On the evening of October 25, Sun Art Retail (06808.HK), the parent company of RT-Mart, issued a profit warning, projecting a net loss of approximately RMB 500 million to RMB 550 million for the six months from April to September 2026.
The loss for the same period last year was RMB 127 million, meaning the shortfall has expanded roughly fourfold year on year. The loss for just this half-year alone has already exceeded the RMB 326 million loss recorded for the entire prior fiscal year.
When Hong Kong stocks opened on October 26, the share price fell by more than 6% at one point.
What makes this warning particularly notable is that it landed in a half-year period that should have been a tailwind: the 2026 Mid-Autumn Festival fell on September 25, meaning holiday sales were fully captured within the reporting window, whereas in the same period of 2025 the festival fell in October and the holiday boost was absent.
The holiday benefit was fully captured, yet the loss still quadrupled, indicating that RT-Mart's underlying business is more fragile than surface figures suggest.
From "New Retail Experimental Plot" to Being Divested: Alibaba's Seven-Year Gains and Losses
To understand today's losses, one must go back to the seven-year partnership between Sun Art Retail and Alibaba.
In 2017, Alibaba took a stake in Sun Art Retail as part of its New Retail strategy. At the time, Daniel Zhang's message was that "RT-Mart will be different because of Alibaba, and Alibaba will be different because of RT-Mart."
After increasing its stake in 2020, Sun Art Retail became a consolidated subsidiary of Alibaba.
Alibaba implemented deep reforms: it introduced Hema's hanging-chain system, boosting in-store order processing capacity from 300 orders to 5,000 orders; it connected to Ele.me's Fengniao delivery network and Hema's delivery infrastructure; and it incubated new formats including "Xiao Runfa," M Membership Stores, and RT-Mart Super.
But the overhaul did not produce sustained growth. From fiscal year 2022 to fiscal year 2026, Sun Art Retail's revenue slid from RMB 88.1 billion all the way down to RMB 63.4 billion, with net profit swinging back and forth between profit and loss.
Alibaba ultimately chose to exit. On January 1, 2025, Alibaba announced it would sell its 78.7% stake to DCP Capital for up to approximately HKD 13.138 billion, at HKD 1.75 per share — a nearly 30% discount to the pre-announcement market price of HKD 2.48.
Alibaba's statement in the announcement was blunt: the sale of non-core assets, with proceeds to be used to focus on core businesses.
Seven years of New Retail experimentation came to a close with a divestiture at a 30% discount.
DCP Capital Steps In Directly
DCP Capital completed the transaction in February 2025 and formally took over RT-Mart. But the new shareholder initially chose a path of "professional manager stewardship."
In December 2025, Li Weiping was appointed CEO. Yet after only about three months in the role, he was removed by the board for "going missing for an extended period without requesting leave."
The person called in to steady the ship was Hua Yuneng, co-founder and CEO of DCP Capital. He had served as chairman of Sun Art Retail's board since March 2025 and took on the additional role of CEO in March 2026, drawing no compensation during his concurrent tenure.
The market interpreted this arrangement as a clear signal: DCP Capital had completely abandoned the "hands-off" approach of the financial investment phase and shifted to hands-on operational management.
Hua Yuneng's background is concentrated in private equity investment — partner at KKR Asia-Pacific, head of Morgan Stanley's private equity China business. His strengths lie in resource integration and cost optimization, but the refined store-level operations, supply chain management, and regional localization required in offline retail represent an entirely different capability set.
Whether a capital-side direct management approach can work in the "mud-and-boots business" of retail is itself an open question.
Nature of the Loss: Front-Loaded Transformation Costs or Core Business Bleeding?
Judging from the wording of the profit warning, Sun Art Retail attributes the loss to several factors: customer traffic declining due to competitive diversion, product and supply chain adjustments and store renovations being in a transitional phase, and certain stores slated for closure continuing to generate losses.
The declining average transaction value trend has narrowed somewhat, and cost savings have partially offset the impact of revenue decline.
This set of attributions points to a narrative of "pain during a proactive adjustment period."
Two positive indicators support this narrative: adjusted EBITDA is expected to be approximately RMB 1 billion to RMB 1.05 billion, remaining positive; and net cash from operating activities is approximately RMB 1.75 billion to RMB 1.8 billion, representing growth of more than 30% over the RMB 1.323 billion recorded in the same period last year.
But these two figures need to be viewed with caution. More than 60% of RT-Mart's stores are leased properties. Under current accounting standards, the majority of rent is classified as depreciation and interest, which are not deducted from EBITDA — making this metric inherently inflated.
The improvement in operating cash flow may also partly stem from gift card sales before Mid-Autumn Festival and accounts payable generated by pre-holiday inventory stocking, rather than a substantive improvement in the business itself.
The real structural pressure comes from customer traffic. For the full fiscal year 2026, RT-Mart's same-store sales declined 11%. Total order volume was roughly flat year on year, but the number of items per customer purchase was decreasing, and average product prices were also falling — consumers were still entering stores, but they were tightening their wallets.
By the April-to-September 2026 period, the situation evolved further: some customers simply stopped coming.
Sam's Club has accelerated store openings, Hema, Meituan, and Pupu are capturing immediate demand with "30-minute delivery," and rivals like Yonghui are competing for the same family customer base with renovated stores.
RT-Mart's format logic of "big and comprehensive, one-stop stock-up" is being fragmented by instant retail and membership stores.
Renovation Progress and the Time Window
Sun Art Retail has not been idle. As of the end of March 2026, the company operated 462 hypermarkets, 34 mid-sized supermarkets, and 6 M Membership Stores nationwide. About 25% of hypermarkets had completed renovations, and management plans to raise that proportion to 50% to 60% in fiscal year 2027.
The renovation approach is "one store, one policy": Hangzhou stores lowered shelves, widened aisles, and introduced greenery and family-oriented scenes; Shanghai focused on fresh food counters and convenience services; South China used fresh produce scene transformation as a template.
Sales of the dual private-label brands "Runfa Select + Super Saver" grew 54% year on year, and the Super community format expanded to 32 locations.
But the renovations themselves are creating short-term losses. Store closures or partial closures during renovation, procurement and logistics costs from supply chain restructuring, and exit costs from closing underperforming stores all show up concentrated in the current period's income statement.
Meanwhile, M Membership Stores launched bulk membership fee refunds in September 2026 and eliminated the paid membership threshold, meaning the attempt to benchmark against warehouse membership stores has effectively undergone a strategic pullback.
The trial-and-error costs of new formats are also eroding profits.
Management had promised at the May 2026 earnings briefing to achieve a return to profitability in fiscal year 2027. But losing RMB 500 million to RMB 550 million in just half a year means the second half would need to earn back an equivalent amount just to break even — and given the full-year profit level of RMB 386 million in fiscal year 2025, the real difficulty of achieving this target is already extremely high.
What DCP Capital bought for HKD 13.1 billion is a retail foundation with a nationwide network, positive operating cash flow, and a clear renovation roadmap — but also a traditional hypermarket system that is being continuously drained of customer traffic by instant retail and membership stores.
When renovations are 25% complete, losses are widening. When renovations reach 50%, whether the decline in customer traffic can be halted will be the true validation point for this deal.
For Hua Yuneng, the capital-side resource integration capability is already in place, but the answer in retail must ultimately be earned back one transaction at a time inside the stores.
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