Yonghui Superstores’ year‑end warning for 2025 — a projected net loss attributable to shareholders of RMB 2.14 billion — has refocused attention on a once‑dominant national supermarket chain. The result marks the fifth consecutive year of losses and a 45.6% widening of the annual deficit, undoing the fragile progress seen in 2024 and underscoring how a high‑profile transformation has become an immediate financial strain.
The company attributes the plunge to “short‑term pain” from an aggressive strategic pivot: in 2025 Yonghui deep‑refitted 315 stores and closed 381 underperforming outlets, generating roughly RMB 1.21 billion in direct transformation charges, including RMB 910 million in asset write‑offs and RMB 300 million in foregone gross margin. Short‑term supply‑chain disruption, an overseas investment loss of RMB 236 million and RMB 162 million in long‑term asset impairments compounded the hit, producing the headline RMB 2.14 billion deficit.
But the balance‑sheet story runs deeper than a single‑year adjustment. Yonghui’s assets peaked at RMB 80.19 billion in 2021 and had shrunk to RMB 31.62 billion by Q3 2025, while liabilities stood at RMB 28.129 billion and the asset‑to‑liability ratio climbed to 88.96%, perilously close to a 90% warning line. Operating cash flow has weakened dramatically — from RMB 5.864 billion in 2022 to just RMB 1.14 billion in the first three quarters of 2025 — constraining the company’s ability to absorb transformation costs without external funding.
The symbolic driver of Yonghui’s overhaul is the “Pangdonglai model”, a regional retailer famed for dramatic service upgrades, high staff pay and profit‑sharing, and tight local procurement networks. Yonghui’s pilot refits reported an average 80% traffic lift and record‑high single‑store results in 60% of refitted outlets, lending CEO Wang Shoucheng the confidence to promise company‑wide refits by 2026 and a two‑to‑three year plan to restore viability.
Traffic gains, however, have not translated into sustained profitability because Yonghui copied Pangdonglai’s surface without replicating its structural design. Pangdonglai’s economics rest on three hard‑to‑export pillars: a redistribution of profits toward employees that yields extremely low turnover and high operational discipline; regionally concentrated, co‑operative procurement and cold‑chain logistics that compress costs; and a transparent pricing and trust model that drives very high repeat purchase rates. Yonghui’s national footprint — more than a thousand stores across 30 provinces — undermines the localized supply‑chain density and cultural coherence that make the Pangdonglai formula work.
Industry data highlights the mismatch. The China Chain Store & Franchise Association reports most successful refits cost retailers roughly 3–5% of revenue and deliver single‑store efficiency gains; Yonghui’s store refit and closure bill reached about RMB 1.2 billion, roughly 1.7% of anticipated 2025 revenue near RMB 70 billion, but when combined with supply‑chain disruption, overseas losses and impairments the overall hit consumed the company’s potential profit pool. In short, Yonghui’s transformation costs are unusually large relative to its current margin cushion and cash flow profile.
The capital picture raises the stakes further. Yonghui plans a private placement to raise RMB 3.1 billion to fund refits and supply‑chain upgrades; a failed fundraising round coupled with weak consumer spending would leave the company exposed to a liquidity crunch. The broader retail sector is polarizing: regional chains that localize procurement and refine service are widening the gap with national players, prompting a “single‑store quality over sheer scale” shift for winners and a painful re‑sorting for laggards.
Yonghui’s predicament is therefore twofold: operational and strategic. Operationally, it must convert headline footfall into repeat spending by rebuilding assortment quality, pricing transparency and store economics; strategically, it must decide whether to decentralize into regional operating hubs, reallocate margins to employees to lower shrinkage and turnover, and invest in proprietary brands to escape dependence on channel fees. Those are systemic reforms that cannot be solved by cosmetic redesigns or a rapid nationwide roll‑out of a model tailored to a different scale and culture.
What matters beyond Yonghui is the lesson for Chinese retail: imitation without institutional transfer is risky. Pangdonglai’s founder put it plainly — practices that look easy on the surface are rooted in difficult, often cultural choices. For investors, suppliers and policymakers, Yonghui’s losses are a warning that the industry’s shift from scale to efficiency requires deeper organizational redesign, resilient regional supply chains and new labour‑and‑incentive structures. 2026 will not only test Yonghui’s execution of its refit programme but also the viability of a national chain trying to synthesize a regionally proven operating model at scale.