Goldman Sachs pointed out that among the retail stocks under stress test, Sa Sa was the weakest. As of the end of March 2019, its main business in Hong Kong accounted for 109% of the year's profit, and other markets even recorded operating losses. The company faces fierce competition from the larger market such as local pharmacies, and its market share has fallen. It launched more aggressive price cuts to drive the flow of people and further damage the gross profit margin.
The bank also stated that it will lower the target price of Sa Sa from HK$2.3 to HK$1.8, a reduction of 22%, and maintain a “neutral” rating.
Earlier this year, Sa Sa International Holdings Limited announced its fiscal year 2019 performance report. Its turnover was 7.342 billion yuan, a year-on-year increase of 4.5%, and its net profit was 413 million yuan, a year-on-year increase of 7%. But the mainland market performance fell 1.9% to 252 million yuan, same-store sales fell 1.1%, and the loss widened to 14.1055 million yuan. What's more noteworthy is that during May 1st this year, the retail sales of Sa Sa in Hong Kong and Macau dropped by 3.9% year-on-year.
Sa Sa was born in Hong Kong in 1978. After nearly 20 years of development, it has become one of the most influential cosmetics retail groups in Asia and was listed on the Hong Kong Stock Exchange in 1997.
went from 9.28 Hong Kong dollars per share at its peak in 2013 to only 1.76 Hong Kong dollars at the close of the market on August 20, 2019. Sa Sa’s total market value has also fallen from 22.6 billion Hong Kong dollars at its peak to 5.417 billion Hong Kong dollars now. 17 billion Hong Kong dollars.
Sa Sa's previous business card "must buy for mainland tourists to Hong Kong", what happened?
Make mistakes in the location selection for opening stores in the Mainland.
In fact, Sa Sa has been at a loss for a long time since it entered the Chinese Mainland for 14 years. Although the number of its mainland stores has more than tripled in the past 10 years, it has actually been adjusted every year. In 2018 alone, it opened 7 new stores and closed 8 underperforming stores. The overall operating status of the stores is poor, and it is the mainland. An important reason for the long-term market losses.
Sa Sa’s operating data in the Chinese mainland market from 2009 to 2018
According to the previous financial report information disclosed on Sa Sa’s official website, Sa Sa had previously made “decision-making errors” in selecting locations for its stores in the Mainland. In 2011, most of its 26 stores were located in northern China; in 2012, Sa Sa continued to increase its size in the northern market, opening new stores in Dalian, Harbin and other places.
But in that era when the logistics were not well developed, Sa Sa, who was constantly opening up battlefields in the north, had warehouses far away in the south, which hindered Sa Sa's layout in mainland China. In 2012, Sa Sa’s same-store sales in the Mainland dropped sharply from 13% in 2009 to 0.5%. Sa Sa’s financial report that year blamed this on “the poor performance of logistics providers”.
Later, Sa Sa began to move its store layout to the central-eastern and central-southern regions including Chengdu, Suzhou, Hangzhou, Dongguan, Foshan, and Zhuhai. In 2013, it began to pay attention to logistics issues, reintegrated the supply chain and looked for suitable logistics services in the South China market. supplier. Even so, it was still unable to reverse the impact of early site selection “errors” and poor logistics performance. Sa Sa’s performance and same-store sales in the Mainland both declined from 2014 to 2016.
Ten years of losing e-commerce
This year Jingdong 618 sales increased by more than 26% year-on-year, while Hong Kong Sa Sa saw a year-on-year decline in sales during the May Day Promotion. In the ever-changing Chinese market, the speed of market response is often everything. However, Sa Sa, who likes to write "cautious" in its financial reports, is obviously overly cautious. As a result, it always lags behind the market in its e-commerce layout, and finally missed the most important development. Good time-Sa Sa’s “sluggish” e-commerce business has not yet made a profit. In 2018, the business’s annual loss reached 23.35 million yuan. After
entered the mainland market in 2005, Sa Sa devoted almost all of its energy to the adjustment of offline stores, while ignoring the rapidly developing online channels in its cautious expansion. It was not until the tenth anniversary of its entry into the Chinese mainland market in 2015 that Sa Sa updated its official shopping website sasa.com and launched the mainland China page. It was not until 2017 that theLaunched the “new retail” model, built a micro-mall, settled in Tmall International, opened a flagship store, launched a mobile app, and reached strategic cooperation with platforms such as NetEase Koala.
In 2005, Taobao just defeated eBay eBay and became China's largest C2C e-commerce trading platform. The following ten years have been the ten years in which China's local e-commerce companies shine. In contrast, Sa Sa seems to have "completely lost ten years."
over-relies on mainland visitors
is the most important and important market segment of Sa Sa. The performance of Hong Kong and Macau is highly related to mainland visitors and their consumption habits in Hong Kong. In the past ten years, the number of Sa Sa stores in Hong Kong and Macau has been increasing, but the same-store sales growth has been slowing down. On the other hand, while the contribution of mainland tourists to the performance of Hong Kong and Macau has increased, their purchasing power has been declining.
Sa Sa Hong Kong and Macau operating data, trends in the number of mainland tourists visiting Hong Kong and their consumption data in Hong Kong from 2009 to 2018
Since April 2009, Shenzhen permanent residents can apply for multiple entry visas to Hong Kong, which stimulated the number of visits by Shenzhen residents . The relaxation of the policy not only achieved the highlight of Sa Sa’s Hong Kong and Macau sales data in 2011, but also played a positive role in its performance even in 2014. Sa Sa mentioned in its financial report that year that the number of passengers travelling to and from Hong Kong increased by 19.1%. , Is still the main driving force for sales growth.
However, the anti-parallel cargo passenger incident that broke out in Hong Kong in 2014 not only deterred visitors from visiting Hong Kong, but also affected the purchase decisions of local consumers in Hong Kong. At the same time, the vigorous development of overseas online shopping and cross-border e-commerce has added more purchase channels for mainland consumers. That is to say, since this year, Sa Sa's various operating data have experienced a sharp decline.
In 2015, the passport for Shenzhen residents to visit Hong Kong was changed from "one visa, multiple lines" to "one line per week" after expiration. Since then, the number of mainland tourists visiting Hong Kong has continued to decrease, which has affected the average sales of each transaction of Sa Sa. Leading to further weakening of performance.
The sales performance of Hong Kong’s retail industry in fiscal 2016 and the trend chart of the number of mainland visitors to Hong Kong (screenshot from the financial report)
It is worth noting that the implementation of the E-Commerce Law has a greater impact on Sa Sa’s 2018 and the first quarter of 2019. It is mentioned in the financial report that the implementation of the New Deal has made Hong Kong Daigou cautious, and the impact of this on Sa Sa's overall sales performance may continue.
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