Company History and Expansion
Maison Solutions was founded on July 24, 2019 as an Illinois corporation with its principal place of business in California. In September 2021, the company was redomiciled in the State of Delaware as a corporation registered under the laws of the State of Delaware. Immediately upon formation, Maison acquired three retail Asian supermarkets with two brands – Good Fortune and Hong Kong Supermarkets – in Los Angeles, California and rebranded them as HK Good Fortune Supermarkets. These entities became controlled subsidiaries of the company. In July 2019, Maison purchased 91% of the equity interests in Good Fortune Supermarket San Gabriel, LP and 85.25% of the equity interests in Good Fortune Supermarket of Monrovia, LP. In October 2019, Maison purchased 91.67% of the equity interests in Super HK of El Monte, Inc. On June 30, 2022, the company purchased 100% equity interest in GF Supermarket of MP, Inc., the legal entity holding a supermarket in Monterey Park.
Through its five subsidiaries, Maison engages in the specialty grocery retailer business, offering traditional Asian food and merchandise to U.S. consumers, particularly to Asian-American communities. The company is committed to providing Asian fresh produce, meat, seafood, and other daily necessities in a manner that caters to traditional Asian-American family values and cultural norms, while also accounting for the new and faster-paced lifestyle of younger generations and the diverse makeup of the communities in which it operates.
In December 2021, Maison Solutions acquired a 10% equity interest in a new grocery store in Alhambra, California, the “Alhambra Store,” from a related party. The company intends to acquire the remaining 90% stake and operate the Alhambra Store as its first “satellite store,” complementing the traditional center stores.
Further expanding its reach, in May 2021, Maison Solutions acquired a 10% equity stake in Dai Cheong, a wholesale business that supplies Asian-imported foods and groceries. The company plans to eventually acquire a controlling interest in Dai Cheong, establishing a vertically integrated supply-retail structure.
On June 27, 2023, Maison Solutions invested $1.44 million for a 40% equity interest in HKGF Market of Arcadia, LLC (HKGF Arcadia), a supermarket in Arcadia, California, to further expand its footprint. In December 2023, the company invested an additional $360,000 for another 10% equity interest in HKGF Arcadia.
Most recently, on April 8, 2024, Maison Solutions, through its wholly-owned subsidiary AZLL LLC, completed the acquisition of Lee Lee Oriental Supermart, Inc. (Lee Lee), a three-store supermarket chain operating in Arizona under the name Lee Lee International Supermarkets and specializing in Southeast Asian groceries. The $22.2 million acquisition, consisting of $7 million in cash and a secured note, effectively doubled the company’s size, adding approximately $70 million in annual revenue.
Financial Performance and Outlook
For the fiscal year ended April 30, 2024, Maison Solutions reported net revenue of $58.04 million, a 5.0% increase from the prior year’s $55.40 million. However, the company incurred a net loss of $3.34 million, compared to a net income of $1.25 million in the previous year. This deterioration was primarily due to increased operating expenses, investment losses, and higher interest expenses. The company’s operating cash flow for the fiscal year 2024 was negative $3.50 million, with a free cash flow of negative $6.84 million.
In the first quarter of fiscal 2025, ended July 31, 2024, Maison Solutions generated net revenue of $29.65 million, a significant 115.6% increase from the $13.75 million reported in the same period of the prior year. This surge in revenue was mainly driven by the inclusion of $18.2 million in sales from the newly acquired Lee Lee subsidiary. Gross profit also improved, rising to $8.27 million, or 27.9% of net revenue, compared to $3.11 million, or 22.6%, in the year-ago quarter.
Despite the top-line growth, the company reported a net income of $700,910, which, while an improvement from the $104,940 net loss in the prior-year period, was still impacted by higher operating expenses, investment losses, and interest expenses related to the Lee Lee acquisition. The company’s operating cash flow for Q1 2025 was $3.59 million, with a free cash flow of $3.48 million, showing a significant improvement in cash generation.
Maison Solutions operates in two main product segments: perishables and non-perishables. The perishables segment, which includes meat, seafood, vegetables, and fruit, generated $15.19 million in net revenue for Q1 2025. The non-perishables segment, comprising grocery, liquor, cigarettes, lottery, newspaper, reusable bag, non-food, and health products, brought in $14.45 million during the same period.
Looking ahead, Maison Solutions expects the Lee Lee acquisition to contribute significantly to its financial performance, effectively doubling the size of the company. However, the company also faces challenges, including increased competition, the end of certain COVID-19 relief programs, and the temporary slowdown of its Maison El Monte store due to renovations.
The specialty grocery retail industry has seen a compound annual growth rate (CAGR) of 5.2% over the past 5 years, driven by increasing consumer demand for ethnic and premium food offerings. This trend bodes well for Maison Solutions’ growth prospects.
Liquidity and Capital Resources
As of July 31, 2024, Maison Solutions had a cash balance of $588,900. The company’s debt-to-equity ratio stood at 1.29, indicating a moderate level of leverage. The current ratio was 0.44, and the quick ratio was 0.19, suggesting potential short-term liquidity challenges.
Maison Solutions has a $2.55 million loan from the U.S. Small Business Administration with an annual interest rate of 3.75%. This loan provides some additional financial flexibility for the company.
The recent Lee Lee acquisition involved a $7 million cash payment and a $15.2 million secured note, which has significantly impacted the company’s debt position and will likely affect its future cash flows and financial flexibility.
Challenges and Risks
Maison Solutions operates in a competitive food retail industry, facing competition from national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, and online grocers. The company’s principal competitors include 99 Ranch Market, H-Mart, and Weee. These competitors may have greater financial resources, more experience, or a larger store footprint than Maison Solutions.
The company’s growth plans, which involve acquiring and opening additional supermarkets and warehouses, carry risks and will require significant management, human resources, and capital expenditures. There is no assurance that these investments will be successful or generate the expected returns.
Maison Solutions also faces risks related to its recent acquisition of Lee Lee, including the successful integration of the business and the ability to achieve the anticipated synergies and cost savings. Additionally, the company’s substantial debt load, including the $15.2 million secured note related to the Lee Lee acquisition, could place a burden on its financial resources and limit its flexibility.
On January 2, 2024, the company and its executives were named in a class action lawsuit alleging violations of securities laws. While Maison Solutions believes the allegations are without merit and is defending the lawsuit, such legal proceedings can be costly and time-consuming. Furthermore, on April 9, 2024, a shareholder derivative lawsuit was filed against the company’s officers and directors, alleging breach of fiduciary duty and other claims. This case has been stayed pending the outcome of the class action lawsuit. These legal challenges add an additional layer of risk and uncertainty to the company’s operations.
Conclusion
Maison Solutions is a fast-growing specialty grocer that has strategically positioned itself to serve the evolving needs of Asian-American consumers. The company’s recent acquisition of Lee Lee has significantly expanded its footprint and revenue base, but it also faces challenges in the form of increased competition, integration risks, and a higher debt load. The company’s financial performance shows strong revenue growth, particularly following the Lee Lee acquisition, but profitability remains a concern.
As Maison Solutions continues to execute its growth strategy, investors will closely monitor the company’s ability to navigate these obstacles, including the ongoing legal challenges, and capitalize on the opportunities presented by the dynamic Asian-American grocery market. The company’s success will depend on its ability to effectively integrate its acquisitions, manage its debt, improve its liquidity position, and continue to meet the changing needs of its target market.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.