.
In addition, the decline in stock prices made Haidilao’s actual controller Zhang Yong temporarily withdraw from the position of Singapore’s richest man. According to the 2021 Forbes Global Rich List, Zhang Yong is currently ranked fourth on the Singapore Rich List with a net worth of $13.8 billion.
Outside the capital market, Haidilao’s negative news continues to emerge. In May, Haidilao was revealed to have closed or postponed the opening of nearly 10 stores in Beijing. During a field visit by Jiemian News, it was found that there was a notice in front of the Beijing Huamao store that “due to the expansion of the business area, it is being rebuilt.” Some staff weighed the opening time or in July. The Haidilao store in Majiapu New City Mall in Beijing has been closed, and nearly 90% of the shops in the entire mall have closed.
The closed Haidilao store in Majiapu New City, Beijing. Photo shoot: Ma Yue
Haidilao responded at the June shareholders meeting that it is normal to suspend business due to property, decoration, business district planning and other reasons. The Majiapu store is due to the closure of the mall and the Miyun store is due to changes in property conditions. “In addition, if a store loses money, there is no hope for improvement. It is normal to close the store, but this is not the case yet.” Haidilao said.
But the decline of Haidilao has been revealed.
Haidilao’s 2020 annual results announcement shows that the group achieved revenue of 28.6 billion yuan, a year-on-year increase of 7.8%; annual net profit was 309 million yuan, a year-on-year decrease of 86.8%. Among them, Haidilao Restaurant realized revenue of 27.434 billion yuan, accounting for 95.9% of total revenue, lower than 96.3% in 2019.
Since its listing, the new store was once the main driving force of Haidilao’s performance growth, but the new store needs a certain maturity period, and its profitability for a period of time is worse than that of the old store. And with the increase of new stores, it will also reduce the average profitability of catering companies and the rate of single store turnover. This is also intuitively shown from the financial report data. Haidilao’s turnover rate has been declining year after year-in 2017 and 2018, the overall turnover rate of Haidilao reached 5 times/day, and in 2019 it was 4.8 times/day, but in 2020 The annual turnover rate has been reduced to 3.5 times per day.
In order to save net profits, Haidilao has tried to increase prices many times in recent years. According to its annual report data, the per capita consumption of customers has increased from 97.7 yuan in 2017 to 105.2 yuan in 2019, and it has further increased to 110 yuan in 2020. However, consumers are dissatisfied with this. Haidilao was also controversial last year because of the price of “7 yuan a bowl of rice and 1.5 yuan a piece of potato”.
Regarding the financial performance, on the surface, the restaurant closures and the decline in passenger flow caused by the outbreak are the main factors that led to the sharp decline in Haidilao’s performance.
If there is no horizontal comparison, this statement seems to be valid; but by comparing other chain hot pot brands, you will find that this is not the case.
Nowadays, some leading companies, such as Coucou Hotpot, have returned to their performance in 2019, and Haidilao’s turnover rate is still only about 70% of the pre-epidemic level. Behind the reduction in Haidilao’s market value, more problems have been exposed for this company.
One year before Haidilao’s plunge, what happened to this company?
At the shareholders meeting in June of this year, Zhang Yong admitted that in June last year he judged that the epidemic would end in September, but this judgment now seems too optimistic.
In June last year, Zhang Yong made a plan to further expand his stores when the epidemic situation improved slightly. According to the financial report of Haidilao, the number of Haidilao’s stores reached 1,298 in 2020, and the number in 2019 is 768, which is almost doubled.
It is not difficult to understand Zhang Yong’s idea of expansion. He is eager to “buy the bottom” when the epidemic is at a low point.
On the one hand, when the entire industry atmosphere is sluggish during the epidemic, Haidilao can achieve lower costs in terms of rents. Shopping malls and commercial complexes also tend to allow Haidilao hot pot restaurants that already have brand auras to enter and bring passenger flow. . At the shareholders meeting, Haidilao executives also mentioned that the current store rents accounted for the proportion of receivables is stable, and even the proportion of rents in second and third tier cities is lower than in 2019.
In addition, residents’ consumption, especially catering, is rigidly demanded. Therefore, when the industry is in a downturn, it expands at a low cost. After the market rebounds and the popularity returns, there will be a performance rebound.
But the fact is, “I was wrong about the trend. I made further plans to expand the store in June last year, and now I look really blind and self-confident.” Zhang Yong said, “When I realized the problem, it was January 2021. By the time I reacted, it was March.”