The lingering downturn in China's real estate market appears to be accelerating its negative impact on downstream industries this year, with the home furnishings sector feeling the effects most acutely. On March 30, leading home decoration and furniture retailer Red Star Macalline (601828.SH; 01528.HK), which holds listings on both the A-share and H-share markets, disclosed a massive loss in its 2025 annual report. The company reported a net loss attributable to shareholders of 24 billion yuan, marking its third consecutive year of losses and a nearly six-fold increase compared to the 2024 deficit. However, possibly due to prior market anticipation, the stock reaction was muted. On March 31, Red Star Macalline's A-shares edged up 0.41%, while its H-shares closed down 1.56%. Year-to-date, the A-shares have declined approximately 10%, while the H-shares have gained over 3%.
Red Star Macalline, which went public on the Hong Kong Stock Exchange in 2015 as the "first stock in China's home furnishings retail industry" and later listed on the Shanghai Stock Exchange in 2018, reported a significant performance collapse for 2025. Revenue fell to 65.819 billion yuan from 78.213 billion yuan in 2024, a decrease of 15.8%. Gross profit followed a similar trend, declining 15.2% to 42.297 billion yuan from 49.87 billion yuan. The net loss attributable to shareholders, however, ballooned to 240.937 billion yuan, a 590% increase from the 34.92 billion yuan loss in 2024. The core net loss attributable to shareholders widened to 54.922 billion yuan, a 314% increase from 13.274 billion yuan. Loss per share surged from 0.80 yuan in 2024 to 5.53 yuan in 2025. Financial data from the past nine years indicates that Red Star Macalline's performance peaked in 2019, with total revenue reaching 164.7 billion yuan, followed by a steady decline. The net loss began in 2023 with a deficit of 24 billion yuan, which increased moderately in 2024 before the sharp deterioration in 2025.
The company attributed the revenue and profit decline directly to the industry contraction. Its 2025 annual report cited the ongoing impact of a sluggish real estate market and falling demand in the home building materials sector, leading to weaker retail demand. To retain merchants and attract new brands, the company implemented rent and management fee reductions, which significantly impacted its leasing and management income and led to a notable drop in rental rates. Red Star Macalline's core business operates through three models: self-operated malls (74 locations, contributing 74.2% of revenue), commissioned management malls (218 locations, 18.1% of revenue), and cooperative malls (7 locations). The total number of malls decreased by 42 year-on-year, with self-operated malls down by 3 and commissioned management malls down by 39. Total operating area shrank by nearly 2 million square meters, and coverage decreased by 21 cities. Revenue from self-operated malls fell 8.9%, primarily due to lower occupancy rates and rental income amid industry challenges. Revenue from commissioned management malls dropped more sharply by 18.4%, mainly due to the reduction in the number of such malls.
A rare bright spot was the gross margin for commissioned management malls, which improved and helped lift the company's overall gross margin to 64.3% in 2025, up 0.5 percentage points from 63.8% in 2024. While the gross margin for self-operated malls saw a slight decline, the margin for commissioned management malls rose by nearly 2 percentage points. In contrast, the gross margin for construction and decoration services plummeted from 14.8% in 2024 to -43.6% in 2025, indicating that these services were being offered at a loss. This segment, which involves construction design and decoration services, contributed only 1.6% to total revenue.
In response to the industry-wide downturn, Red Star Macalline is actively pursuing a strategic repositioning to cultivate new growth drivers. The company has upgraded its strategic focus to becoming a "new commercial operator for home living and an ecosystem service provider for the home industry," aiming to enhance its core home furnishings business while expanding into related services. Specific initiatives include expanding its business scope and diversifying revenue streams through several channels: implementing a high-end appliance (MEGA-E) strategy with dedicated store sections; creating offline channels for new retail furniture brands; establishing M+ high-end home design centers; expanding into the automotive sector with doubled operating space; adding dining facilities to improve the mall experience; and entering the home wellness market with a "Silver Life Aesthetics Gallery" in Shanghai. These efforts underscore the company's determination to reverse its operational decline, with hopes for improved results in 2026.
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