- New Oriental saw an 80% slump in sales, chairman says
- It fell victim to far-ranging curbs on after-school education
New Oriental Education & Technology Group Inc. fired tens of thousands of employees last year, revealing the toll wrought by China’s stunning shake-up of the $100 billion after-school education sector.
Yu Minhong, founder and chairman of the Chinese tutoring giant, revealed in a WeChat post over the weekend that the company had dismissed 60,000 workers and saw revenue fall 80% after ending all K-9 tutoring services following Beijing’s overhaul of the once-lucrative sphere last July. That’s nearly three-quarters of its more than 81,000 employees as of May.
“In 2021, New Oriental encountered too many unforeseen events from factors such as policy, the pandemic, and international relations,” Yu wrote. “Much of our business remains in a state of uncertainty.”
Once one of China’s leading private education providers, New Oriental saw 90% of its market value wiped out last year after Beijing banned tutoring companies from making profits and raising capital. A combination of severance payments, tuition refunds and terminated leases for teaching sites cost the firm nearly 20 billion yuan ($3.1 billion), Yu said in the post.
Operating losses may be wider than expected at $500 million in the fiscal year ending in May, said Catherine Lim, a senior industry analyst for Bloomberg Intelligence. New Oriental and rival TAL Education Group could see losses extend to 2024 as government-imposed price controls on classes and bans on weekend and holiday lessons handicap revenues, she wrote in a research note.
New Oriental has sought to increase investments into businesses targeting college students and overseas Chinese markets, while exploring new areas such as live-streaming and the sale of agricultural products. Finding a new direction will be a focus in 2022, Yu said, adding that he took part in a one-hour live broadcast last week that sold nearly 200,000 books.
The regulatory shifts in the edtech space, mirroring a broader sweeping crackdown on Chinese internet companies, have forced major players to adapt to survive, including by expanding non-academic curricula and providing some after-school classes for free.
On Dec. 31, local regulators in big cities like Beijing and Shanghai unveiled their pricing standards for nonprofit K-9 tutoring, signaling that a relaunch of online classes could be imminent. Fees for online classes are guided at 20 yuan per session, with companies allowed to charge a premium of no more than 10%.
New Oriental’s Hong Kong-listed stock tumbled as much as 3.7% in early trading Monday before reversing losses.
Author: Sarah Ya-Ru Zheng, Bloomberg