Layoffs, store closures, supplier arrears! What happened to Carrefour? Related | Ma Weiping | Arrears

"I worked at Carrefour for 20 years, and everything was normal at first. But one day at the end of April, I suddenly received an email from the company about the termination of the labor contract. According to my length of service, the layoff should be N+1 compensation, which is about 200000 yuan, but Carrefour gave me more than N, 190000 yuan, and it was agreed to pay in installments, but so far nothing has been received." Wu Fang angrily told the First Finance reporter.

Recently, many former employees of Carrefour disclosed to the reporter of China Business News that they had received layoff notices one after another, and the plans given were basically N compensation fees, which were paid in full installments or at a discount of 60%, but many people had not received the payment.

At the same time, Wangwang, Tongyi and other suppliers also had disputes with Carrefour because of the payment arrears. Carrefour's store closure and shopping card troubles have also been heard all the time.

It took several months for the First Finance reporter to restore the truth behind the giant Carrefour's crisis through field research, multiple interviews in the industry and information sorting. And where should this globally renowned retail enterprise's business in the Chinese market go in the future?

Layoff controversy

Wu Fang is mainly engaged in the operation of Carrefour. At the age of 45, she has a 22-year-old son, who also stayed at Carrefour after his internship. However, at the end of April this year, both mother and son were laid off. "We are all working normally, and then we received a notice. The proposed solution is N's compensation fee, but it should be paid in 12 installments. After thinking about it, I signed a compensation clause and divided it into 12 installments. The first installment was supposed to be paid on May 31st, but the compensation was not received until June 1st. So far, I haven't received anything." Wu Fang told First Financial reporters that it is difficult to find a job at his age. Currently, only his husband is still working, and his son hasn't found a suitable job yet. Later, Wu Fang filed for labor arbitration.

Similar to Wu Fang, He Ming has worked in Carrefour for 18 years, and has worked in household appliances, procurement, management, commodity planning and other positions. Also, one day in late April this year, he was still working, and suddenly was called to talk, and suddenly informed that he was laid off. "The compensation is calculated based on N, and the company told me that there are two options, either a 60% discount to take it all at once, or a full payment divided into 12 installments, given once a month. In fact, some people with poor performance have already resigned one after another since last year, but I didn't expect it to be my turn. I think discounts or installments are not reasonable, so I went to labor arbitration and demanded that the company pay me 2N compensation." He Ming told a reporter from First Financial that he heard that some colleagues have received some money, while others have not received money, and everyone's situation is different.

Zhang Jia is a cashier at Carrefour. He has worked at Carrefour for nearly 10 years and will retire in a few years. At the end of April, he suddenly received a dismissal notice from Carrefour. Also, give Zhang Jia a 60% discount to receive a one-time compensation or receive the full payment in 12 installments. "My monthly salary is very low, and I can't really compensate much. I'm not very willing to accept the company's plan. Last year, some colleagues in our store were laid off, and we haven't received all the money we deserve yet. So I went to arbitration, and my demand is to pay the normal compensation in a lump sum," Zhang Jia told First Financial News.

Ma Weiping, who has worked at Carrefour for more than five years, received the notice of dismissal in June this year. It is also the same choice of getting the compensation at a discount of 60% or getting the full payment in 12 installments. Similar to Zhang Jia, Ma Weiping has seen cases of colleagues who have been unable to get the compensation for a long time. Therefore, Ma Weiping is unwilling to compromise, so he also chose arbitration and does not accept mediation. Currently, he is waiting for a court hearing. "Our department originally had 8-9 people, but now less than half of them are available. My demand is to make a one-time payment of N+1," Ma Weiping told First Financial reporters.

Fang Gang, who is nearing retirement age, was also laid off by Carrefour a few months ago and asked to choose between a one-time compensation at a discount of 60% and a full payment in installments of 12 months. Fang Gang resolutely chose a one-time compensation at a discount of 60%. "I don't want to fuss too much, just give it a discount and make a one-time payment. But I didn't expect the company to not make the payment as scheduled, so I also went to arbitration. Now I'm waiting for the hearing," Fang Gang told a reporter from First Financial.

There are also many similar employees, with varying length of service, who are gradually laid off within a few months. The compensation is either a one-time discount of 60% or a full payment in 12 installments. Based on the feedback from these employees, some of them made choices, while others were unwilling to make either choice. Some people have received partial compensation, some have not received it yet, and there are also those who were laid off earlier who have received full compensation. Many people have gone to arbitration, including those who accept mediation, those who do not, and some who are waiting for the hearing.

In this regard, Carrefour said, please rest assured that it will properly solve the problem for relevant employees.

Duan Zimian, Senior Partner of Beijing Jincheng Tongda Law Firm, analyzed to First Financial reporters that according to relevant laws and regulations, layoffs should be notified in advance. As for compensation, whether to receive a 60% discount in one lump sum or receive it in 12 installments depends on whether the employee has signed an agreement. If the employee chooses to sign an agreement, it will be executed according to the agreement. If there is no agreement signed, one can raise their own demands through legal channels. As for the overdue payment after signing the agreement, it depends on whether there is a breach clause in the agreement for overdue payment, and it should be handled according to the breach clause.

Store closures and stockouts

At the same time of staff layoff disputes, Carrefour stores are shrinking, and some stores are still out of stock.

After visiting more than ten stores in Shanghai and Beijing recently, a reporter from First Financial News found that many stores have introduced Suning Electric floors, and the overall customer flow in the stores is not high. Some stores did not turn on air conditioning during the hot summer season, and the salesperson explained that it was an air conditioning malfunction. Some of the stores are pitch black, with no customers, no shopping exits closed by yellow fences, and cash register exits also closed. After questioning the staff of nearby shops, the staff stated that it was due to a power outage and shutdown.

It is worth noting that the reporter of First Finance and Economics has seen in many Carrefour stores that its freezers are basically empty and out of stock, and some shelves are also short of goods. Relatively speaking, daily necessities and condiments are relatively sufficient. There are still restrictions on the use of shopping cards.

As for the restriction on the use of shopping cards, Carrefour previously responded that the proportion of shopping cards in some regions was once again abnormal, and the malicious cashing of "scalpers" was on the rise. In order to further curb and crack down on illegal activities that disrupt the market, such as the malicious run of commodities by criminals and "scalpers", reduce the proportion of shopping card consumption, and ensure that the store inventory is at a normal level to meet the normal shopping needs of consumers, the shopping card consumption policy in some cities was temporarily adjusted.

According to the public information, Carrefour has once been brilliant, and once entered the top three chain supermarkets in China in 2012, with 321 stores at its peak. However, by the end of June 2022, there are only 151 Carrefour stores left, less than half of the number in its heyday. Last year, Carrefour closed 58 stores. From January to March this year, Carrefour closed another 33 stores. On April 28, Carrefour on Malian Road in Beijing was closed. Also on April 28, Carrefour's first membership store was closed. On April 30th, the Jiukeshu and Shijingshan stores in Tongzhou, Beijing were temporarily closed.

A reporter from China Business News recently saw in Carrefour's Longde Plaza store in Beijing that all channels leading to Carrefour had been closed. According to the staff of the store, the reason why Carrefour closed was that the store had to be renovated and upgraded, so it was suspended. The closure of Carrefour also led to the tenants who rented Carrefour being unable to open, so they had to post a notice to apologize, and the emergency address was opened separately. Residents near Longde Square said that when he went to Carrefour for shopping on July 18, the store was still open, but many of the shelves inside were empty, and the air conditioners and elevators were also out of service. Customers could only walk up and down. The empty fresh food area simply turned off the lights. Only some of the shelves near the cashier's counter were still lit, but they were filled with paper towels, laundry detergent and other products, and almost no staff could be seen.

Closing and stopping losses is also a common method used by retailers. Carrefour is also trying to make efforts. At the beginning of April, Carrefour's new business store, the first community quality life center, was unveiled. The store is located in Gubei District of Shanghai and is upgraded from an existing store. The reporter from First Financial News saw on site that, unlike previous stores, the Quality Life Center has introduced a large number of household appliances, opened up its own brand area, and added a series of convenient services. The senior management also stated that they plan to upgrade their supply chain and hope to transform more than 100 stores nationwide into a community quality life center model in the future.

Supplier disputes

Although Carrefour is also trying to transform and adjust its stores, the core problem is that many stores are out of stock, which is the key to the operation of retailers.

A person familiar with the matter said that the dispute between Carrefour and its suppliers over payment in arrears began last year, and from time to time suppliers would come to Carrefour to recover payment.

The reporter from China Business News learned from some Carrefour suppliers that the reason why Carrefour has no goods to make up is that the supplier has not settled the payment for goods and the supplier no longer cooperates with Carrefour.

Since the second half of 2022, Carrefour has been confronted with financial difficulties and arrears of payment for goods. Since February 2023, enterprises including China Wangwang, Haoliyou and Uni President have applied to freeze Carrefour's assets and recover payment for goods.

In February 2023, Holiyou Food Co., Ltd. applied to freeze the bank deposit of 22.7412 million yuan of Carrefour Supply Chain Management Co., Ltd; China Wangwang applied to freeze more than 23.98 million yuan of Carrefour supply chain company.

The relevant person in charge of China Wangwang told China Business News that Wangwang and Carrefour had stopped cooperation since September 2022, and Carrefour still owed more than 20 million in the payment for goods, and had not given a clear solution, so China Wangwang also took the way of litigation to recover.

A supplier told China Business News that since the first half of 2022, Carrefour's payment collection has become abnormal. At the beginning, Carrefour can make payments on time every month, but only part of the accounts can be settled each time. At that time, it had already "felt bad". But it did not expect that since September 2022, Carrefour would completely fail to make payment for goods.

Since the payment period of Carrefour is 45 days, the supplier has already borne some financial pressure, so after the dispute, the supplier was unwilling to supply goods in arrears and chose to stop the goods. Carrefour also tried to persuade suppliers and proposed a new cooperation method of taking goods in cash. However, according to the above supplier, Carrefour did communicate with him about this, but did not come up with a specific plan in the end, so the cash delivery plan was not followed.

Zhu Danpeng, vice president of Guangdong Food Safety Promotion Association, told the reporter of China Business First that Carrefour's problems include its own supply chain, management costs, etc., which are too high and inefficient; There are also "sequelae" generated by consumer iteration. The consumer group in traditional hypermarkets is aging, while the younger generation of consumers is becoming "increasingly lazy", even if the price is higher, but they pay more attention to the convenience of shopping and service system, which is also the weakness faced by the traditional hypermarket model.

A person familiar with the matter reluctantly said that Carrefour's purchases were all about goods in the past, but now they are dealing with the account of payment for goods in many cases.

The supplier dispute directly led to some products being out of stock, resulting in some stores having empty shelves. In addition, limited use of shopping cards has led to a sharp decline in revenue for some stores. According to an insider, under normal circumstances, the daily turnover of a single store in a hypermarket like Carrefour is more than 700000 yuan to more than 1 million yuan, but now the number of some stores has dropped sharply.

How could that be so?

How could an internationally renowned retail giant be in such a situation?

The reporter from First Financial News learned that in recent years, due to fierce market competition, physical retailers have faced various challenges such as e-commerce and costs, and retailers have been under great pressure. Even the former star enterprise, Bu Bu Gao, has had to change its control. Carrefour and other hypermarket enterprises also face the same competitive problems. For example, Wal Mart and Metro AG are actively launching high price and high profit member stores to improve their performance, because the performance of hypermarkets is obviously inferior to that of member stores.

Unfortunately, what Carrefour is best at is the hypermarket, and the membership store is its weakness. Although Carrefour has also tested the membership store, the private brand and supply chain of Carrefour's membership store are significantly different from those of Sam, COSTCO and other competitors, so Carrefour has previously closed its first membership store.

As a giant, one of Carrefour's original biggest advantages is its supply chain, which is also the key point that Suning attaches importance to.

On June 23, 2019, Suning E-shop announced that Suning International, a wholly-owned subsidiary of the company, planned to invest 4.8 billion yuan (equivalent to EUR) to acquire 80% of the shares of Carrefour China. Three months later, Suning acquired Carrefour China and completed the settlement. At that time, Zhang Jindong, Chairman of Suning Holding Group, issued an open letter of "Embrace each other and salute the future" to welcome 30000 Carrefour Chinese employees to join Suning. "To accelerate the integration of the industrial chain, we must embrace each other without reservation and wholeheartedly, connect resources, and serve our upstream and downstream partners well," Zhang Jindong wrote in a letter to all employees

At that time, Suning E-shop "targeted" Carrefour China's FMCG operation experience and supply chain capability. In 2019, Suning announced the establishment of a fast moving consumer goods group, and the order volume of fast moving consumer goods grew rapidly. Suning E-shop mentioned in the announcement that the acquisition of Carrefour China would effectively improve Suning's overall business capability, strengthen Suning's own brand research and development capabilities, market promotion capabilities, and food quality control capabilities in the field of fast moving consumer goods, and promote supply chain empowerment. At the same time, Suning believes that its experience of full scene retail mode, three-dimensional logistics distribution network and combination of online and offline can help Carrefour stores complete a comprehensive digital transformation and build a supermarket scene integrating online and offline.

However, unlike the original team practice of Wumart in Metro AG, which retained Metro AG, Suning adopts the "exchange of blood" model. According to an insider, Suning has sent a large number of personnel to Carrefour after it became a shareholder of Carrefour. However, Suning's business logic is very different from Carrefour itself, which has also changed Carrefour in supply chain, personnel management and store operation.

"At the beginning, the original management was still there, but slowly, many Suning staff joined Carrefour's management. At present, a large number of Carrefour's management staff are from Suning. If any staff leaves, some of the new recruits recruited by Carrefour under Suning's control are Suning's management trainees. Under this mode, Carrefour's old people who were proficient in the supply chain business of hypermarkets gradually fade out, but these receivers or new people in Suning do not know the supply chain business and procurement of hypermarkets, so Carrefour's original supply chain advantages are damaged." A former Carrefour employee revealed Under Suning's management, the original ordering rules of Carrefour stores have also been changed. For example, the quantity of orders has led some stores to order a large number of goods that are not very popular, which has affected Carrefour's performance.

The store business of Carrefour has been affected by fierce competition, high cost and supply chain advantages. Comparatively speaking, Wal Mart, which relies on Sam's Club for profits, and Metro AG, which retains its original team and continues to play its procurement advantages, are also facing competitive pressure, but the overall situation is significantly better than Carrefour.

Public information shows that in 2020, Carrefour will have a net loss of 795 million yuan; In 2021, Carrefour had a net loss of 3.337 billion yuan; In the first half of 2022, Carrefour suffered a net loss of 471 million yuan.

Under such circumstances, Carrefour urgently needs financial support to "rescue", but Suning seems powerless.

From 2020 to 2022, Suning's operating revenue has declined significantly for three consecutive years, falling into huge losses. From 2020 to 2022, Suning's operating revenue was 252.296 billion yuan, 138.904 billion yuan, and 71.374 billion yuan, respectively, with year-on-year declines of 6.29%, 44.94%, and 48.62%.

This also means that before Carrefour China could be "transfused", Suning E-Buy's own main business and finance were in crisis. According to the announcement of Suning.com, the decline in the company's revenue is mainly due to complex factors such as external environment and strict real estate control affecting the Chinese home appliance retail market. Affected by the real estate, the demand for Suning's main 3C home appliance business has weakened. In addition, changes in home appliance retail channels are also taking place constantly. Previously, Jingdong, Ali, Pinduoduo, Meituan, Tiktok, Kwai, etc. joined the competition of 3C home appliances. Suning's retail sales in China's home appliance market have declined year by year.

Suning's financial crisis is gradually emerging. In 2021, Suning's liabilities reached 157 billion yuan, with an asset liability ratio of 81.83%. Zhang Jindong also engaged in frequent equity pledge actions with Suning Electric Appliances Group in the same year. The emergence of funding problems is partly due to the long-term accumulation of insufficient blood production in the main business. Since 2017, the net cash flow generated by Suning's operating activities has been negative for six consecutive years, and the net increase in cash and cash equivalents has been negative for four consecutive years since 2019. On the other hand, Suning's continuous expansion since 2012 has also brought sequelae. The acquisition of American brand Red Child for $66 million has entered the maternal and child industry, PPTV for $250 million has entered the entertainment industry, Tiantian Express for $2.975 billion, ZTE Nubia smartphones for $1.93 billion, and Wanda Commercial shares for $9.5 billion have consumed Suning's large assets, and the operation of these acquired assets has mostly ended in failure.

Under such circumstances, it is difficult for Suning to "transfuse" Carrefour China and drive Carrefour China's operation with the strength of the group. Since 2021, Suning E-shop has entered the stage of accelerating "downsizing". Zhang Dongdong proposed that "some loss making business units should actively carry out model transformation, and businesses that are seriously loss making and deviate from the main line of development should be actively cut off." That is, Carrefour not only did not receive financial support from Suning, but also was included in the "downsizing plan" by Suning E-shop, and a large number of Carrefour stores were closed to improve operating efficiency. Financial report data shows that in 2022, 58 Carrefour stores will be closed in China, and 33 stores will be closed in the first quarter of this year. Suning E-shop announced that "the company's current capital situation cannot inject capital into Carrefour in a short time" to improve Carrefour's insufficient liquidity and inventory.

However, Carrefour still faces many difficulties after its stores shrink. The announcement of Suning E-shop disclosed that what the company could not predict was that Carrefour's operations in China were not recovered as expected in January 2023. Instead, from the beginning of February 2023, the negative public opinion about Carrefour China, including the centralized consumption of stored value cards, gradually expanded from the impact of individual regions and the We Media. The company and Carrefour China continued to face serious external public opinion pressure. The confidence of all partners, including suppliers, was severely hit, Carrefour's liquidity pressure surged, supply chain relationships were blocked, and effective inventory declined rapidly, which directly had a bad impact on Carrefour's operations in China. In February and March 2023, Carrefour's sales revenue in China decreased by 65.0% and 77.4% year on year respectively, and 54.63% and 31.25% month on month respectively. Carrefour's business in China is facing great crises and challenges. Affected by this, its operation plans, such as the disposal of relevant assets and the introduction of strategic partners, have almost stagnated. Brand goodwill and reputation have been severely damaged, and consumer trust, satisfaction and reputation have declined precipitously.

On the evening of July 14, Suning E-shop released a semi annual performance forecast for 2023. The announcement showed that the net profit loss attributable to shareholders of listed companies during the reporting period was expected to be between 1.5 billion and 2 billion yuan, the net profit loss attributable to shareholders of listed companies after deducting non recurring gains and losses was 1.6 billion to 2.1 billion yuan, and Carrefour China's estimated net loss was 950 million to 1.1 billion yuan. Regardless of the loss of fair value changes and the impact of exchange losses caused by exchange rate fluctuations, as well as the one-time related compensation and other expenses brought about by the closure of Carrefour stores in China and the provision for goodwill and long-term asset impairment, Suning's profit related to the business operation in the first half of the year also lost 250 million to 500 million yuan.

How will Carrefour's business in China be saved in the future? Some insiders believe that the first thing to solve is the problem of capital. Whether it is layoffs, store closures or supplier disputes, it is ultimately due to the shortage of capital. Therefore, it is necessary to find capital supplements, and then let professional retail stores operate Carrefour to gradually restore its supply chain advantages. However, it is not easy to achieve.

In this regard, Suning E-shop said in its announcement that since February 2023, in order to curb the sharp deterioration of Carrefour's business in China, the company has taken the initiative to shoulder its due social responsibility, actively negotiated and communicated with important suppliers, tried to promote the recovery of normal cooperation, took various means to restore consumer confidence, and tried to maintain the stability of Carrefour's daily business in China. By the end of March 2023, the company has gradually clarified the plight of Carrefour China and the latest operating conditions through the above measures, and has also mastered relatively reliable and comprehensive information to optimize and adjust its future operations in line with the current actual situation. Considering that the current capital situation of the company cannot inject funds into Carrefour to improve its external public opinion and internal liquidity in a short time, the company has further determined the future development keynote of "downsizing and changing" for Carrefour's operation plan in China, and must firmly close stores and exit from loss areas, while reducing the investment in various operating costs; Retaining stores to reduce operating space, increasing integration with the electrical industry, and accelerating investment in community living formats; Regional operations must exert autonomy and implement diversified supply chain cooperation models to improve capital turnover efficiency.

Suning Yigou further disclosed that at the beginning of April, the present value of Carrefour China's future cash flow calculated according to the above updated operating plan was lower than the book value of its portfolio of asset groups, and it was expected that the net amount of the fair value of the portfolio of related asset groups less the disposal costs would not be significantly higher than the present value of future cash flow. The Company determined the recoverable amount of the portfolio of asset groups based on the present value of future cash flow and accrued long-term asset impairment reserves of about 3.9 billion yuan accordingly. Compared with the performance forecast in January 2023, the main reason for these differences is that Carrefour plans to reduce the number of future operating stores, reduce the operating area of the reserved stores, and increase the change in the future income growth rate used in the discount calculation of cash flow after the integration with the electrical industry.

It is worth noting that Suning has not yet given up its hope for Carrefour China to "attract aid". It was mentioned in the announcement that Suning E-Commerce will actively seek financial support for Carrefour China, including the sale of Carrefour China's own commercial properties, seeking support from strategic partners and other ways to raise funds to support the adjustment and development of business.