Summary of Yonghui Supermarket Conference Call Company Overview - **Company**: Yonghui Supermarket - **Date**: October 21, 2025 Key Points and Arguments Industry and Company Strategy - Yonghui Supermarket is undergoing a transformation from traditional inventory management to a brand retail logic, focusing on core user segmentation to enhance store traffic and positioning [2][3] - The company has closed over 300 underperforming stores while increasing its store count to over 200 during September to October 2025, positively impacting financial performance [2][3] Operational Efficiency and Brand Development - The company is adopting a customer-centric approach, optimizing both consumer demographics and employee management [4] - Over 60% of the remodeled stores have achieved profitability levels exceeding the average of the past five years, with customer traffic increasing by over 80% [2][4] - Yonghui is focusing on developing private labels to improve product quality and category optimization, inspired by the operational model of Costco, which increased its private label share from 12% in 1999 to over 30% [2][5] Future Growth Plans - Yonghui plans to complete its store remodeling by June 2026 and is likely to initiate a new round of store growth, targeting the addition of no less than 400 remodeled stores, each expected to generate sales of at least 150 million yuan, with total revenue projected to exceed 60 billion yuan [2][6] Competitive Advantages of Offline Supermarkets - Offline supermarkets have a significantly lower cost ratio compared to online platforms like Alibaba and JD.com, with ROI ratios typically not exceeding 8% [4][7] - This cost advantage allows offline supermarkets to adjust prices more flexibly, enhancing their competitive edge in terms of price-to-quality ratio, which attracts more consumers and boosts sales [4][7] Additional Important Insights - The management is focused on attracting talented individuals and enhancing organizational capabilities to further improve operational efficiency and market competitiveness [2][6]

Core Viewpoint - Hongqi Chain stated on October 21 that Yonghui has disclosed its reduction plan as required, and the company will continue to focus on its operations [2] Group 1 - Hongqi Chain responded to investor inquiries on an interactive platform [2] - The company emphasized its commitment to maintaining operational performance despite Yonghui's actions [2]

Core Viewpoint - The event aims to enhance food safety through rapid testing of agricultural products in large chain supermarkets and online platforms, ensuring consumer confidence in food quality [1][2] Group 1: Event Overview - The "Scan for Quality, Quick Test for Public Benefit" promotional event was held at Yonghui Supermarket in Taiyuan, organized by the Taiyuan Market Supervision Administration and the Xinghualing District Market Supervision Administration [1] - The event featured the launch of the "Food Agricultural Product Quality Safety Information Code" and introduced a "You Send, I Test" open day for rapid testing [1] Group 2: Consumer Engagement - Consumers can bring purchased agricultural products to Yonghui Supermarket for free rapid testing every Thursday, with real-time results available [1] - Interactive elements were included in the event, such as a questionnaire for consumers to express their concerns and suggestions regarding food safety [2] Group 3: Responsibilities and Collaboration - Supermarket and online platform operators are required to integrate rapid testing into their daily operations and ensure food safety [2] - The market supervision department plans to enhance collaboration with agriculture, rural affairs, and public security departments to establish a regular working mechanism for food safety [2] Group 4: Future Plans - The Taiyuan Market Supervision Administration intends to expand the coverage of rapid testing and improve the effectiveness of food safety supervision and service quality [2]

Core Insights - The appointment of Wang Shoucheng as CEO of Yonghui Supermarket at the age of 34 signals a strong desire for change within the company, aiming to embrace new transformations and break away from traditional management practices [1][3][7] Company Performance - In the first half of 2025, Yonghui Supermarket reported revenue of 29.948 billion yuan, a year-on-year decrease of 20.73%, with a net profit attributable to shareholders of -241 million yuan [3] - Under Wang Shoucheng's leadership, the "Fat Donglai Model" has begun to show results, with an average increase of 80% in customer traffic and over 60% of stores achieving their highest profitability in the past five years [3][4] Leadership Background - Wang Shoucheng joined Yonghui in 2017 as a management trainee and has held various positions, including business assistant to the CEO, cluster operations partner, and regional general manager, before becoming CEO [4] - His successful implementation of the "Fat Donglai Model" in 100 stores within a year demonstrates his capability to drive significant change in a struggling company [4][6] Strategic Shift - Wang Shoucheng is leading a strategic transformation towards a "product-centered" approach, aiming to develop 100 billion-yuan-level products within three years and increase the number of private label products from 60 to 500 by 2029 [9] - The traditional supermarket model of merely selling shelf space is deemed outdated, prompting Yonghui to establish a unique competitive advantage through its own brands [9][10] Market Context - The Chinese retail market is undergoing profound changes, characterized by a "new normal" of single-digit growth, while instant retail is experiencing significant growth, projected to exceed 1 trillion yuan by 2025 [10][11] - Yonghui is simultaneously renovating and closing stores, having opened 93 new locations while shutting down 227 underperforming ones in the first half of 2025, aiming to streamline operations in a competitive market [11]

Investment Rating - The report maintains an "Overweight" rating for the industry, with a focus on new consumption sectors such as beauty care, IP derivatives, and gold jewelry [5][29]. Core Insights - The report highlights the positive performance of the beauty care sector during the Double Eleven pre-sale event, with significant sales figures and increased visitor traffic in live-streaming sessions [3][23]. - The adjustment of the Hainan offshore duty-free shopping policy is expected to expand the range of duty-free products and enhance consumer spending [3][23]. - The overall market performance for the week showed mixed results, with retail, social services, and beauty care sectors experiencing declines, while jewelry and general retail sectors performed positively [14][16]. Summary by Sections Market Performance - For the week of October 13-17, 2025, the commerce retail, social services, and beauty care sectors saw declines of 0.45%, 1.72%, and 2.53% respectively, ranking 6th, 11th, and 17th among 31 primary industries [14][16]. - The Shanghai Composite Index fell by 1.47%, while the Shenzhen Component Index and CSI 300 Index dropped by 4.99% and 2.22% respectively [14][16]. Key Industry Events and News - The Ministry of Finance and other authorities announced adjustments to the Hainan offshore duty-free shopping policy, effective November 1, 2025, which includes expanding the range of duty-free products and changing the age requirement for duty-free shopping [3][23]. - The Double Eleven pre-sale event on Tmall saw 14 beauty products surpassing 100 million yuan in sales within the first four hours, with significant growth in visitor numbers during live-streaming sessions [3][23]. - LVMH reported a recovery in the Chinese market during the third quarter, while Kering is in negotiations to sell its beauty division to L'Oreal [3][23]. Investment Recommendations - The report recommends focusing on companies such as Shangmei Co., Juzi Bio, Marubi, Runben, Proya, Chaohongji, and Furuida within the beauty care and new consumption sectors [5][29].

Core Insights - Yonghui Supermarket has completed the transformation of its Huai Fang Wanda Plaza store, adopting a "learning from Pang Donglai" strategy to enhance its offerings and customer experience [1][2] - The store's product structure integrates over 80% of Pang Donglai's selection logic, with more than 40% of new products in the food and daily necessities categories [1] - During the recent double holiday period, Yonghui's nationwide transformed stores saw sales increase by over 100% year-on-year, with customer transactions rising by over 80% [1] Product Strategy - The store focuses on high-quality, cost-effective products, enhancing the shopping experience by optimizing product structure and service flow [1] - Popular items include customized fresh milk, quality orange juice, and red heart pomelo, which have received positive customer feedback [1] - The prepared food section features popular items like boneless pig trotters and beef jerky, alongside traditional offerings such as Peking duck and Korean fried chicken [1] Store Environment and Service - Systematic optimizations have been made to the store's environment, including widening main aisles to 3 meters and standardizing shelf heights to 1.6 meters for improved visibility and flow [2] - Yonghui is accelerating its transformation efforts in Beijing, with new stores set to open in the coming weeks, expanding its service coverage [2]

Core Viewpoint - Yonghui Supermarket has officially opened its 14th modified store in Beijing, following the "learning from Pang Donglai" initiative, indicating a strategic shift in its operational model [1] Group 1: Store Modifications - The newly opened store at Wanda Plaza in Huai Fang is part of a broader strategy to enhance customer experience and operational efficiency [1] - As of August 22, 2023, Yonghui Supermarket has completed modifications in 168 stores, with at least 30 more expected to be completed in September [1]

Core Insights - Yonghui Supermarket has officially opened its 14th modified store in Beijing, integrating the "Pang Dong Lai" model, which focuses on optimizing product structure and service flow to cater to local consumer characteristics [2][3] - As of August 22, 2023, Yonghui has completed modifications in 168 stores, with at least 30 more expected to be completed in September, bringing the total to over 200 modified stores [3] - The company aims to establish a new positioning as "National Supermarket Quality Yonghui" and plans to secure 200 core strategic partners and develop 100 billion-level flagship products within three years [3] Sales Performance - During the recent National Day and Mid-Autumn Festival, modified stores saw a sales increase of over 100% year-on-year, with customer transactions rising by over 80% and sales of popular items increasing by more than tenfold [4] - Despite the positive performance in modified stores, Yonghui's overall revenue fell by 20.73% year-on-year to 29.948 billion yuan, with a net loss of 241 million yuan in the first half of the year [4] Store Management - In the first half of the year, Yonghui opened 4 new stores but closed 227, resulting in a net decrease of 223 stores compared to the end of 2024 [4] - The new CEO, Wang Shoucheng, emphasized that the immediate priority is to modify existing stores, with plans for new store openings contingent on improvements in operational efficiency [4]

Summary of Key Points from Conference Call Records Industry or Company Involved - **Education Sector**: Action Education (EMBA training) - **Hospitality Sector**: Shoulv Hotel - **Retail Sector**: Small Commodity City, Yonghui Supermarket - **Beauty Sector**: Proya, Winona - **Jewelry Sector**: Laopuhuangjin, Zhou Daxing - **Food and Beverage Sector**: Mixue Group Core Insights and Arguments Education Sector - Action Education's performance improved in Q3 after a challenging Q2 due to US-China trade tensions, with expected annual revenue exceeding 300 million and a valuation of 15-16 times earnings, alongside a dividend yield over 6% [1][2] - The company's "Hundred Schools Plan" is anticipated to contribute over 10% to revenue growth next year [1] Hospitality Sector - Shoulv Hotel showed continuous improvement in data, with a target of 2.6 million rooms and an expected annual performance of 900 million, valued at 17-18 times earnings this year and 16 times next year [1][2] Retail Sector - Small Commodity City exceeded expectations with Q3 net profit over 1.7 billion, raising annual profit forecasts to 4.7-4.8 billion, with a valuation of 16-17 times [1][4] - Yonghui Supermarket is stabilizing daily sales after store adjustments, with expectations of reduced losses or profitability next year, supported by self-owned product growth [1][4] Beauty Sector - The beauty sector is benefiting from the Double Eleven shopping festival, with Proya and Winona showing strong sales performance. Proya's valuation is expected to be no more than 20 times in 2025 and 16-17 times in 2026 [1][5][6] Jewelry Sector - Laopuhuangjin is experiencing significant growth, with a projected annual increase of at least 50% and a valuation of under 30 times, expected to grow at least 30% next year with a valuation around 20 times [1][9] - The brand is expanding its presence in overseas markets, with plans to enter Japan by 2026 [10] Food and Beverage Sector - Mixue Group's same-store sales decreased by 7% month-on-month but increased by 6% year-on-year, with expectations of growth as external factors stabilize [11][12] Other Important but Possibly Overlooked Content - The overall consumer sector is currently underperforming, but there are still quality low-priced stocks worth considering [2] - The beauty sector's performance during the Double Eleven festival indicates strong consumer interest, particularly in leading brands [5] - Laopuhuangjin's competitive advantages include strong brand recognition in lower-tier cities and effective management of store openings and closures [7][9] - Yonghui Supermarket's adjustments and self-owned product development are crucial for its recovery and future growth [4][8]

Investment Rating - The investment rating for the retail industry is "Positive" (maintained) [1] Core Insights - The report highlights the commencement of the Double 11 e-commerce promotion, emphasizing a trend of simplifying promotional strategies, extending sales cycles, and seeking new growth avenues. This shift allows consumer demand to take precedence and encourages brands to focus on long-term value building [23][24] - The report identifies a significant increase in the performance of domestic brands during the Double 11 event, with a notable presence in the beauty and skincare categories, indicating that domestic brands are no longer just supplementary to international brands [25][29] Summary by Sections Retail Market Review - The retail industry index closed at 2277.78 points, down 0.45%, outperforming the Shanghai Composite Index, which fell by 1.47% [5][12] - The supermarket sector showed the highest increase this week, with a growth rate of 1.75% [15][18] - Year-to-date, the jewelry sector has led with a growth of 30.14% [15][18] Retail Perspectives - The Double 11 e-commerce promotion has officially started, with key trends including simplification of promotional strategies, extended sales cycles, and strategic exploration for new growth [23][24] - Domestic brands are increasingly strengthening their market presence, with significant sales performance noted in live-streaming events [25][29] Investment Recommendations - Investment focus areas include: 1. **Gold and Jewelry**: Recommend brands with differentiated product offerings and consumer insights, such as Laopuhuang and Chaohongji [30][32] 2. **Offline Retail**: Highlighting companies that adapt to trends, such as Yonghui Supermarket and Aiyingshi [30][32] 3. **Cosmetics**: Emphasizing strong domestic brands during the Double 11 event, including Porcelain and Maogeping [30][32] 4. **Medical Aesthetics**: Focusing on companies with differentiated product lines, such as Aimeike and Kedi-B [30][32]