The epidemic repeated, the catering industry also suffered a huge blow. 5 evening, listed in Hong Kong, "hot pot brother" Haidilao suddenly announced the closure of 300 stores, the news also quickly rushed to the microblogging hot search.
About 300 stores will be closed during the year, but there will be no layoffs
On Nov. 5, Haidilao (HK.06862) announced that after reviewing the operating performance of its stores, the group decided to adjust the decision of store expansion planning, and to gradually close down about 300 Haidilao stores that have a relatively low flow of customers and a worse-than-expected operating performance by Dec. 31, 2021, some of which will be temporarily closed. Some of these stores will be temporarily rested and reopened at an opportune time, with a resting cycle of no more than two years. At the same time, Haidilao said the company will not lay off employees and will properly settle the employees of these stores within the group.
In addition, in order to improve the group's business performance, the board decided to carry out a "woodpecker program" led by Yang Lijuan, executive director and deputy chief executive officer. The main contents of the program include: continuing to pay attention to stores with poor business performance, including overseas stores, and taking improvement measures accordingly; rebuilding and strengthening some of the Group's functional departments and restoring the regional management system; continuing to convey the corporate culture and the value of "changing fate with our hands" to our employees under the premise of scientific evaluation of each department and vigorously advocate the spirit of dedication centered on love and trust; contract the Group's business expansion plan in due course, and will not open new Haidilao stores on a large scale if the average turnover rate of the Group's Haidilao stores is lower than 4 times/day.
Haidilao on the same day in its official microblogging released an open letter said, this plan to shut down the store operation did not meet expectations is mainly caused by the company's rapid expansion strategy formulated in 2019, specifically in the part of the store site selection errors, organizational structure changes so that managers at all levels can not be understood and exhausted, the number of outstanding store managers is insufficient, excessive belief in the even stay interests of the KPI indicators, and the lack of corporate culture construction.
Store number expansion, but turnover rate and net interest rate plummeted
Data show that in the first half of 2021, Haidilao realized operating income of 20.094 billion yuan, up 105.9% from the same period in 2020.
This was mainly due to the relaxation of epidemic prevention and control measures, an increase in the number of operating days, a rebound in customer traffic and an increase in the number of stores during the reporting period.Profit for the first half of 2021 amounted to CNY96.5 million, a turnaround from the same period last year.
Haidilao said in its half-yearly report that the main reasons affecting the results were: the company opened a higher number of new stores in the second half of 2020 and the first half of 2021, with a significant increase in related expenses; it took longer than in previous periods for newly opened stores to reach first-time breakeven and realize a return on their cash investment; and store operations are still being affected by the continued impact of the new coronavirus outbreak. The epidemic prevention and control situation in mainland China is relatively good, but there are still localized cases of recurring outbreaks. Overseas outbreaks are still subject to considerable uncertainty, and overseas stores have been hit hard as a result.
From the point of view of the number of stores, the financial report shows that the number of global stores in Haidilao at the end of 2018 was 466, 308 new stores in 2019, 544 new stores in 2020, when the catering industry was hit hard by the epidemic, and entering into 2021, the first half of the year alone added 299 new stores, adding an average of 1.64 new Haidilao stores every day.
As of June 31, 2021, the total number of Haidilao stores around the world reached 1,597, of which 1,491 are located in mainland China, and the number of Haidilao stores around the world is still nearly 1,300 after subtracting the 300 or so that are planned to be shut down.
From the perspective of the turnover rate, a key indicator for measuring restaurant companies, Haidilao's turnover rate will be 4.8 times a day in 2019, and then fall to 3.5 times a day in 2020, while the figure slipped to 3.0 times a day in the first half of 2021, with the turnover rate of the newly-opened restaurants standing at only 2.3 times a day.
Behind the wave of store expansion and the decline in turnover rate, Haidilao's net profit margin fell off a cliff, from 8.84% in 2019, to 1.08% in 2020, and then to 0.48% in the first half of 2021.
Market capitalization shrunk more than 75% in February
Corresponding to the slumping performance, Haijiaolu's share price went all the way down. As of the close of trading on Nov. 5, 2021, Haidilao's share price was at HK$21.05, with a total market capitalization of HK$114.9 billion, which is 75 percent lower than the all-time high of HK$85.75 in February 2021, and the market value has shrunk by three-fourths of a percent.
Oct. 27 Hurun Report released the 2021 China's 100 richest people list shows that Haijilao's founders, Zhang Yong and Shu Ping, have seen their fortunes shrink by 51 percent to 95 billion yuan, and their ranking dropped by 35 places to 46th.
Founders have reflected on blind expansion
In June this year, at the Haidilao shareholders meeting, founder Zhang Yong had reflected on blind expansion.
He said he was wrong to judge the trend, "2020 June I judged the epidemic in September on the end, but until today, our Taiwan, Singapore stores are still affected by the epidemic can not open. My judgment of the trend was wrong, last June I further made plans to expand stores, now see it is indeed blind confidence. When I realized the problem it was already January this year, and by the time I reacted it was already March."
He admitted that he made the wrong decision about store expansion in June last year.
In a live response to the question of whether Haidilao will maintain sustained growth in performance in the future, Zhang Yong first said that he, as the largest shareholder of Haidilao, is not hopeful. He believes that enterprises are organizations, and people have the same vitality. This year is good, not necessarily next year is good; this year is not good, not necessarily next year is not good.
He also said, "everyone myth Haidilao, I personally very disgusted. You have to be rational, investment should be cautious. I often say, to know what is the name does not match the reality, look at Haidilao will know. All the difficulties faced by the catering enterprises, we also face; all the catering enterprises can not solve the problem, we still have not solved. Blind expansion will definitely happen, once I integrate the current stores, I will still expand, because this is my mission. I'll charge when it's stable, I'll stabilize when it's unstable, and I'll charge again when it stabilizes until Hai Di Lao falls down."
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