How dare you say "indomitable is better than overwhelming"?

The current situation of Haidilao fully shows that “opportunity” can also become a crisis.

Huge loss

“The current bitter fruit can only be swallowed by ourselves”. On November 5, 2021, Haidilao released the store closure plan and the “woodpecker plan”, how big is the expansion “bitter fruit”? At present, this “bitter fruit” is enough to make it return to before liberation and return the total net profit of the company in the three years before listing to zero.
On the morning of February 21, Haidilao issued a profit warning, saying that compared with the net profit of 309 million yuan in 2020, it is expected to have a net loss of 3.8 billion yuan to 4.5 billion yuan in 2021; At the same time, the revenue in 2021 is expected to exceed 40 billion yuan, an increase of more than 40% compared with the revenue of about 28.6 billion yuan in 2020.
This is the first annual loss of Haidilao since its listing in 2018. Affected by this announcement, Haidilao’s share price fell by 5.54% on the same day and closed at HK $19.08, a decrease of nearly 80% compared with the high of HK $85.80 in February last year, and the market value evaporated by about HK $350 billion.
For the gap between revenue and net profit, Haidilao said in its announcement that it was mainly caused by two reasons:
First, the one-time loss and impairment loss on the disposal of long-term assets caused by the closure of more than 300 restaurants and the decline of restaurant operating performance in 2021 totaled about RMB 3.3 billion to RMB 3.9 billion;
Second, the impact of global continuous changes and repeated epidemics, the rapid expansion of store network in 2020 and 2021 and the company’s internal management problems on the operation of Haidilao restaurant; Especially in the second half of 2021, the operation of Haidilao restaurant was significantly affected by the global regional epidemic outbreak and public health control measures, and its operating performance decreased compared with the second half of 2020. Overseas stores also experienced increased losses in 2021.
Although the impact of the epidemic has been mentioned many times in the announcement, it can be seen that the main cause of the performance loss of Haidilao is strategic error. In the first half of 2020, affected by the strictest epidemic situation and control, Haidilao lost 965 million yuan in net profit. After the recovery in the second half of the year, it turned loss into profit and gained 309 million yuan in net profit for the whole year. With the further relaxation of domestic epidemic control, if we follow the normal rhythm, the net profit in 2021 will increase on the basis of at least 309 million yuan. Why is there a serious loss?
The problem lies in contrarian expansion. Blind self-confidence, misjudgment of the epidemic situation, coupled with the temptation of preferential rent policies for shopping malls and properties, Haidilao “went against the trend and opened 544 new stores and restaurants when its performance was greatly impacted by the epidemic in 2020; In the first half of 2021, it continued to implement the aggressive expansion strategy and opened 299 stores. As of June 30, 2021, the total number of global stores of Haidilao was 1597.
The expansion of stores brought about a significant increase in costs and expenses, but the turnover rate and the average daily sales of the same store decreased one after another, and the company increased revenue without increasing profits. After realizing the problem, Haidilao decided to slow down and put a sharp brake on it, closing 300 stores in succession in the second half of the year. Between opening and closing, the impact is not just the change in the number of stores. The one-time loss and impairment loss are as high as about 3.3 billion yuan to 3.9 billion yuan, accounting for 87% of the total estimated loss in 2021.
It is worth mentioning that in the first half of 2021, Haidilao also obtained a net profit of 94.529 million yuan, that is, the estimated loss of 3.8-4.5 billion yuan was generated in the second half of the year.
Compared with its previous financial reports, from 2018 to 2020, Haidilao’s net profits were 1.646 billion yuan, 2.345 billion yuan and 309 million yuan respectively, with a total of about 4.3 billion yuan. It can be said that once it returned to before liberation, it lost the net profits of the three years before listing in half a year. It has to be said that Haidilao’s adverse expansion had a “bad effect”.


In order to stop the loss in time, Haidilao adopted the strategy of “breaking the arm to stop bleeding”, launched the “woodpecker plan” on November 5, 2021, and closed more than 300 stores with poor performance before December 31, 2021, some of which are “suspended”, and will wait for the opportunity to reopen in the future, with a rest cycle of no more than two years; Rebuild and strengthen some functional departments and restore the regional management system; Timely shrink the group’s business expansion plan. If the average turnover rate of the group’s restaurant is lower than 4 times a day, in principle, new Haidilao restaurant will not be opened on a large scale.
Comparing the financial report data of four years after listing, we can see that the turnover rate of Haidilao is not ideal: in the first half of 2021, the turnover rate of Haidilao is three times a day, and from 2018 to 2020, the turnover rate is five times a day, 4.8 times a day and 3.5 times a day respectively, which has decreased for four consecutive years. The “woodpecker plan” refers to no less than four times a day, which means that it is difficult to return to the level before the outbreak of the epidemic in 2020 in the short term.
While Haidilao squatted down to “tie their shoelaces”, houlang changed the slow pace in the past and accelerated the pace of expansion. Among them, Guangdong style hotpot Laowang and Seafood Hotpot Qixin tianxiangji submitted prospectuses to the Hong Kong Stock Exchange in September 2021 and January 2022, intending to compete for the “third share of Hong Kong stock hotpot”. Both sides put forward ambitious expansion plans in the prospectus. According to the prospectus, as of the third quarter of 2021, the number of Qixin Tianmen stores was 250, and it is planned to open another 300 new stores in the three years from 2022 to 2024; At present, Laowang, which has less than 200 self operated stores, will also usher in a high outbreak period of stores, and plans to open 227 new stores in the next three years.
At the same time, like Haidilao, Banu Maodu hot pot, which belongs to Sichuan hot pot and is also positioned as a high-end hot pot, won a large amount of financing of more than 500 million yuan in June 2021, followed by Chongqing hot pot brand “elder martial brother Zhou” and elder sister Pei hot pot. Although there is still a certain gap between the above brands and Haidilao in terms of volume and brand value, with the blessing of capital, they are eroding Haidilao’s market share and diluting its advantages.
Among them, Banu was a “follower” of Haidilao in its early days. Later, it occupied a place in the field of high-end hot pot with its own product and service advantages. At present, there are only about 85 Direct stores in China, and the customer unit price is dozens of yuan higher than Haidilao, but the grand situation of queuing in its stores in various cities is very similar to Haidilao in its early years, and its prospect is also optimistic by the industry.
According to Shen Boyuan, a consumer consulting expert, it is necessary for Haidilao to stop and rest at this time. The implementation of the “woodpecker plan” is correct and necessary. He said: “at present, the hot pot market still has a certain growth space, and Sichuan hot pot is one of the most popular categories. Haidilao is still the first leading brand. The top priority is to revitalize its own service advantages and improve its internal management level. As long as it operates lean, there is still a great opportunity to regain the market.”
Of course, the operation of any enterprise is not smooth sailing. Many successful chain catering brands have experienced crises, and each crisis is a turnaround to a certain extent. Successful resolution will be a qualitative leap for enterprises.
After nearly 20 years of development, Haidilao has established a mature supply chain, products, management service system and brand value. These core assets give it the ability of sustainable development and are a solid guarantee for its breaking journey. It will take some time to verify whether the “woodpecker plan” can finally get Haidilao out of the dilemma and return to the peak. We might as well be more patient.
This article is from WeChat official account ID:fbc180, author: Li Huanhuan, 36 krypton authorized release.