Behind the Profit Growth Against the Trend: Hongqi Chain's "Retreat to Advance" Strategy

Ask AI · How does Hongqi Chain improve profits against the trend through refined management?

Judging by Hongqi Chain’s 2025 performance, the company is not stuck in a growth dilemma. Instead, amid industry shifts, it is actively making strategic adjustments and reshaping its value.

Produced by | China Survey Network

Reviewed by | Li Xiaoyan

On the evening of March 25, Southwest convenience store leader Hongqi Chain (002697.SZ) released its 2025 full-year performance quick report. This results summary, issued against the backdrop of overall pressure in the consumer market and intensifying industry competition, not only demonstrates the company’s resilience in navigating the cycle, but also outlines its strategic path of focusing on long-term value and proactively seeking change. The data show that in 2025 the company achieved total operating revenue of 8.31B yuan, net profit attributable to shareholders of listed companies of 481 million yuan, and basic earnings per share of 0.35 yuan; meanwhile, total profit reached 658 million yuan, up 9.41% year over year, showing the operational characteristics of “stable revenue, resilient profits, and solid fundamentals.” At the key node of the opening year of the “Fifteenth Five-Year Plan” period, Hongqi Chain centers on “expanding sources, cutting costs, and improving efficiency.” By a series of measures such as store optimization, supply-chain upgrades, and ecosystem collaboration, it is strengthening its foundation amid industry transformation and charting a new journey toward high-quality development.

In 2025, Hongqi Chain faced a complex and severe external environment—weak demand in the consumer market, intensified homogenized competition across the industry, and new formats such as snack discount stores diverting core customer traffic—along with the company’s proactive optimization of underperforming tail-end stores. Together, these resulted in a 5.61% year-on-year decline in revenue scale, falling below the 10 billion yuan threshold and setting a new revenue low since 2020. But from the deeper logic, behind this performance is not merely a setback in growth; it reflects the company’s rational management trade-offs and solid internal capabilities—an inevitable pain during a strategic adjustment period.

Profit performance more clearly highlights Hongqi Chain’s operating resilience. Although revenue declined, the company’s full-year operating profit still reached 668 million yuan, up 10.75% year over year; total profit achieved growth against the trend. This mainly comes from two core supports: first, refined management delivered notable cost reduction and efficiency gains. By substantially cutting selling expenses and administrative costs, it effectively offset external shocks and achieved a breakthrough of “seeking efficiency from management.” Second, investment returns continued to contribute additional growth. Its equity investment in Xinwang Bank has performed well, providing stable investment returns and becoming an important supplement to profit growth.

From the company’s financial fundamentals, its solid base has not been shaken. At the end of the reporting period, total assets were 4.79B yuan, a slight increase of 0.24% from the beginning of the period; shareholders’ equity attributable to listed company shareholders was 4.787 billion yuan, up 7.26%; net assets per share were 3.52 yuan, up 7.32%. The company’s asset scale and shareholders’ equity steadily increased, its financial structure continued to optimize, and its risk-resilience capacity further strengthened. Meanwhile, after deducting non-recurring gains and losses, net profit attributable to shareholders was 453 million yuan, down 4.91% year over year. Objectively, this figure reflects the staged performance of its core business under industry pressure, while also pointing the way for Hongqi Chain to focus on upgrading its core business in 2026 and improving its core profitability.

Regarding the reasons for performance changes, Hongqi Chain’s explanation is objective and pragmatic: overall pressure in the consumer market, disorder in the competitive ecosystem of the industry, clear homogenization characteristics, and the company’s proactive optimization and adjustment of underperforming tail-end stores—all together led to near-term revenue fluctuations. This “retreat to advance” strategy seems to sacrifice part of revenue scale, but in reality it creates space to optimize resource allocation and improve the quality of each store, avoiding the industry’s common pitfalls of “blind expansion and low-efficiency operations,” and laying a foundation for long-term sustainable development.

Facing industry transformation and operating challenges, Hongqi Chain did not respond passively. Instead, it drove multi-dimensional change with strategic resolve—breaking the gridlock from store optimization, supply-chain upgrades, ecosystem collaboration, and digital empowerment. Each measure tightly aligns with the core of “focusing on long-term value,” demonstrating the responsibility and commitment expected of a leading enterprise.

As the core carrier of community retail, Hongqi Chain’s store network is its core competitive strength. In 2025, the company discarded a “numbers-only” extensive expansion approach. It launched a store optimization and adjustment initiative, with a focus on shutting down low-efficiency tail-end stores, deepening efforts in core areas, and optimizing store layout and functional configuration. This adjustment is not merely a simple “closing stores and slimming down,” but rather upgrading store service capabilities around the needs of building “a 15-minute neighborhood life circle.” It adds more than 80 value-added convenience services such as housekeeping services, elderly care services, and transportation ticketing, delivering over 400 million service transactions per year—truly becoming a “life service center right at residents’ doorsteps.”

To date, Hongqi Chain’s total number of stores remains stable at over 3,000, mainly concentrated in Chengdu and surrounding prefecture-level cities. Regional density and market penetration rate continue to lead the industry. Through a store upgrade strategy of “better layout, stronger functions, and better services,” the company not only improves single-store operating efficiency, but also strengthens deep ties with community residents, consolidating its leading position in the Southwest community retail market and building momentum for a subsequent recovery in performance.

Product strength is the core competitive advantage of convenience stores, and the supply chain is the underlying support for product strength. In 2025, Hongqi Chain deepened strategic cooperation with more than 1,000 suppliers and pushed the supply chain from “pure procurement” toward “collaborative co-creation.” It focused on three major directions: first, optimize product structure and accelerate the rollout of products under “Hongqi Select.” In 2026, it plans to break through 100 product SKUs, and by introducing international brands from Hainan it will enrich the product matrix to meet consumers’ diverse and quality-oriented needs; second, deepen cooperation on Sichuan-brand products. By linking with Sichuan business investment entities under Sichuan Shantou, such as “Tianfu Grain and Oil,” it will build a rural revitalization专区 (zone) to help Sichuan products move out of Sichuan. This both enhances differentiated competitive strength and fulfills social responsibility; third, expand international cooperation. It actively participates in China-Korea economic and trade cooperation matchmaking events, reaches cooperation intentions with Korean companies in beauty, food, and more, plans to introduce Korean specialty products, and further increases the added value of products.

Ongoing supply-chain upgrades directly improve the company’s profitability. In the first three quarters of 2025, Hongqi Chain’s consolidated gross margin reached 29.36%, up slightly by 0.23 percentage points year over year. Even under cost pressure, gross margin remained stable, highlighting the significant results of supply-chain collaboration. In 2026, Hongqi Chain will continue to use supply-chain optimization as the core, further improving gross margin through scale effects, collaborative cost reductions, new product introductions, and other methods, strengthening the profitability foundation of its core business.

Relying on its network of over 3,000 stores and the people-daily-services attribute, Hongqi Chain is actively building a diversified business model of “goods + services + finance + ecosystem,” breaking the boundary of single retail and uncovering new growth potential. In the financial domain, it continues to deepen cooperation with Xinwang Bank, expanding financial services by leveraging store scenarios, enabling both improved investment returns and enhanced scenario-based services. In cross-industry cooperation, it has established long-term strategic partnerships with State Grid, China Petroleum, major banks, and others, connecting needs such as employee benefits and cafeteria cooperation, and member connectivity, to build an ecosystem of shared resources and value co-creation.

At the same time, Hongqi Chain actively responds to policy guidance and deeply participates in social welfare and public-interest initiatives, including: serving as a “key contact enterprise for emergency supply of essential living necessities” in Sichuan Province and Chengdu City, taking an active role in emergency supply; participating in activities such as the “Rong e Xing” transportation governance public welfare alliance and “Guo huo Zhen xuan” Sichuan product promotions to help activate the market and develop industries; being selected as an “exemplary advance battalion of demonstration Party members” of state-owned enterprises, practicing social responsibility led by Party building and showcasing the commitment of a leading enterprise. This “dual-engine” model of “business development + social responsibility” not only expands growth space, but also enhances brand reputation and market recognition.

Digitalization is the core engine for retail enterprises to improve quality and efficiency. In 2025, Hongqi Chain accelerated its digital transformation, using technology to empower store operations and supply-chain management. On one hand, in cooperation with Weidian 24, it built 24-hour cloud value-guard stores. Within half a year, it surpassed 500 stores, extending operating hours from 15 hours to 24 hours, activating the night economy, and improving store sales per square meter. In 2026, it plans to expand to 1,500 stores, achieving full coverage across all districts and counties in Chengdu. On the other hand, it explored the application of AI technology in areas such as supply chain, inventory management, and logistics and delivery, and worked with leading enterprises to test unmanned retail systems, reducing labor costs per store and improving operational efficiency.

In internal management, Hongqi Chain promotes organizational flattening through digital operations. In the first three quarters of 2025, the period expenses ratio decreased by 0.82 percentage points year over year. Among them, the selling expenses ratio decreased by 0.26 percentage points, and management efficiency improved significantly. The continued deepening of digital transformation will further reduce operating costs and enhance decision-making efficiency, providing solid support for the “cut costs and improve efficiency” strategy.

2026 is the opening year of the “Fifteenth Five-Year Plan” period and a critical year for Hongqi Chain to consolidate its advantages and achieve upgrades and breakthroughs. Faced with an external environment that remains complex and industry competition that grows increasingly intense, the company has clearly set the goal to “maintain strategic resolve, focus on long-term value, and fully achieve steady progress in development and solid improvement in operating indicators.” Centered on “expanding sources, cutting costs, and improving efficiency,” it will promote high-quality development from four major dimensions.

In terms of expanding sources, it will focus on three key areas: first, optimize product structure and accelerate the goal of breaking through 100 SKUs for “Hongqi Select.” It will introduce international brands and distinctive product categories to enhance product differentiation and added value; second, expand convenience services, adding more elderly care, housekeeping, and community service projects to increase the value of services per store; third, deepen ecosystem collaboration, broaden the boundaries of enterprise cooperation, tap partnership potential such as employee benefits and member interconnectivity, and cultivate new revenue growth points.

In terms of cutting costs, it will continue to advance refined cost control, optimize store operating processes, and reduce costs including labor, logistics, and marketing. At the same time, it will strictly control expense spending, improve the efficiency of capital use, and ensure that cost-control results continue to be released, providing support for profit growth.

In terms of improving efficiency, it will accelerate the implementation of digital transformation, expand the scale of cloud value-guard stores, apply AI technology, and improve supply-chain and store operation efficiency. It will deepen supply-chain collaboration by improving gross margin through large-scale procurement and collaborative cost reductions. It will strengthen refined store management to improve per-store revenue and profitability, achieving “efficiency improvement and value doubling.”

From the perspective of industry structure, although the convenience store industry currently faces challenges such as diversion from snack discount stores and consumption pressure, Hongqi Chain has clear differentiated competitive advantages backed by its strengths in regional deep cultivation, a well-developed convenience services system, solid financial fundamentals, and strong supply-chain capabilities. With the rollout of the company’s strategic initiatives in 2026, store quality and service capabilities will be further enhanced, its core profitability is expected to be steadily restored, and performance is expected to meet the development objective of “steady progress with steady improvements.”

Judging by Hongqi Chain’s performance in 2025, the company is not trapped in a growth dilemma. Instead, amid industry transformation, it proactively conducts strategic adjustments and value reshaping—behind near-term revenue pressure is a priority consideration of development quality; behind profit growth against the trend is the solid effectiveness of refined management and ecosystem collaboration. As a leading community retail player in Southwest China, Hongqi Chain always stays true to its初心 (original aspiration) of “serving people’s livelihoods and rooting in the community,” meeting industry volatility with strategic resolve and solving development challenges through proactive change.

At the start of the “Fifteenth Five-Year Plan” in 2026, Hongqi Chain will use “expanding sources, cutting costs, and improving efficiency” as key levers. It will continue to optimize the store network, upgrade the supply-chain system, deepen digital transformation, and expand ecosystem collaboration—while consolidating its industry advantages, continuously enhancing core competitiveness and profitability. We have reason to believe that, with a solid operating foundation, a clear strategic layout, and strong team execution, Hongqi Chain will undoubtedly pass through the industry cycle and write a new chapter of high-quality development in the community retail track, continuously creating greater value for consumers, partners, and society.