On September 23, Yonghui Supermarkets announced that its shareholders intend to transfer 29.4% of their shares to Miniso's controlling entity, Jun Cai International, for approximately 6.27 billion yuan. This strategic partnership aims to facilitate Miniso's transformation toward a quality retail model. Following this announcement, Miniso's stock (MNSO.US) opened down by more than 19% and ultimately closed with a decline exceeding 16%.

Miniso's Acquisition of Yonghui Supermarket Shares Leads to Significant Stock Drop

Miniso announced on the Hong Kong Stock Exchange its acquisition of 29.4% of Yonghui Supermarkets for approximately 6.3 billion yuan, which includes 21.1% held by Dairy Company and 8.3% held by JD.com. Upon completion of this transaction, Miniso is expected to become Yonghui's largest shareholder, thereby expanding its offline retail footprint. However, in reaction to this news, the market responded negatively, with Miniso's stock initially dropping 19% before closing down by 17%, reaching a 52-week low of $13.19 and reducing its market capitalization to $4.3 billion.

Market Concerns

The significant decline in stock price has raised considerable concerns in the market. On one hand, despite a teleconference held that same evening to clarify that Miniso would not seek control over Yonghui's board or consolidate financial statements, investors remain cautious regarding the potential financial strain resulting from such a substantial investment. On the other hand, Yonghui's recent performance has been disappointing, as consecutive losses have prompted skepticism about its future viability. Although Yonghui has shown signs of recovery under recent management changes, its half-year report reveals declines in both revenue and profit.

CEO Ye Guofu suggested a deeper strategic intent behind the investment, asserting that China's offline supermarket sector is facing a rare structural opportunity and that Yonghui possesses substantial potential. He emphasized that the challenges confronting the sector do not indicate a lack of viability in offline retail but rather stem from deficiencies in traditional retail models. Moreover, Ye characterized Yonghui's reform as a return to the fundamental principles of retail, highlighting the importance of consumer needs, corporate identity, and product quality.

While the immediate market reaction to the acquisition has been negative, Miniso's long-term strategic objectives remain resolute. The company continues to prioritize product innovation and intellectual property strategies, aiming for compound annual revenue growth of no less than 20% over the next five years, with earnings per share growth expected to exceed revenue growth.

In summary, Miniso's significant stock decline reflects market apprehension regarding its acquisition of Yonghui Supermarkets. Nevertheless, management remains optimistic about the investment's prospects, believing that this collaboration will create strategic synergies and open a new chapter in Chinese retail. Consequently, future disclosures and market reactions will be critical in determining whether Miniso can reverse its current downturn. Analysts recommend that investors closely monitor the company’s strategic execution and market feedback to assess its long-term growth potential.

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