On October 31, Red Star Macalline Group Corporation Ltd. released its Q3 2025 report. Despite dual pressures from a sluggish real estate market and weakened demand in home retail, the company reported revenue of RMB 4.969 billion for the first three quarters, with a net loss attributable to shareholders of RMB 3.143 billion. However, the losses were primarily driven by short-term market volatility and valuation adjustments, which do not affect the company's cash flow or operational capabilities.
At the operational level, although the industry remains in a downturn, Red Star Macalline's core business has begun to "stabilize." Net operating cash flow has turned positive for two consecutive quarters, while gross margin has improved significantly year-over-year, signaling the effectiveness of cost-cutting measures.
**Core Business Stabilizes: Net Operating Cash Flow Turns Positive for Two Quarters** Amid overall industry weakness, all of Red Star Macalline's business segments have been impacted to varying degrees. As a leader in home retail, the company reduced rents and management fees for some merchants to support them while offering additional incentives to retain tenants. Despite declining revenue, the company adjusted its strategic focus, achieving steady profitability with approximately RMB 200 million in operating profit from mall leasing and operations.
The significant net loss in the first three quarters was mainly due to short-term market fluctuations and valuation adjustments, including a RMB 3.33 billion fair value loss on investment properties and RMB 170 million in impairment losses. These non-cash items do not affect the company's liquidity or operations. In fact, net operating cash flow for the period reached RMB 643 million, marking two consecutive quarters of positive performance.
Under new management, Red Star Macalline has implemented measures to improve asset quality. Financial expenses decreased by RMB 187 million YoY, credit impairment losses dropped by RMB 564 million, and asset impairment losses fell by RMB 22 million.
**Gross Margin Expands as Cost Efficiency Measures Pay Off** The company's gross margin improved significantly YoY, reflecting the success of operational optimizations. Initiatives include digitalization-driven business upgrades, omnichannel marketing enhancements, and stronger merchant support. Leveraging C&D Group's supply chain expertise, Red Star Macalline streamlined procurement and logistics while improving mall efficiency through professional urban development teams.
Financial data highlights the impact of these measures: Q3 sales expenses fell 18.05% YoY to RMB 618 million, administrative expenses dropped 19.92% to RMB 600 million, and financial expenses declined 10.23% to RMB 1.642 billion. As of September, cash reserves stood at RMB 3.744 billion, sufficient to cover short-term debt, which decreased by RMB 3.277 billion from year-end 2024.
**Transformation Gains Traction: Overall Occupancy Rate Hits 84.72%** Facing supply chain disruptions and demand contraction in the home furnishings sector, Red Star Macalline has pivoted by capitalizing on shopping festivals like "818 Hi-Buy" and Singles' Day. The company pioneered a "dual subsidy" model combining government and corporate incentives, boosting domestic consumption. During this year's Singles' Day, five Beijing stores focused on curated home refresh packages, emphasizing design, value, and comfort over online gimmicks.
The company expanded into appliances, 3C, smart home products, building materials, and aging-friendly solutions, becoming a multi-category subsidy platform. Nationwide, trade-in programs generated RMB 8.898 billion in sales and 918,000 orders as of August 24, 2025.
Operational reforms span organizational structure, format diversification, and service upgrades, aiming to transform from traditional home malls into "lifestyle curators for younger consumers." The "3+ Star Ecosystem" strategy centers on the home, extending to appliances, renovation, and new growth areas like premium appliances, M+ design hubs, automotive, F&B, and lifestyle services.
Premium appliances emerged as a fast-growing segment, accounting for 9.4% of operational space. In renovation, the M+ Design Center network expanded to 731,000 sqm across 1,000+ studios and 5,000 designers by mid-2025. The automotive division, under Shanghai Jianmei Smart Auto Services, now covers 44 cities with 260,000 sqm of space and partnerships with 30+ automakers.
By Q3, appliance space share rose 0.2 percentage points (pp), lifestyle formats grew 1.1 pp, design hubs expanded 0.8 pp, and automotive increased 0.3 pp. Synergies between core home categories and experiential formats extended customer dwell time, lifting occupancy rates. Self-operated mall occupancy improved 1.7 pp since January to 84.72% by September-end.
Despite industry headwinds, Red Star Macalline has built competitive advantages in commercial property efficiency, consumer demand mapping, and product databases. As consumption recovers, the company is poised to reap the benefits of its transformation.
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