Suning's third-quarter net profit fell 36.92% year-on-year

On October 30, 2012, Suning Appliance released the third quarter financial report as of September 30, 2012. In the financial report, the first three quarters of Suning revenue reached 72.431 billion yuan, an increase of 7.11%; net profit attributable to shareholders of listed companies was 2.351 billion yuan, a year-on-year decrease of 31.28%; basic earnings per share of 0.3321 yuan. Among them, the net profit attributable to shareholders of listed companies in the third quarter was 597 million yuan, a year-on-year decrease of 36.92%.

First, performance points

According to the report, due to the impact of the macro economy, physical store sales are not ideal. Suning Appliance further increased its efforts to adjust and close the chain stores in the third quarter, resulting in a phased reduction in chain stores. In the third quarter, 59 stores were closed and 22 chain stores were reduced. At the same time, the company increased its investment in online business. The online business achieved sales revenue of 9.556 billion yuan (tax included) in the third quarter.

According to the report, the proportion of self-operated merchandise in the offline business of Suning Appliance increased, the gross profit margin remained stable, and the online business grew but the gross profit margin was low. On the whole, the level of consolidated gross profit dropped by about 0.28 percentage point from the same period of last year to 18.69%.

Suning Appliance increased the adjustment of poor performance stores in the third quarter, resulting in a one-off increase in off-store expenses. At the same time, the company further optimized its personnel structure and streamlined its positions. In response to the long-term development, the company also introduced more recent universities. Graduates and e-commerce professionals, although personnel costs are controlled, but the absolute value still maintains a certain increase.

In addition, in order to improve the competitiveness of the e-commerce business, various input including advertising and promotion were increased; in August, Suning launched online and offline business linkages, and various inputs were further increased. Suning Appliance's sales expenses and management expenses in the third quarter increased by 28.21% and 23.13% respectively over the same period of last year.

During the reporting period, the increase in bank borrowings brought about an increase in interest expenses, which resulted in a decrease of 45.46% in financial income over the same period of last year.

In the same period of last year, Japan LAOX Corporation (hereinafter referred to as "LAOX") was first included in the scope of the company's consolidated statements. In the consolidated statement, according to the provisions of the Accounting Standards for Business Enterprises, the company's previously held shares of LAOX should be re-measured at fair value. The difference between fair value and book value is included in current investment income. In the third quarter, none of the above-mentioned related businesses occurred, so investment income decreased by 99.62% year-on-year.

During the reporting period, the company’s grants received from local governments have increased compared to the same period of last year, making non-operating income up by 111.46% over the same period of last year.

Second, the chain development

The report shows that in the third quarter, Suning entered three cities above prefecture level, and 37 new stores were opened, of which 35 were regular stores and 2 were at Tesco Life Plaza. In the third quarter, 59 franchise stores were closed and 22 chain stores were reduced.

As of September 30, 2012, Suning Appliance Store has covered 267 prefecture-level and above cities across the country and has a total of 1,667 chain stores, including 1,543 regular stores (336 flagship stores, 431 central stores, 776 community stores) and boutiques. There are 10 stores, 110 county stores, and 4 stores of Tesco Life Plaza. The total chain store area is 6.91 million square meters.

In January-September 2012, Suning opened one new chain store in Hong Kong, replaced/discontinued three chain stores, and owned 28 chain stores in total. In the Japanese market, it opened two chain stores and owned 12 chain stores in total.

As of September 30, Suning Appliance owns 1,707 chain stores in China, Hong Kong, and Japan.

Suning Appliance added a new purchase store project in Neijiang in the third quarter. As of the end of the reporting period, the company had owned 39 property chain stores (3 of which were in pre-opening period).

From January to September 2012, Suning Appliance achieved a 10.11% year-on-year decrease in sales of comparable stores (stores opened on or before January 1, 2011).

Third, performance expectations

Suning Appliance expects net profit for 2012 to fall by 30%-40% from the same period of last year.