Loss of 142 million in 9 months, Shenzhen's big sellers may be crushed

ST Youkeshu is still losing money despite being stuck in a quagmire ...

In the first nine months of this year , ST Youkeshu lost 142 million yuan, and the loss in the third quarter worsened. The once glorious top seller is now in decline in its core business and has been losing money for years. Its efforts to save itself are not optimistic. In addition, it and its subsidiaries are entangled in lawsuits, which will inevitably have an impact on its future profits. Today, this ill-fated seller seems to have been crushed.

ST Youkeshu lost 142 million in 9 months

Recently, ST Youkeshu released its third-quarter performance report. The company achieved operating income of 345 million yuan in the first nine months, a year-on-year decrease of 44.87%, and a net loss of 142 million yuan, with the loss expanding by 6.73% year-on-year. The basic earnings per share was -0.34 yuan.

In August, ST Youkeshu’s semi-annual performance report showed that the company achieved operating income of 235 million yuan in the first six months, a year-on-year decrease of 44.40%, and a net loss of 59.2862 million yuan, a year-on-year decrease of 29.28%.

In the third quarter of this year, ST Youkeshu’s losses exceeded 80 million, which was more than the losses in the first half of the year, and the losses widened.

However, compared with previous situations, ST Youkeshu's losses this year have narrowed.

In 2022, ST Youkeshu's revenue was 774 million yuan, a year-on-year decrease of 56.11%, and its net profit loss was 367 million yuan. As of the end of 2022, ST Youkeshu still had 307 million yuan in bank loan principal to be repaid, and the accrued interest and penalty interest reached 24.8404 million yuan.

In 2021, ST Youkeshu suffered a loss of nearly 2.7 billion yuan due to the impact of Amazon's account blocking. During the "account blocking wave", ST Youkeshu had about 340 stores frozen, about 130 million yuan of funds frozen, and the number of employees reduced from 3,000 to a few hundred.

In the second half of 2020, ST Youkeshu stocked up a large amount of inventory, especially strategically stocking up for the Amazon platform. However, its account was blocked the following year, its sales channels rapidly narrowed, and a large amount of inventory was unsold.

The Amazon ban in 2021 dealt a huge blow to ST Youkeshu, and the company has continued to lose money since then. According to this year's situation, the company lost 142 million yuan in the first nine months. During the traditional peak season in the fourth quarter, the company is expected to improve its performance and profits, and the overall loss this year should not exceed last year's 367 million yuan.

Core business is declining, and efforts to save oneself are not optimistic

After the account was blocked, ST Youkeshu also realized that over-reliance on the Amazon platform was too risky, so it adjusted its business strategy. On the one hand, it continued to rely on platforms such as Amazon to focus on the mainstream markets in Europe and the United States. On the other hand, it deepened its presence on other platforms such as Shopee and continued to explore blue ocean markets such as Southeast Asia and emerging platform businesses.

In the first half of this year, ST Youkeshu's sales on Amazon were 49.8902 million yuan, down 54.81% from the same period last year. The revenue on the Shopee platform reached 51.4793 million yuan, becoming the third-party platform with the highest revenue. However, it is worth noting that compared with the same period last year, the sales of the Shopee platform were also in a state of decline.

At present, the core business of ST Youkeshu is still cross-border e-commerce exports. In 2022, the operating income structure of ST Youkeshu was as follows: e-commerce accounted for 81.84%, software services accounted for 16.72%, and other industries accounted for 1.43%.

ST Youkeshu's cross-border export business is mainly carried out on third-party platforms such as Amazon, Shopee, AliExpress, and Wish. However, with the slowdown in macroeconomic growth, setbacks in overseas core consumer markets, and intensified competition in the cross-border e-commerce industry, ST Youkeshu's advantages are not so obvious. Sales on Amazon and Shopee platforms are declining, and its self-rescue situation is not optimistic.

In 2022, ST Youkeshu's online channel revenue was 625 million yuan, accounting for 98.79% of its cross-border e-commerce business revenue. Among them, sales on Amazon were 201 million yuan, down 61.28% from 2021; sales on other third-party platforms were 241 million yuan, down 65.31% from 2021.

Overall, ST Youkeshu's core cross-border e-commerce business saw a 60.11% decline in revenue last year. Offline revenue also declined, down 85.36% from 2021.

Revenue continued to decline and net profit continued to be in the red. From the opening of the market on April 26 this year, ST Youkeshu’s stock was suspended for one day. When it resumed trading on April 27, it was subject to other risk warnings. The company’s stock abbreviation was changed from "Youkeshu" to "ST Youkeshu".

Stuck in lawsuits, ST Youkeshu's "foundation" was damaged

At present, the funds frozen by Amazon for ST Youkeshu have not been unfrozen. On October 24, an investor asked ST Youkeshu about the unfreezing and recovery of funds from Amazon . The company replied that it is currently actively filing appeals and working hard to lift the fund freeze through cross-border arbitration, litigation and other means.

In response to inquiries about the reasons for the continued losses, ST Youkeshu replied on October 27 that the company's 2023 semi-annual and third quarter performance losses were mainly affected by the previously disclosed lawsuits, resulting in the provision of a large amount of estimated liabilities. The case is currently in the second instance, and the company and the legal advisors hired by the company will closely monitor the progress of the case and continue to promote the trial process of the case.

In terms of operations, the company continues to focus on its two main business operations. While maintaining steady development of its existing businesses, it actively expands incremental markets and improves profitability.

Speaking of lawsuits, ST Youkeshu faces quite a few. In the 12 months before July, ST Youkeshu was involved in 18 major lawsuits. On average, there were lawsuits every month, mostly service contract disputes, labor disputes and sales contract disputes, and most of them were defendants.

There are 7 cases in which ST Youkeshu is directly the defendant . Currently, there is a road freight transport contract dispute with 4PX in June, which has not been decided yet, and the amount involved is as high as 6.8077 million yuan.

In addition to itself, ST Youkeshu's subsidiaries are also facing multiple lawsuits. Recently, ST Youkeshu's subsidiaries Huangyuanrun and ST Youkeshu received documents such as the November 10th hearing notice delivered by the Beijing Arbitration Commission. The reason why the applicant Jiuqi Digital filed for arbitration was: there was a service contract dispute with Huangyuanrun and ST Youkeshu, and it required Huangyuanrun to pay US$1.4207 million.

In August, Shanghai Modern Shangyou Software Co., Ltd., a wholly-owned subsidiary of ST Youkeshu, was bankrupt and liquidated; in July, ST Youkeshu was sentenced to pay the principal of 184.92 million yuan and interest, penalty interest, compound interest, etc. to Pudong Development Bank in its M&A loan overdue dispute.

Before July, ST Youkeshu and its subsidiaries were involved in several major lawsuits. This series of cases made ST Youkeshu move forward under heavy burden.

Today, ST Youkeshu has already suffered a "root injury". After the third quarter report was released, Tonghuashun's financial diagnosis model conducted a comprehensive calculation and tracking analysis of more than 1,200 financial indicators of its current and past five years' financial data. ST Youkeshu's overall financial status in the past five years is lower than the industry average. Specifically, its asset quality, growth ability, debt repayment ability, and profitability are very weak, its cash flow is weak, and its operating ability is average.

The products sold by ST Youkeshu mainly include home building materials and household goods, electronic products, mobile communication and game accessories, sports goods, toys, health products and daily necessities, etc. In the first half of this year, the company's cross-border e-commerce business has accumulated purchases of 74.3454 million yuan, of which 14.5107 million yuan has been purchased from the top five suppliers. I wonder if these suppliers can sleep well?

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