Profit of 600 million vs. debt of 100 billion: Is Suning.com turning around or facing a crisis?

Some businesses were sold off, others were spun out, and after a period of streamlining, Suning.com has successfully turned a "profit" by taking advantage of the favorable policy of trade-ins for new products. On March 29, Suning.com released its 2024 annual report. The report shows that the company achieved a net profit attributable to shareholders of the listed company of 610 million yuan for the whole year, an increase of 114.93% year-on-year. The net amount of cash flow generated from operating activities was 4.586 billion yuan, an increase of 57.56% year-on-year, marking the first time the company has achieved a full-year profit since 2020.

Although some argue that Suning.com's profits in 2024 are "technical" profits achieved through debt relief and asset sales, overall, profitability at the operational level is still a positive signal.

Industry insiders pointed out that under the burden of huge debts, Suning's profitability is also the result of operational improvement, which is conducive to enhancing the confidence of investors and creditors, providing more room for Suning to make a comeback. The fee and debt reductions granted by relevant stakeholders are a vote of confidence and bet on Suning's recovery.

After Zhang Jindong's return, Suning.com refocused on its core retail business and achieved operational improvements through measures such as asset sales and debt resolution. The capital operations involving TTK Express, while streamlining burdens, also added a new source of net profit for the company. This is seen as a technical contributor to Suning.com's profitability. Additionally, last year, Suning.com gained investment income of 1.244 billion yuan from advertising fees, rental income, property management fees, and partial debt exemptions.

Industry insiders pointed out that Suning.com can still generate revenue this year through the same method, as the market value of the China Unicom stocks held by Suning.com is around 2.3 billion yuan. The arbitration application related to the 5.041 billion yuan buyback amount involving Wanda Group has also been accepted.

However, it is undeniable that, with the tailwind of the trade-in policy and its own reform strategies, Suning.com's turnaround from losses to profits also involves certain proactive factors. From a policy perspective, the trade-in initiative has driven a recovery in the home appliance consumer market. According to data from AVC, the retail sales of all home appliance categories in the fourth quarter of 2024 increased by 24.4% year-on-year.

As an important home appliance retail channel, Suning.com took the lead in responding to and undertaking the trade-in subsidy campaign. Relying on its nationwide store layout and localized retail service capabilities, its total channel operating income in the fourth quarter increased by 34.35% year-on-year. The conversion rate of the company's trade-in business is higher than the industry level.

The Suning.com report shows that in 2024, Suning.com promoted the comprehensive optimization and upgrade of its store model, with comparable store sales revenue and sales per square meter increasing by 2.8% and 1.17% year-on-year, respectively. Particularly in the fourth quarter, performance was strong, with comparable store revenue and sales per square meter rising by 64% and 62% year-on-year, respectively.

In terms of performance, Suning.com achieved both revenue and profit growth in the fourth quarter of 2024, with revenue and net profit reaching 18.769 billion yuan and 11 million yuan, respectively, representing year-on-year increases of 34.35% and 100.77%. The growth rate of net profit outpaced that of revenue.

Despite the improved performance of Suning.com in 2024, the company's crisis has not been resolved. Although it has received some debt relief, Suning.com's debt crisis still looms large. As of the end of 2024, the company's asset-liability ratio remains as high as 90.63%, with current liabilities exceeding current assets by 40.859 billion yuan. Additionally, 33.189 billion yuan in payables are overdue, and 16.810 billion yuan in bank and financial institution loans have triggered defaults or early repayment clauses in the relevant loan agreements.

Of the company's RMB 119 billion in total assets, more than RMB 51 billion are restricted for various reasons. In 2024, as a defendant due to contract disputes, the company and its controlled subsidiaries saw new litigation and arbitration cases with a claimed amount exceeding RMB 3.3 billion. This adds uncertainty to Suning Commerce Group's subsequent operations.

Industry insiders point out that achieving profitability at the operational level still holds significant positive implications. Under heavy debt, the sustained improvement in operating cash flow (such as maintaining a positive net operating cash flow in 2024) provides core support for stabilizing creditors.

Looking back at its business development in 2024, Suning.com seized the opportunity of the national trade-in policy, resulting in a 150% increase in trade-in order volume in 2024, which drove a year-on-year growth of 24.4% in retail sales across all home appliance categories in the fourth quarter. By combining "national subsidies + manufacturer subsidies + Suning subsidies," the cost for consumers to trade in their old products was significantly reduced, stimulating demand release, directly boosting sales growth, and improving operating cash flow.

What is reflected behind this is Suning's ability to align with policies. The full utilization of the old-for-new policy dividends is beneficial for strengthening its leading position in the home appliance retail channel and enhancing its confidence in sustainable profitability. Industry insiders believe that the recovery of profitability has strengthened creditors' confidence in the company's debt repayment ability.

Additionally, the enhancement of hematopoietic capacity also helps it break free from the cycle of "repaying old debts with new loans." Suning.com is transitioning toward a virtuous cycle where operational profits support debt repayment. Benefiting from the policy红利 of trade-in programs, Suning.com's performance outlook for 2025 remains positive. Analysts point out that with the continued advancement of the "trade-in" policy, Suning.com's sales scale, market share, and operational efficiency are expected to further improve.

However, in the long term, Suning.com still faces uncertain risks. The recovery of profitability can only be delayed, but the real problem cannot be solved. The scale of short-term borrowings and maturing debts still exceeds 20 billion yuan. In 2024, the net cash outflow from financing activities means that the path of repaying debts relying on operating cash flow may break under the background of shrinking revenue. In addition, the two-way squeeze from traditional e-commerce platforms (JD.com, Tmall) and instant retail platforms (Meituan, Douyin), along with consumer price comparison behaviors, has led to a decline in the premium ability of offline channels.

If the non-GAAP net profit can substantially turn positive in 2025, and debt does not trigger a new liquidity crisis, the sustainability of Suning.com's profitability can be expected.