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Lihua Supermarket is a listed company, and its every move attracts attention. Since the second half of 2003, Lihua Supermarket has stopped recruiting new employees, which is a very obvious signal that many people did not notice when it was exposed.

Supermarket employees have a very high turnover rate. There's an old saying within the company: "The supermarket is like iron, but the employees are like flowing water."

This detail is reflected in the financial statements. Professional investors will carefully study the weekly financial reports to determine whether the company's performance has changed. Originally, there was nothing unusual, but some observant people noticed that the number of employees in the 2003 annual report was more than 5% lower than that in 2002, and the 2004 interim report showed that the number of employees had decreased by another 5%. This was quite surprising. How could the number of employees have decreased by so much?

Last time it decreased by 5% in a year, this time it decreased by 5% in just six months, and looking back at last year, the 2003 interim report, it showed that it actually decreased by 5% in the second half of the year.

A major event occurred in the first half of last year, so Lihua Supermarket did not reduce its staff, but in the second half of the year, it did.

More than half of 2004 had passed when someone published this news in the newspaper: was Lihua Supermarket experiencing operational problems? Although Lihua Supermarket is currently operating stably and its performance continues to grow, the reduction in employees is still shocking.

Such a matter led to a complaint being filed with the Hong Kong Securities and Futures Commission (SFC), which then inquired about the situation. Lihua Supermarket was required to explain to the SFC why it was laying off employees.

On the same day, Lihua Supermarket immediately responded: Following the events of the first half of last year, Lihua Supermarket only suspended employee recruitment in the second half of the year, without laying off any staff. The reduced number of employees were simply those who resigned voluntarily, not laid off by the company. As for why no more positions were being recruited, the company adopted more advanced technologies and did not need as many employees. This would not only allow for salary increases and improved benefits for existing employees, but also optimize the existing workforce…

This explanation is reasonable, but what outsiders don't know is that while what is said above is true, it actually means that Lihua Supermarket is scaling back its business.

Since the incident at the beginning of last year, the Internet has flourished and online shopping has gradually entered the lives of more people. Lihua Online's business volume has reached 30% of its total business volume. Therefore, Zhang San immediately asked Lihua Supermarket to adjust its business.

Lihua Online and Lihua Supermarket are two independently operated companies. Lihua Supermarket only holds 35% of the shares in Lihua Online, while the rest are distributed by Zhang San through various charitable investment institutions.

Lihua Online is currently on the rise, while Lihua Supermarket's business is shrinking. As a result, in terms of personnel, there is only employee turnover and no new hires, and Lihua Supermarket itself is an industry with high staff turnover. This situation will be reflected in the financial statements.

Moreover, the total number of employees was still decreasing, reaching 90.25% of the number in the first half of 2003. However, some of these departing employees went to Lihua Convenience Store, where the number of employees was increasing. This convenience store was much more profitable than Lihua Supermarket. Similarly, this chain retail enterprise, in which Lihua Supermarket held a 35% stake, brought a lot of profits to Lihua Supermarket.

In the second half of the year, Lihua Supermarket is preparing to sell some of its supermarkets, naturally with the aim of scaling back its strategy.

Lihua Supermarket issued a public announcement stating that it will sell nearly 70% of its 400 stores in Beijing, Shanghai, Guangdong, and Jiangsu provinces. An agreement has been reached with Walmart Supermarket for a transaction amount of RMB 8 billion, which includes all the goods. The two parties have reached an agreement on the transaction.

This announcement immediately shocked many people; this move was simply incomprehensible. On the day the announcement was released, Lihua Supermarket's stock price dropped by 10%, a fact that surprised many.

However, Lihua Supermarket didn't care about this at all. These people didn't know the reason, and no one would explain it to these ordinary consumers.

The supermarkets in these four locations are basically all owned by the same person. Even if the owner is the same person, they still have to pay rent. Although the rent is 10% cheaper than outside, the rent increases every year. Now that housing prices are rising, the rent will naturally have to go up as well.

These 400 stores are surrounded by various convenience stores. Although these convenience stores all belong to Lihua Retail, they have different names. To put it simply, Lihua Supermarket is like a wholesale store, while Lihua Convenience Store is the real retail store.

Moreover, something that has been overlooked or even ignored is that before Lihua Supermarket went public, it cleared out a lot of things and kept only the core business for listing. One of the businesses that was cleared out was Lihua Investment, which was renamed the Asia Development Investment Fund after the cleanup.

This Asian Development Investment Fund holds a very large number of companies. By the second half of 2004, it held nearly 5,000 companies, all of which were manufacturing companies. It mainly supplied goods to Lihua Supermarket, Lihua Retail and Lihua Online.

These 5,000 companies are diverse and numerous, with 20% already listed on the Shanghai Stock Exchange, Shenzhen Stock Exchange, and Hong Kong Stock Exchange.

Furthermore, more companies will go public, forming a large cluster of consumer enterprises. If any company disobeys, their supply qualification to Lihua Supermarket will be immediately suspended, and payments will be withheld for various reasons; the upstream suppliers will also stop providing raw materials.

However, such a thing is unlikely to happen. In most private enterprises, the management only needs to manage the company well, and procurement, production, quality control, and sales are not in the hands of other shareholders.

In this situation, if Lihua Group wants to perform well, it needs to increase sales, hold promotions, and raise its stock price. Then, its annual report will look good, and its stock price will rise. If it wants to short sell, it needs to perform poorly, and everything will be the opposite.

This explains why Zhang San was so willing to form joint ventures, buy out, and contract so many companies back then; Lihua Supermarket had such abundant cash flow at the time.

So how to cash out these investments became Zhang San's biggest worry. Therefore, he could only list these companies so that he could reduce his holdings and recoup his funds.

These funds couldn't just sit idle; they naturally had to be put to use. Most of them were invested in real estate, but not now, but after 2008.

Many companies are doing well now, but Zhang San wants to list all of them on the stock exchange. One reason is to cash out, since the 2008 crisis is only a few years away. He plans to list them first, then cash out, and then inject similar companies to ensure controlling stakes. This way, he gets the money and still has the companies in his hands.