is really a disaster. A month ago, , , just apologized after slid down. In the past few days, it has been forced to "prove its innocence."
htmlOn September 15, Miniso issued an announcement stating that the independent investigation has been substantial and emphasized that the key allegations in the short-selling report have no factual basis.Not long ago, the US Klein Law Firm announced that it had filed an class action lawsuit on behalf of shareholders of Miniso Group Holdings Co., Ltd., accusing the company of violating federal securities laws.
The law firm stated that there are false, misleading and undisclosed major content in Miniso’s IPO registration statement, including the number of Miniso stores owned and controlled by Miniso and other undisclosed affiliates that are far higher than those described in the IPO registration statement and related prospectus, failure to truthfully disclose the business model, conceal the real cost amount, etc.
This class action lawsuit against Miniso can be traced back to a short sale report by Blue Whale Capital, a US short selling institution, in July this year. Blue Whale Capital believes that Miniso’s franchise business model is a lie and the company’s revenue also has major problems.
After experiencing a series of storms such as institutional short selling, "pseudo-Japanese" doubts, and quality issues, the capital market is no longer optimistic about Miniso. In July this year, Miniso, which was listed in Hong Kong, fell below the listing price of HK$13.8 per share on the first day. As of September 20, MISC’s U.S. stock closed on September 20, MISC’s rated US$5.35 per share, with a total market value of US$1.695 billion, shrinking by more than 80% from its peak.
Source: Snowball Network
Since 2013, Miniso’s stores have emerged like bamboo shoots after a rain in just nine years. Founder Ye Guofu seems to be committed to being the king of retail in China. However, now it seems that Miniso may be more like what the short-selling report says, "It is like a declining entity operator, and it should be revalued."
weak retail, and growth is weak
Not long ago, Miniso released its Q4 fiscal year 2022 fiscal year and full-year financial report. Data shows that the company's revenue in fiscal year 2022 was 10.09 billion yuan and its net profit was 638 million yuan. The Q4 fiscal quarter achieved revenue of 2.32 billion yuan, a year-on-year decrease of 6.2%; net profit was 220 million yuan, and increased by 256.9% year-on-year.
This first financial report after logging into Hong Kong stock has not been good. Judging from the single-quarter revenue changes, Miniso's revenue and net profit growth rate in the past year have shown a downward trend. At the same time, due to the decline in costs such as sales expenses, general and administrative expenses, Miniso's gross profit margin has increased significantly, reaching 33.3% in the Q4 fiscal quarter, setting a record high.
In other words, although Miniso compresses costs, it has limited help to profits. The sustainability of company performance growth in the future is facing considerable pressure.
In fact, one of the main doubts of Blue Whale Capital earlier on Miniso was that the company concealed the fact that its performance declined from investors, and its revenue shrank by more than 40% from its peak of 17 billion yuan in 2018.
In the past three fiscal years, Miniso's revenue was 9.395 billion yuan, 8.979 billion yuan and 9.072 billion yuan, respectively, and the revenue growth rate stagnated; the net losses during the same period were 294 million yuan, 260 million yuan, and 1.429 billion yuan, respectively, with a cumulative loss of nearly 2 billion yuan. The financial situation in fiscal year 2022 seems to be better than in the past few years, but the overall performance trend is still a continuation of the past. While the number of stores continues to increase, the growth in revenue and net profit is very limited.
Blue Whale Capital also proposed that in order to attract franchisees, Miniso has reduced franchise fees by 63% in the past two years, which indirectly proves the dilemma of Miniso's performance decline.
According to the official website of Miniso, as of December 2, 2020, the company's franchise fee required by the company to potential domestic franchising distributors was 80,000 yuan per year and the product deposit was 750,000 yuan. But by 2022, the franchise fee for urban first-class stores will be reduced to 29,800 yuan per year, and the product deposit will also be reduced to 350,000 yuan.
Blue Whale Capital believes that the behavior of significantly reducing franchise fees means that Miniso's brand value to customers and suppliers is declining, and it will also erode the company's future profits.According to the financial report, as of June 30, 2022, Miniso had 3,212 domestic third-party stores. Based on the difference between 80,000 yuan and 29,800 yuan, the annual revenue from franchise fees alone decreased by 161 million yuan.
Source: Miniso Financial Report
In addition, the domestic market has always provided Miniso with the largest source of income, but its business revenue has fallen into a bottleneck period. Financial report data shows that in this fiscal quarter, domestic business revenue was 1.533 billion yuan, a year-on-year decrease of 21.22%; from the perspective of the entire fiscal year, the company's domestic revenue was 7.44 billion yuan, a year-on-year increase of only 2.1%.
Chuangyoupin tried to hand over the responsibility of revenue growth to overseas markets. Over the past year, overseas stores have taken a big step, but overseas business cannot be restocked in China. As of fiscal year 2022, it only accounted for 33.9% of total revenue.
And there are many problems with this process. Miniso has a lack of overseas management and communication with operators is not smooth. According to international media reports, Miniso encountered large-scale burst in both Canada and South Africa. Many franchisees accused Miniso of ignoring its reasonable demands, resulting in constant losses and disputes. The "geisha" incident that happened not long ago is also a manifestation of the company's immature overseas operations.
expands greatly, and the business model is doubtful
In the past year, the number of Miniso stores has been increasing. As of the end of this fiscal quarter, Miniso had 5,199 stores worldwide, of which 3,226 were domestic stores, a net increase of 287 stores year-on-year; the number of overseas stores was 1,973, a net increase of 163 stores year-on-year. But strangely, while Miniso's market continues to expand, its revenue has not increased accordingly.
Blue Whale Capital previously questioned that Miniso's business model has great problems. The company is not a "light asset and high profit independent franchise model". Hundreds of its stores are secretly operated by company executives and chairman Ye Guofu, and the actual profit margin is lower than the market disclosure data.
According to the short-selling report, from 2018 to March 2022, the number of Miniso stores increased from 3,459 to 5,205, but at the same time, the company's revenue fell sharply, falling from its peak in 2018.
This may be related to the big cake that Ye Guofu painted for franchisees. Unlike the general franchise model, Miniso adopts the model of: franchisees give money and Miniso management. Specifically, franchisees are responsible for "heavy" asset investment such as store rent and decoration, while Miniso is responsible for overall brand operation and store management. Franchise companies and Miniso are divided into 38% and 62% of their daily turnover respectively, while food products are divided into 33% and 67%.
From this perspective, franchisees do not look like work partners, but have become investors of Miniso. With this model, Miniso only bears the cost of production and management, and franchisees bear greater operating risks. As long as Miniso continues to increase the number of stores, it can expand its revenue and achieve profitability.
Screenshot of the official website of Minchuang Youpin
In the early stage of expansion, Miniso has indeed developed rapidly, allowing some franchisees to gain dividends, but everything has an upper limit. When the company's total revenue growth tends to flatten, losing money in some franchisees becomes an inevitable result.
Chuangyou Products is also in a dilemma. If it continues to expand, it will reduce the revenue of a single store and affect the company's overall profitability; but if it does not expand, it will not be able to maintain the revenue scale, and performance growth will become a problem. In other words, Miniso can only strengthen its performance by continuously increasing the number of stores.
, and it seems that there are not enough franchisees who believe in Miniso’s story of “winning money by lying down”. Blue Whale Capital cross-comparison of corporate registry, online map and consumer data, and found that at least 620 Miniso stores have close relationships with company executives and chairman. The independent franchisee network may be a lie.
