Core Viewpoint - A management controversy has put Minhua Holdings, the parent company of the well-known furniture brand Zhi Huashi, in the spotlight due to questionable employee penalty practices and declining financial performance [1][3]. Group 1: Management Controversy - A senior executive from the e-commerce department made controversial comments in an internal chat, discussing penalties for employees, which sparked public outrage regarding labor compliance in leading companies [3]. - Minhua Holdings responded briefly to the controversy, stating that internal measures had been taken, while the executive claimed the penalties were voluntary donations rather than fines [6]. - Legal experts indicated that the company's penalty practices may violate labor laws, emphasizing that such deductions from wages are illegal regardless of how they are framed [6]. Group 2: Financial Performance - The latest financial report shows a revenue decline of 8.2% to HKD 16.903 billion and a net profit drop of 10.4% to HKD 2.063 billion for the fiscal year ending March 2025 [8]. - The Chinese market, once a core growth driver, saw a significant revenue decrease of 17.2%, with sofa sales down 10.6% and bed sales down 19.4% [8]. - In contrast, the overseas market showed signs of recovery, with revenue increasing by 8.33% to approximately HKD 6.666 billion for the fiscal year 2024 [8]. Group 3: Company Actions - To address the financial downturn, Minhua Holdings implemented drastic measures, including a significant workforce reduction from 29,837 to 26,134 employees, resulting in over 3,700 job losses [8]. - Despite the layoffs, the total remuneration for directors increased by 20% to HKD 20.956 million, highlighting a disparity in management compensation during challenging times [10]. - The company also expanded its retail presence by opening 131 new stores, bringing the total to 7,367 locations [10].