21st Century Business Herald reporters Yan Shuo and intern Song Caiwei

In 2025, the pharmaceutical retail industry will enter a deep water zone of structural transformation, shifting from extensive growth driven by scale expansion to specialized and diversified refined operations. Against this backdrop, the performance of some chain pharmacies has improved.

A review by 21st Century Business Herald reporters found that in 2025, the performance of six major listed chain pharmacies still showed a polarized situation, with DaSanLin, Yifeng Pharmacy, and SYPM achieving growth in both revenue and net profit, while LBX experienced declines in both. YIXINTANG and JZJ saw a decrease in revenue but an increase in net profit attributable to the parent company.

In terms of the number of stores, the net increase in the number of stores for the six chain pharmacies during the reporting period showed little overall change, with DaSanLin and Yifeng Pharmacy achieving net growth, while LBX, YIXINTANG, SYPM, and JZJ experienced net decreases. From an industry perspective, data from Zhongkang CMH shows that in 2025, a total of 21,925 stores closed nationwide, leaving 680,476 stores at the end of the year, indicating an accelerated industry clearing and further concentration of leading enterprises.

A securities analyst previously told 21st Century Business Herald reporters that the performance of new and relatively new retail pharmacies is still waiting to be fully released, and the effects of cost control measures such as rent reductions are gradually reflected in financial statements. Leading chain pharmacies are actively responding to the industry's development cycle, continuously promoting store adjustments and product structure upgrades, with the proportion of varieties with lower dependence on medical insurance expected to further increase. The industry's profit margins may improve in 2026.

Performance Improvement

Looking back at the 2024 annual report, Yifeng Pharmacy achieved growth in both revenue and net profit, while LBX experienced declines in both. The other four companies showed a phenomenon of increasing revenue without increasing profit. In terms of net profit attributable to the parent company, SYPM saw a significant decline of 241.90%, turning from profit to loss for the first time; YIXINTANG's net profit declined for two consecutive years, achieving 114 million yuan in 2024, a ten-year low; JZJ's net profit reached 128 million yuan, a significant decline of 69.08% year-on-year.

In 2025, the performance of chain pharmacies remained differentiated, but there were significant changes. LBX still experienced declines in both revenue and net profit, but the number of companies achieving growth in both has reached three, while YIXINTANG and JZJ showed an increase in profit without an increase in revenue. In terms of net profit attributable to the parent company, SYPM turned a profit after a significant increase of 160.50%, while YIXINTANG halted the trend of decline over the previous two years with a substantial increase of 130.8%.

Regarding the decline in performance, LBX pointed out in its financial report that revenue decreased by 0.54% year-on-year, remaining basically flat compared to the previous year; net profit attributable to the parent company decreased by 26.44% year-on-year, mainly due to the company's provision for goodwill impairment losses and land impairment losses. After excluding the impact of goodwill and land impairment, the net profit was 620 million yuan, a year-on-year decrease of 1.0% Regarding the growth of net profit, SYPM stated that during the reporting period, the company focused on optimizing product strategies for core categories, simultaneously promoting the upgrading of core store formats and scenarios, and implementing various measures to enhance consumer experience and satisfaction, leading to an overall gross margin increase of 0.79% year-on-year. The company's profitability showed a steady recovery trend. At the same time, during the reporting period, the company continued to optimize its store network layout, reduced rent and controlled costs, and deeply applied digital tools to improve efficiency, reducing the expense-to-sales ratio by 1.28 percentage points. The overall operational turnover efficiency and refined management level of the company significantly improved.

The stability of retail business, improvement in gross margin, store optimization, and refined expense control are also key factors for the performance improvement of several chain pharmacies.

In terms of gross margin, for retail business, YIXINTANG, DSL, JZJ, and SYPM all saw year-on-year growth in gross margin, with current gross margins of 37.27%, 36.96%, 35.62%, and 25.83%, respectively. Yifeng Pharmacy and LBX experienced declines, with gross margins of 40.82% and 35.39%, down 0.57% and 1.03% year-on-year, respectively. Although Yifeng Pharmacy's gross margin slightly declined, the overall base remains high enough to reflect its outstanding competitive advantages in supply chain management, high-margin product structure, and cost control.

A chairman of a listed chain pharmacy previously stated in an exclusive interview with 21st Century Business Herald that by 2025, companies in the pharmaceutical retail industry will see performance improvements through a series of adjustment measures such as optimizing existing pharmacies, cautiously opening new pharmacies, structural optimization, and diversified development. In the near future, the transformation will continue, with compliance costs, service upgrades, and digital investments still causing ongoing pain, and the implementation of favorable policies will take time.

In terms of store optimization, DSL still has the most stores, with a net increase of 1,205 stores during the reporting period, reaching 17,758 stores. Yifeng Pharmacy reached 14,831 stores after a net increase of 147 stores. LBX, YIXINTANG, SYPM, and JZJ saw net decreases of 302, 386, 166, and 65 stores, respectively, resulting in 14,975, 11,112, 8,869, and 5,421 stores.

In the future, the industry's concentration will continue to increase. According to data from "China Pharmacy" and CITIC Securities, in 2022, the market share of the top three pharmacies in the United States was 85%, and the market share of the top ten drugstores in Japan was 73.7%. In China, the market share of the top ten pharmacies is only 33.37% before 2024, indicating significant room for improvement in concentration.

Against this backdrop, Yifeng Pharmacy, SYPM, and several other pharmacies have clearly proposed a steady expansion strategy, balancing scale growth with operational quality. DSL pointed out that unlike the model in mature markets such as Europe, the United States, and Japan, where leading pharmacy chains mainly increase market share through mergers and acquisitions of medium and large chains, the Chinese pharmaceutical retail market has a large number of small and medium-sized chains and individual pharmacies. The franchise model has become an important supplementary force driving the increase in industry concentration and is an inevitable trend for high-quality development in the industry.

Accelerating Transformation

In recent years, multiple policies have driven the high-quality development of retail pharmacies, accelerating the industry's transformation towards specialization and diversification At the performance briefing for the fiscal year 2025 and the first quarter of 2026, SYPM pointed out that medical insurance and professional services are fundamental to the survival of pharmacies. The role of medical insurance and coordinated services in attracting customer traffic to stores is significant, serving as the foundation and core traffic entry point for retail pharmacies, which must always be given high importance.

Companies such as SYPM, DSL, and LBX have over 90% of their directly-operated stores qualifying for medical insurance. At the same time, major chain pharmacies are building pharmacies to high standards and providing professional pharmaceutical services. For example, by the end of 2025, DSL had 705 designated stores under the "dual-channel" model and 1,322 designated stores for chronic disease management; LBX had a total of 1,725 stores qualified for outpatient chronic disease management, accounting for 17.73% of its directly-operated stores; and the number of stores with dual-channel qualifications reached 317.

In terms of diversification, related companies are exploring various avenues. For instance, Yifeng Pharmacy plans to utilize the spare space in its stores by adding functional foods and products, such as skincare, personal care, oral care, women's health, paper products, and food; SYPM is introducing experience projects such as AI physical constitution identification, beauty mirrors, moxibustion, and ear acupressure by setting up special zones for chronic diseases, health, beauty, and tea drinks, significantly enhancing customer experience and store attractiveness.

CITIC Securities' research report believes that Chinese pharmacies may differentiate into two main categories in the future: specialized pharmacies and diversified pharmacies. Specialized pharmacies essentially meet the professional medication needs of patients discharged from hospitals, such as outpatient coordinated pharmacies and dual-channel pharmacies; diversified pharmacies essentially meet the daily health needs of consumers, such as drugstores, maternal and infant stores, pet stores, and sports stores.

From a business model perspective, new retail is a key focus for major chain pharmacies. In 2025, YIXINTANG's new retail segment achieved a year-on-year growth of 19.16%, with instant retail channel sales accounting for 77.48%, and the private domain "YIXINTANG Home" mini-program channel growing by 101.42% year-on-year. JZJ's third-party O2O business store coverage reached 92.57%, with operating income increasing by 9.31% compared to the same period last year, accounting for 13.56% of total operating income.

It is worth mentioning that AI has become an important tool driving high-quality development in the industry. DSL relies on AI algorithms to build an intelligent replenishment system for stores and warehouses, achieving a 50% reduction in the out-of-stock rate across the entire operational catalog and continuously improving inventory turnover efficiency, with inventory turnover days as low as 83.54 days during the reporting period and a 60% increase in store clearance efficiency.

Multiple companies continue to increase their investment in AI. At the beginning of 2025, LBX established an AI application strategy committee. Currently, the company has independently developed the AI comprehensive Q&A intelligent agent—"LBX Little Maruko AI," which covers eight core businesses including medical insurance policies, chronic disease services, and new retail, liberating labor through precise Q&A; SYPM also built an intelligent training system in 2025, launching the "AI Little Yu" store Q&A intelligent assistant and developing intelligent practice applications Overall, the pharmaceutical retail industry will complete its reshuffling in 2025 amid accelerated clearing. Leading listed chain pharmacies will strengthen their operational foundation through store adjustments and cost control, while activating growth momentum through digitalization and diversification transformation, with the industry's structural transformation continuing to deepen