Huarun'S Extensive Operation "Crisis" Mergers And Acquisitions Difficult To Stop Tesco Downtrend

After selling 22 billion yuan for Tesco in May, the ravines of integration were placed in front of Huarun.

According to the first half results of Huarun venture in August, its retail business turnover and net profit were HK $52 billion 589 million and HK $700 million respectively. After excluding the impact of the post valuation surplus, the retail business net profit decreased by 29.6% compared with the same period last year.

For the decline in performance, Huarun venture, mainly due to the establishment of a joint venture with TESCO (Tesco) in May, has diluted the contribution of retail business to the group's profits.

In this view, Huarun has taken Tesco as the main reason for its decline.

Because of this, there are rumors in the industry that Huarun venture is going to close TESCO Tesco's 10% stores in China.

But after the news came out, Huarun Department claimed that it had not closed the plan of TESCO's 10% stores in Tesco.

In response, the reporter called Chen Yong, chief executive of Huarun Wanjia public relations. He responded that the integration of the two sides was still proceeding according to the number of previously scheduled routes, and could not be achieved overnight.

He did not know anything about Tesco's closing shop. The news came from Huarun's pioneering business, and Huarun had to be asked about specific matters.

As a central enterprise, Huarun has always been determined to become a leading enterprise in the domestic super industry.

"Huarun's original performance has gone down seriously, and now the burden of Tesco's purchase is full of uncertainty."

Hu Chuncai, general manager of Shanghai Shangyi Management Consulting Co., Ltd., said in an interview with reporters.

Mergers and acquisitions difficult to stop Tesco downtrend

As we all know, Tesco was originally founded by Taiwan Dingxin group. In 2004, as the first largest retailer in the UK, TESCO acquired 50% stake in Tesco. In 2006, TESCO spent $350 million on Tesco 40% stake, holding an absolute controlling position.

In May, Huarun officially purchased Tesco. Huarun hopes to complete the integration of more than 130 stores in TESCO's Tesco China in 2 years, and the more than 130 stores in TESCO Tesco will be renamed as Huarun million.

Tesco's performance in the Chinese market has been ignored.

"When it was acquired by TESCO, the British side sent foreign executives to control Tesco, but foreign executives did not have enough understanding of the domestic market. The commodities sold by Tesco stores were not close to customers' needs, mainly in department stores and daily necessities, and prices did not suit people's hearts, while daily consumer goods such as fresh food and food were few, which became the biggest injury of Tesco in the Chinese market."

Hu Chuncai told reporters.

In fact, Tesco was sold in China because of poor management.

According to people familiar with Tesco's retail industry, corruption in its procurement level has been very annoying in recent years.

"This will greatly increase the difficulty of Huarun's integration."

Du Yanhong, a retail researcher at CIC, said.

As a matter of fact, most of Tesco's stores are located in crowded areas with thousands of thousands of square meters in operation. Apart from some of their own properties, some of them are rentals and are inevitably subjected to rising rental pressure.

What can not be ignored is that TESCO has 135 Tesco supermarkets and more than 25000 employees in mainland China. Its salaries are higher than the average level of the industry, and it is also a fixed cost which is hard to ignore.

Reporters learned that, by cost pressures, Tesco shops across the country to compress the phenomenon of wages in the middle and lower levels also occur frequently.

The rise in costs has pushed up the entry fee, resulting in a tight relationship between suppliers. Tesco has repeatedly been caught in a "broken cargo crisis". Now Huarun has become the catcher, and naturally needs to carry it away.

The profitability of Huarun in the past two years has been questioned by the outside world. It has increased 135 stores, which easily lead to indigestion.

"Because Huarun's management and integration capabilities in the retail sector are not outstanding, and the lack of rich experience in the operation and management of hypermarkets, it appears to be more difficult in the process of integration."

Hu Chuncai said.

According to Tesco's current store operation, Huarun is unlikely to be able to reverse its performance. Tesco's business in some East China stores is acceptable, while in the northern market, such as Tianjin, it is a perennial loss.

Therefore, for Huarun, shutting down poorly managed stores is inevitable.

After Tesco joined China in Huarun, many employees in Tesco worried that their personal income would drop.

"As a foreign company, the staff salaries of Tesco China are generally higher than those of Huarun million, so Huarun will inevitably be under pressure from the original employees of Tesco," he said.

Hu Chuncai said, one is TESCO China belongs to foreign enterprises, Huarun belongs to state-owned enterprises, there is a great difference in the salary system between them. TESCO China's wage system is much higher than Huarun. Once the TESCO China system is closer to Huarun, it will lead to the loss of TESCO talents in China, and Huarun's pressure will undoubtedly increase.

Tesco has become a drag on Huarun, and the overlap between Huarun and Tesco is not very big in business. In fact, Tesco does not have much help to Huarun in the Chinese market. Huarun only grabs only more than 130 stores of Tesco, and Tesco can only provide Huarun with its international experience.

Hu Chuncai said.

"On a large scale, Huarun's continued acquisition has made it the leading retailer in China, but its extensive business model has been criticized compared to the large retail companies such as big RFA and Yonghui."

Hu Chunhua told reporters.

This can be seen from the number of shops opened by Huarun this year.

Today, in today's retail industry, heavy weight and saving money, the rich Huarun in 2013 opened 48 new stores.

However, the reporter found that in the four quarters of 2013, the net profit of the company has dropped by more than 60%.

According to Huarun's first quarter 2014 earnings report, the company's retail business, namely Huarun, has also been the fifth consecutive quarterly decline.

In view of the fact that Tesco stores can not be optimistic about profitability, Huarun's profits are likely to continue to decline.

It can be found that now Huarun's endless expansion has also made many enemies in the regional market. In the areas outside Jiangsu and Guangdong, the performance of Huarun stores is not dominant, even compared with the regional retail giants such as BBK and Yonghui.

In Changsha Hongxing Road, Huarun's more than 10 thousand square meters store and BBK supermarket are separated by 300 meters, but the benefit is only half of the BBK supermarket with an area of 7000 square meters.

According to the reporter's understanding, even in the northwest of Zhangye, Gansu, although there are four layers of Huarun's Ganzhou market stores, the scale has already passed the local Xinle supermarket Ganzhou market, but the daily average sales volume is only about 70% of the Xinle supermarkets.

"Huarun's format is relatively rich, and like most state-owned enterprises, Huarun has behaved in the right way, its shortcomings are not obvious, and its advantages are not outstanding, which means that Huarun has limited space to upgrade."

Hu Chuncai said that although Huarun's performance in Guangzhou and Jiangsu is good, Huarun's chief executive, Song Lin, has been involved in corruption. Although the retail sector has not been seriously affected, the spread is inevitable.

In Du Yanhong's view, the scale of Huarun will be very large in the future. There will be 3970 self owned stores and stores. If there is no significant improvement in management capability, it will be difficult for the company to control such a large scale of stores and stores.

"If Huarun does not properly solve the problems of personnel mobilization, resource allocation and store closing on the integration of Tesco Road, it will be difficult to achieve integration in the true sense, and the overall operational efficiency of Huarun will be affected."

Except simple and crude.

Expansion, unrestrained shop, placed in front of Huarun million problems and how to enhance profitability.

Compared with foreign-funded enterprises, Huarun's salary and equity incentives have not kept up, and private enterprises supermarkets are more advanced in terms of salary and equity.

The internal mechanism is more powerful than Huarun, and the innovation ability is stronger. This makes Huarun more pressure on the regional market.

"This time

Tesco, Huarun's strategy in how to adopt a better business model will be the biggest challenge. "

According to Hu Chuncai analysis, Huarun still needs to focus on the market. If we lose too much blood because of mergers and acquisitions, we will have a strong influence on the development of the domestic market.