Sun Art Retail is still trapped in the contraction cycle of hypermarkets.

The transformation of Sun Art Retail Group, parent company of RT-Mart, has yet to exit its pressure testing phase.

On May 18, Sun Art Retail announced its fiscal year 2026 results for the period ending March 31, 2026: annual revenue was 63.442 billion yuan, a year-on-year decline of 11.3%; net loss for the year was 326 million yuan, while in the previous fiscal year the company was still profitable, with a net gain of 386 million yuan.

Sun Art Retail stated that revenue pressure mainly came from CPI fluctuations, weak consumer demand, and intensified industry homogenization competition, which diverted in-store traffic and transaction volume per visit.

From an industry perspective, hypermarkets under pressure are not unique to Sun Art Retail.

Instant retail siphons off high-frequency demand for fresh produce and daily necessities, discount stores reshape consumer decisions with curated SKUs and low-price mentality, while warehouse membership stores reinforce differentiation through bulk packaging, private labels and membership systems.

In comparison, the advantages traditional hypermarkets once built on comprehensiveness and one-stop shopping are being dismantled.

The pressure on customer traffic further transfers to store street leasing operations.

For hypermarkets, store street rents are not completely independent rental income, but are ancillary gains dependent on hypermarket foot traffic. Decrease in store traffic weakens tenants’ business expectations, increases vacancy pressure, and reduces bargaining power for rent negotiations.

In fiscal 2026, Sun Art Retail’s rental income was 2.8 billion yuan, a decrease of 230 million yuan year-on-year, a drop of 7.6%.

To offset pressure from the old model, Sun Art Retail is advancing business model reconstruction.

By the end of March 2026, the company had 462 hypermarkets, 34 medium-sized supermarkets, and 6 membership stores, totaling 502 physical stores.

After DCP Capital’s takeover, Sun Art Retail established a three-in-one business model: hypermarkets — medium-sized supermarkets — front warehouses. Medium-sized supermarkets and front warehouses are seen as new models closer to communities and more adaptable to instant retail.

Data shows that the new business model has made some progress in certain areas.

During the reporting period, the medium-sized supermarket format added three new stores, and online revenue accounted for 31%; front warehouses were launched in cities including Shanghai, Luoyang, and Jinan, and by year-end the operating scale reached nine, with seven added during the fiscal year.

For fresh food, the company improved efficiency through national joint procurement and category restructuring; fresh food sales increased nearly 3%, and gross margin rose by 0.8 percentage points.

Among them, the self-operated pork category, which started national joint procurement in September 2025, achieved national same-store sales growth of over 20% from January to March 2026.

Meanwhile, Sun Art Retail is accelerating its transformation around low prices, product restructuring, and private label development.

In fiscal 2026, the company’s private labels “Thumb Ultra Saver” and “RT-Mart Select” achieved year-on-year sales growth of over 60%, sales accounted for 3.2%, meeting the annual target. The company plans to further increase this proportion to 5% in the next fiscal year.

The division of labor between the two product lines is fairly clear: “Thumb Ultra Saver” focuses on ultimate cost performance and price competitiveness, aiming to drive order and performance growth; “RT-Mart Select” emphasizes differentiation and value-for-money, contributing more to gross profit.

However, the incremental gains from low prices and private labels have yet to translate into an overall rebound in customer traffic.

Nevertheless, the incremental contributions from new formats, new categories, and private labels are still insufficient to offset the contraction speed of the hypermarket’s main business.

In fiscal 2026, Sun Art Retail’s total order volume essentially stayed flat compared to last year; online B2C business order volume increased by 5.5%, but same-store sales based on goods sold declined by 11% year-on-year.

Internal management changes further increased the uncertainties of the transformation.

Over the past two years, Sun Art Retail has gone through four CEOs: Lin Xiaohai, Shen Hui, Li Weiping, and Hua Yuneng. In March 2026, Li Weiping, who had served just over three months, was dismissed for prolonged absence, with DCP Capital co-founder Hua Yuneng taking over.

Despite pressure on performance, Sun Art Retail has maintained its dividend arrangements.

The Board has declared a second interim dividend for the year ended March 31, 2026, totaling about 811 million Hong Kong dollars, or about 698 million yuan.

In fiscal 2026, the company has paid 2.173 billion yuan in dividends to shareholders, higher than last fiscal year’s 1.702 billion yuan.

How to balance cash returns, store adjustments, and transformation investments will continue to test Sun Art Retail’s capital allocation capabilities.

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