Core Viewpoint - The article discusses the recent controversies surrounding Minhua Holdings and its brand Zhi Huashi, highlighting issues of employee treatment, declining financial performance, and management practices that have sparked public outrage [2][9]. Financial Performance - Minhua Holdings reported a revenue of HKD 16.903 billion for the fiscal year 2024/2025, a decrease of 8.2% year-on-year [10]. - The net profit attributable to shareholders was HKD 2.063 billion, down 10.4% compared to the previous year [10]. - Sales of sofas and bedding products saw significant declines, with sofa sales dropping approximately 7.2% to HKD 11.743 billion and bedding sales decreasing by 19.4% to HKD 2.408 billion [10]. Market Dynamics - The domestic market for home furnishings is experiencing weak demand, contributing to the company's revenue decline [2][11]. - Despite the challenges in the domestic market, overseas sales of sofa products increased by 13%, with a total of approximately 884,000 units exported [11]. - The company's market share in the functional sofa segment remains strong, with Zhi Huashi holding a 45.3% market share in China [10]. Employee Management and Practices - A high-ranking executive at Zhi Huashi has been criticized for imposing arbitrary fines on employees for minor infractions, leading to public backlash [3][5]. - The company reduced its workforce by over 3,700 employees, a decrease of more than 12%, while simultaneously increasing executive compensation to HKD 20.956 million, up from HKD 17.406 million [12][13]. - The company added 131 new stores, bringing the total to 7,367, while also optimizing sales channels in response to market conditions [12].

Core Viewpoint - The article discusses the recent controversies surrounding Minhua Holdings and its brand Zhi Huashi, highlighting the company's declining financial performance and the backlash from employees regarding punitive measures imposed by management [2][11][13]. Financial Performance - In the fiscal year 2025, Minhua Holdings reported a revenue of HKD 16.903 billion, a decrease of 8.2% year-on-year [13]. - The net profit attributable to shareholders was HKD 2.063 billion, down 10.4% compared to the previous year [13]. - Sales of sofas and bedding products saw significant declines, with sofa sales dropping approximately 7.2% to HKD 11.743 billion and bedding sales decreasing by 19.4% to HKD 2.408 billion [14]. Market Dynamics - The domestic market revenue fell by 17.2%, contributing to a decline in the overall revenue share from 65.0% to 58.7% [17]. - Despite the domestic challenges, the overseas market showed positive performance, with exports of sofa products increasing by 13% [15]. - The company continues to hold a leading position in the domestic functional sofa market, with a market share of 45.3% [12][18]. Operational Changes - The company increased its store count by 131 to a total of 7,367 stores, focusing on cost-effective locations in lower-tier cities [20]. - The gross profit margin reached 40.5%, the highest in five years, attributed to a 9.9% decrease in the cost of goods sold [21]. - Employee numbers decreased by over 3,700, resulting in a reduction of total employee costs to approximately HKD 3.055 billion [21][22]. Management Controversies - A high-ranking executive's punitive measures against employees, including fines for minor infractions, sparked public outrage and discussions about employee treatment [4][5][8]. - The executive defended the measures as part of a management strategy, claiming they were not fines but rather contributions to a fund [9].

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].