Only 100 million yuan sold in half a year, it is difficult to sell well even on Amazon

Zebao's parent company released its financial report. The profit was pretty good and the revenue decline was not big, but the performance in many dimensions was not even a little bit worse than the past highlights ...

Sold 100 million on Amazon in half a year

On August 20, Zebao's parent company, Xinghui Holdings, released its latest financial report, stating that its revenue in the first half of this year exceeded 801 million yuan , a decrease of 5.62% from 849 million yuan in the same period last year . However, in terms of net profit, it has turned losses into profits, up 145.34% year-on-year to 9.35 million yuan . In the first half of last year, it suffered a net loss of 20.62 million yuan.

However, Xinghui Co., Ltd.'s non-GAAP net profit still performed poorly, with a loss of more than 990,000 yuan, a year-on-year decrease of 105.31%. The profit in the same period last year was 18.69 million yuan.

Precision hardware business and cross-border e-commerce business are the main businesses of Xinghui Co., Ltd. Among them, the cross-border e-commerce business was mainly carried out after the acquisition of the cross-border big seller Zebao in 2018. Although in 2022, Xinghui Co., Ltd. established Guangdong Huahui Innovation Technology Co., Ltd. to manage this business, the industry still habitually refers to it as "Zebao", and the following article also uses Zebao as a synonym.

Through third-party platforms such as Amazon, Walmart, Wayfair , and well-known supermarkets such as Best Buy, Softbank, Costco, and Walmart , ZEBO's "online + offline" dual-drive runs in parallel. With four main product lines of smart small appliances, power supplies, computer and mobile phone peripherals, and furniture, as well as auxiliary home categories, its overseas business contributes a lot to the total revenue.

From the product perspective, its milk frother, vacuum cleaner, floor scrubber, baby monitor and other products have accumulated a sticky user group.

Although precision hardware products represented by slide rails brought Xinghui Co., Ltd. 417 million yuan in revenue, accounting for more than half.

However, the gross profit margins of a series of products in the cross-border e-commerce export business are obviously higher. The financial report shows that the gross profit margin of Xinghui's slide rail products is 18.81%, but the gross profit margins of smart small appliances in the cross-border export business are 31.86%, power supplies are 28.16%, computer and mobile phone peripherals are 30.51%, and furniture is 23.45% .

Although the gross profit margins of all products are declining, the gross profit margins of a series of cross-border e-commerce products are still much higher than those of slide rails.

It is worth noting that in the first half of this year, Xinghui’s performance on Amazon declined.

The financial report pointed out that in the past six months, Xinghui Co., Ltd.'s revenue on Amazon was 117 million yuan, which is still the largest contribution among all online channels, but compared with 262 million yuan in the same period last year, it has decreased by 55.28%, and its share in cross-border e-commerce business revenue has also dropped from 56.90% to 38.82% .

In addition, the revenue of its self-operated platform also decreased from 26 million yuan in the first half of last year to 16 million yuan this year, a decrease of 40.41%, and the proportion of this business in revenue slightly decreased from 5.71% to 5.19%; the revenue of Walmart channels decreased by 2.13% year-on-year, from more than 24 million yuan to less than 23.7 million yuan, but its share in revenue increased from 5.26% to 7.85%.

On the contrary, Xinghui Co., Ltd.'s layout in other third-party platforms seems to have received positive feedback, with revenue increasing from 80 million yuan in the first half of last year to 160 million yuan, a huge increase of 104.26%, and its share increasing from 1.72% to 5.38%.

Offline channels are also making efforts. Although they have decreased to 129 million yuan from 140 million yuan in the same period last year, their share of revenue in cross-border e-commerce business has increased from 30.41% to 42.76%.

Although the products are exported to many markets around the world, including North America, Europe, Japan and the Middle East, North America is still the destination for most sellers, and Xinghui Co., Ltd. is no exception.

In the past six months, Xinghui Co., Ltd.'s sales in the North American market reached 172 million yuan, accounting for 56.88% of its cross-border e-commerce export business revenue , while the total revenue from other overseas markets accounted for "only" 43.12%.

There is 12.61 million yuan on Amazon that cannot be recovered

Although there has been some improvement in profits, the information in the financial report reveals that Xinghui Holdings' operations may not have improved significantly. In addition to the decline in revenue, it can be seen that the data in these dimensions, whether it is revenue from various channels, revenue from various markets, revenue from different products, and gross profit margin performance, are all declining.

The increase in its profits may be related to things outside of its business.

It is reported that in the past six months, Xinghui Co., Ltd. obtained investment income of 10.37 million yuan, accounting for 51.38% of the total profit, mainly debt settlement income; in addition, the penalty interest receivable from the arbitration with Amazon was 4.34 million yuan, accounting for 24.47% of the total profit.

In terms of liabilities, as of the first half of this year, Xinghui Co., Ltd.'s estimated liabilities exceeded 60 million yuan, and there were also estimated liabilities of 8.63 million yuan due to pending litigation .

Perhaps because of the greater competition in the market and the mess within Xinghui Holdings and its average financial situation, its investment in the first half of this year has also decreased by 39.74%, from 18.74 million yuan in the same period last year to 11.29 million yuan today.

What is giving Xinghui Holdings a headache is that it is still trying to clean up the mess left by Zebao.

From last year to this year, Xinghui Co., Ltd.'s subsidiaries STK and SKL have successively received tax payment notices from the tax authorities of the United States and Italy . The tax years involved are 2016-2021 . The former's taxes and fines totaled US $2.3784 million , and the latter exceeded 6.4244 million euros . As a result, Xinghui Co., Ltd.'s profit and loss amounted to 18.3275 million yuan in 2023 .

Therefore , in April, Xinghui Co., Ltd. announced that it would file a lawsuit with the Shenzhen Intermediate People's Court, demanding that four former senior executives of Zebao, including Sun Caijin, jointly compensate for losses of approximately 243 million yuan.

At present, perhaps Xinghui shares cannot be sure whether Zebao has any other unpaid taxes left. Although it will seek compensation from related parties (namely Zebao founder Sun Caijin, etc.) , it is unknown whether the money can be received in the end .

At the same time, the impact of the "Amazon account blocking" incident still exists. In 2021, six major brands under Zebao were banned from sales, and 367 related Amazon stores were closed . The balance of funds in the frozen stores that year was equivalent to approximately RMB 32.23 million.

By 2022, the amount of frozen Amazon store payments that are confirmed to be unrecoverable will reach 16.82 million yuan, while the amount of overdue payments that are expected to be unrecoverable is 13.17 million yuan.

In 2023, although STK, a subsidiary of Xinghui Holdings, won the lawsuit against Amazon and Amazon was ordered to pay US$2.4827 million , equivalent to approximately RMB 17.6487 million at the exchange rate at the time, there was still a batch of bad debts that could not be recovered.

The financial report for the first half of this year showed that the book value of Xinghui Co., Ltd.'s stores that were blocked on Amazon was 12.6125 million yuan, and it is estimated that the bad debts cannot be recovered .

In June this year , the Foshan Intermediate People's Court accepted the lawsuit filed by Xinghui Co., Ltd. The defendants included Sun Caijin, Zhu Jiajia and 11 others. The case was still about the acquisition contract of that year and the concealment of overseas tax evasion by Zebao Technology's wholly-owned overseas subsidiary from 2018 to 2019. Xinghui Co., Ltd. required the defendants to pay performance compensation and liquidated damages , of which the total amount of performance compensation payable was 89.1134 million yuan , and the liquidated damages were calculated at the rate of 0.05% of the compensation amount per day until it was actually fulfilled .

The case has not yet been heard in court.

Since the acquisition of Zebao, Xinghui Co., Ltd. has been involved in multiple legal proceedings with multiple parties in the original Zebao. As of June 30, 2024, the company's book value of goodwill from the acquisition of Zebao was RMB 330 million, and it may face the risk of goodwill impairment in the future.

After the acquisition , the glory did not last for a few days, and now it is in disarray ...

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