Against the backdrop of widespread pressure on the domestic retail industry in 2025 and a shift from scale expansion to deep competition in efficiency in the convenience store market, Red Flag Chain, headquartered in Chengdu, has delivered a remarkable "resilience".

On the evening of April 8th, Red Flag Chain released its 2025 annual report, which showed that the company achieved a total operating revenue of 9.556 billion yuan and a net profit attributable to shareholders of the listed company of 481 million yuan. Although the revenue scale has slightly declined due to proactive adjustments, a more noteworthy signal is that the company's operating profit has reached 668 million yuan, a year-on-year increase of 10.75%, setting a new historical high since its listing in 2012.

In the industry dilemma of "snack discount store diversion, instant retail squeeze, and reduced customer flow", Hongqi Chain did not choose to blindly expand, but decisively "seek inward" - with "layout optimization, quality improvement and efficiency enhancement" as the core, actively cleaning up inefficient tail department stores and divesting revenue sources without profit contribution. This seemingly conservative contraction is actually a profound quality change.

Profit quality far exceeds book value: cash flow reaches 2.46 times net profit

To understand the 2025 annual report of Hongqi Chain, the first thing to understand is a key financial indicator: the net cash flow generated from operating activities reached 1.18 billion yuan, which is 2.46 times the net profit.

This means that the company not only makes a profit on paper, but more importantly, it has earned 'real gold and silver'. Excellent profitability has provided ample ammunition for Hongqi Chain during industry downturns, as well as a solid financial security cushion for its subsequent store upgrades, technological investments, and regional expansion.

The core driving force for profit growth comes from three aspects: firstly, the continuous optimization of the operational efficiency of the entire supply chain, and the stable overall gross profit margin; Secondly, significant internal potential tapping has been achieved, with sales and management expenses experiencing a significant year-on-year decrease. The total expenses during the three periods decreased by 6.86% year-on-year, further expanding the decline compared to 2024; Thirdly, the operating efficiency of the newly acquired online bank is good, driving a corresponding increase in investment returns.

Chengdu's' basic market 'grows against the trend, and store optimization logic is realized

From a regional market perspective, the most important area of Hongqi Chain in Chengdu achieved a revenue of 5.32 billion yuan, a year-on-year increase of 0.97%, which is particularly valuable in the context of a slight decline in overall revenue. This growth is not due to the expansion of the number of stores, but rather the result of improving the quality of individual stores.

In 2025, the company will scientifically optimize its store structure, implement store adjustment strategies in an orderly manner, and decisively clean up inefficient tail stores. In the original words of the annual report, 'divest revenue sources that do not contribute to profits'. This kind of courage to do subtraction is not common in the retail industry's general pursuit of scale inertia, but it directly promotes the overall improvement of business quality.

At the same time, Hongqi Chain is also actively "adding up". By the end of 2025, the company's 24-hour cloud value gatekeeper stores have exceeded 500. This model replaces traditional manual duty with digital duty, focusing on high-quality stores with stable passenger flow and outstanding nighttime demand, achieving 24/7 uninterrupted business, effectively filling the gap in nighttime services, and expanding business hours. The company plans to strive to reach 1500 companies by 2026 and achieve full coverage by 2027.

Tiktok's sales exceeded 1.1 billion yuan, and online and offline integration took a new path

Beyond traditional stores, Red Flag Chain's online exploration has also delivered impressive results. In 2025, the company's sales on the Tiktok platform will break through 1.1 billion yuan, becoming an important source of increment beyond offline passenger flow.

Its core strategy lies in the "online sales+offline write off" mode. Through the normal operation of Tiktok live broadcast, it drives the increase of customer flow to stores and repurchase rate, while settling the private domain traffic. This strategy not only avoids price wars with pure e-commerce platforms, but also fully leverages the advantages of Hongqi Chain's store network throughout the community, forming a differentiated social e-commerce competition path.

In addition, the company has also added a pre-sale model, adopting sales based procurement and precise stocking to reduce inventory loss and capital occupation, improve product turnover efficiency and store profitability.

Joint products have exceeded 60, and the "Red Flag Optimal Selection" matrix has been established

Product power is one of the core competitiveness of retail enterprises. In 2025, Hongqi Chain will continue to deepen its joint research and development with high-quality suppliers, focusing on high repurchase and cost-effective categories, and continuously enriching the "Hongqi Preferred" product matrix.

As of the end of the reporting period, the number of joint products of the company has reached over 60, with plans to exceed 100 by 2026. These differentiated specialty products not only increase the gross profit margin level, but also enhance user stickiness, forming their own moat in response to the diversion impact of emerging formats such as snack discount stores.

From "selling goods" to "providing services": highlighting the value of community comprehensive platforms

Red Flag Chain has long adhered to a differentiated competitive strategy of "goods+services". In 2025, this strategy will be further deepened.

On the basis of more than 80 convenient services such as tuition fee payment and water and electricity fee collection, the company has jointly created a digital home service platform with the Chengdu Home Economics Association, integrating more than 20 services such as cleaning, elderly care, maternal and child care, and aging adaptation. Residents can achieve "one click ordering and door-to-door service" by scanning the QR code through the convenience self-service terminal or exclusive poster in the store.

This measure not only brings incremental consumer groups to the stores, but also subtly enhances the loyalty of community customers. Against the backdrop of declining customer flow in the retail industry, Hongqi Chain has constructed offline value that is difficult to replace by online channels through the concept of "service as traffic".

Facing 2026, which is also the beginning year of the 15th Five Year Plan, Hongqi Chain has put forward a clear strategic direction: actively promoting Sichuan brand products, strengthening store strategic layout, radiating to the southern Sichuan region, and accelerating 24-hour store coverage.

During the period of widespread pressure in the industry, Red Flag Chain proved with an annual report of "record high profits, abundant cash flow, and continuous improvement in quality" that the ultimate goal of retail is not who opens the most, but who lives the longest and walks the most steadily.

When the tide of scale expansion recedes, what truly tests a company is its internal strength. The qualitative change of Hongqi Chain, which is born inward, may be one of the samples of China's convenience store industry crossing cycles.