After experiencing the "growing pains" of performance, the Hunan retail enterprise BBK (002251.SZ) is currently undergoing adjustments from Pang Donglai, with a significant improvement in the turnover of individual stores. On April 30, BBK disclosed the progress of restructuring, the 2023 annual report, and the first quarter report of 2024.

According to the disclosure, on April 25, BBK signed a "Restructuring Investment Agreement" with four industrial investors and 13 financial investors. The 17 investors will subscribe for shares issued by BBK through capital reserve conversion in cash. It is estimated that, without considering the factor of shareholding ratio, the 17 investors are expected to subscribe for a total of 1.175 billion shares, with an investment amount reaching 2.5 billion yuan.

In 2023, BBK achieved a revenue of 3.087 billion yuan; the net profit attributable to the parent company was a loss of 1.889 billion yuan, a year-on-year reduction of 25.50%. In the first quarter of 2024, BBK achieved a revenue of 928 million yuan; the net profit attributable to the parent company was 20.23 million yuan, a year-on-year increase of 120.28%; the net profit excluding non-recurring gains was 8.498 million yuan, a year-on-year increase of 103.96%.

On the same day the agreement was signed, BBK and the administrator had submitted a draft restructuring plan to the Xiangtan Intermediate Court.

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The 17 investors plan to invest 2.5 billion yuan to subscribe for shares. Affected by multiple factors such as industry competition and business strategy, BBK has fallen into a liquidity crisis in recent years. On October 26, 2023, the Xiangtan Intermediate Court ruled to accept the restructuring application of BBK. Under the supervision of the administrator, the company has been steadily advancing the restructuring plan.

BBK announced on April 30 that the company had signed a "Restructuring Investment Agreement" with restructuring investors on April 25. According to the agreement, the 17 investors will subscribe for shares issued by BBK through capital reserve conversion and pay funds. Among them, there are four industrial investors: White Rabbit Group, Foreign Trade Trust (in conjunction with Sinochem Agriculture), Wumart Group + Boya Chunhua, and Xiangtan Electrochemical Industry Investment. There are 13 financial investors: Jifu Venture Capital, Shanghai Hongyi Fund, Yuanjian Fund, Foreign Trade Trust, Shengshi Jingzi Management, Jiuhua Asset Management, China Merchants Ping An, Xiangjiang Asset Management, Yiyuan Xincheng, Hua Chu Investment, Zhongguan Bao, Song Shu Huilin, and Longjieda.

Specifically, among the industrial investors, White Rabbit Group, Xiangtan Electrochemical Industry Investment, Wumart Group, and Boya Chunhua will accept shares at a price of 1.65 yuan per share; the acceptance price for Foreign Trade Trust (in conjunction with Sinochem Agriculture) is 1.90 yuan per share. Among them, White Rabbit Group, Xiangtan Electrochemical Industry Investment, Wumart Group, and Boya Chunhua have all nominated non-independent directors and/or independent directors to deeply participate in the company's governance, provide full industrial resources, and conduct in-depth empowerment, with a lock-up period of 36 months, hence the price per share is 1.65 yuan; Foreign Trade Trust (in conjunction with Sinochem Agriculture) did not deeply participate in the company's governance by nominating directors, and the lock-up is for 24 months, hence the price per share is 1.90 yuan.

As for the 13 financial investors, the acceptance price is uniformly 2.50 yuan per share, with a lock-up period of 12 months.

BBK shares stated that it will rely on industrial investors to improve online retail capabilities, supply chain integration capabilities, and brand marketing advantages, conduct industrial empowerment, and enhance the ability to sustain operations. For example, the retail giant Wumart Group will leverage its strengths in integrating supply chains, brand empowerment, and digital retail to help BBK further enhance its supply chain capabilities and use its strong digital capabilities to help the company improve operational efficiency.On the day of the agreement signing, BBK and the administrators submitted to the Xiangtan Intermediate Court the draft reorganization plan for BBK shares and its fourteen subsidiaries. Currently, the Xiangtan Intermediate Court is reviewing the draft and determining the time to convene the creditors' meeting.

Turned from loss to profit in the first quarter

While advancing the reorganization work, BBK is also taking self-rescue measures. Financial reports show that in 2023, BBK reduced its losses by 25.50% year-on-year. In addition to optimizing the capital structure and resolving debt issues through reorganization, BBK is also actively taking self-rescue measures from strategic adjustments, organizational changes, maintaining main business operations, and reducing costs and increasing efficiency to maintain continuous operations.

In terms of strategic adjustment, to reduce losses and stop losses in a timely manner, BBK closed a total of 113 stores that were hopeless for turning a profit in 2023, and began to relaunch some high-quality stores in September of that year. By the end of 2023, the company had reorganized 84 supermarket stores and had a total of 133 stores of various formats (96 supermarket format stores and 37 department store format stores), leading the chain retail industry in Hunan and Guangxi provinces. In terms of organizational change, based on the company's contraction strategy, while reshaping and optimizing the organization, the compensation and benefits system was adjusted, and labor costs were reduced.

In terms of the main business, the supermarket format has continued to build a stable supply chain and improve the availability of goods; it has continuously innovated in marketing activities to try to attract customers back; it has operated in line with industry benchmarks; and it has achieved flatter management and vertical management. After the company entered reorganization, the department store format changed from self-checkout to centralized checkout. In addition, BBK has continuously reduced rents, closed and merged loss-making stores, and strictly controlled various cost expenditures to reduce costs and increase efficiency.

According to the disclosure, in the first quarter of this year, BBK achieved a revenue of 928 million yuan; the net profit attributable to the parent company was 20.23 million yuan, a year-on-year increase of 120.28%; the net cash flow from operating activities was 183 million yuan, turning from negative to positive year-on-year.

It is worth noting that Pang Donglai and BBK are independent regional retailers. BBK was once glorious, but due to the difficulty of transformation in the traditional retail industry and the large asset investment of the company, BBK fell into a liquidity dilemma last year, with high debt repayment risks and the company's operations in difficulty. In the first three quarters of 2023, BBK's revenue was 2.391 billion yuan, with a loss of 652 million yuan. In November last year, BBK continued to promote investor recruitment and common benefit debt financing, and by November 6 of that year, 14 potential investors had paid a total of 280 million yuan in deposit, and the common benefit debt loan was in place for 780 million yuan. However, the operation of Pang Donglai has always been good.

At the end of the first quarter of this year, BBK introduced the management team of Pang Donglai to transform the company's supermarket business, making systematic adjustments in various aspects such as employee compensation, policy mechanisms, store layout, product reorganization, and price optimization. As of April 25, the BBK supermarket in Meixi Lake, Changsha, has completed the first phase of adjustment. Public data shows that the average daily sales of a BBK store were about 150,000 yuan, with an average daily customer flow of 2,000 people. On the first day of the store's adjustment, April 11, the sales were 210,000 yuan, and the customer flow reached 4,400 people; on the second day, April 12, the sales were 380,000 yuan, and the customer flow was 7,100 people; on the third day, April 13, the sales were 800,000 yuan, and the customer flow was 11,000 people; on April 14, the sales reached 1.01 million yuan, and the customer flow was 13,000 people. The second store to be adjusted is the Jiuhua New World store in Xiangtan, which is planned to be officially launched after the "May Day" holiday.