Secoo denied the rumor but gave no explanation. The company is in undeniable financial distress.
Photo from CFP
By PENG Xin, ZHANG Zitong
The online luxury goods dealer Secoo is in bankruptcy proceedings, according to data service platform Tianyancha on January 5. Secoo claimed the information was false without any further explanation. However, major shareholders are banned from selling their stakes due to the company’s financial distress.
Secoo was founded in 2008 as a marketplace for second-hand luxury goods and started selling new items three years later. It is China’s largest online retailer of luxury goods and has been traded on Nasdaq since 2017.
According to Secoo's fiscal reports, its business had been profitable until 2019 but its financials have been deteriorating since. Sales in 2020 were down 12 percent from the previous year’s, resulting in a net loss of 71.9 million yuan (US$11.2 billion). Secoo blamed the pandemic, although it fared much worse than other luxury goods sellers. In the first half of 2021, sales dropped another 34 percent year on year, to 1.5 billion yuan (unaudited). Losses increased to 37.5 million from 31.5 million in H1 2020.
The company is involved in hundreds of litigations, most related to customer purchases. Payments to suppliers and employees have frequently been delayed in the past two years. An employee who works in Secoo's design division told Jiemian News that he had not been paid since September.
“Every department has to fire a certain number of people,” he said. In design, the headcount has gone from 13 last August to the current 7. Some resigned because they were not getting paid. Some were laid off. A source said the number of people in a company-wide chat group has dropped to 535 from 900 a year ago. Secoo did not respond to requests for further comment.
Its stock price has plummeted from the all-time high of US$14 in August 2018 to less than US$0.5, triggering a delisting warning from Nasdaq. In January 2021 Secoo said it received a proposal from Chairman and CEO LI Rixue to take the company private, but no material progress has been made since.