Chinese cram schools New Oriental and TAL rack up $1bn in losses

Beijing’s clampdown on China‘s education sector has hit the bottom line of after-school tutorial companies as two leading New York-listed businesses reported big losses Tuesday.

Amid Beijing’s move to restrict after-school teaching in core subjects to nonprofit operators, New Oriental Education & Technology Group recorded a net loss of $908 million for the six months ended November, compared with a net profit of $228.6 million over the same period in 2020.

Rival TAL Education Group reported a net loss of $99.4 million for the September-November quarter, worsening from a net loss of $43.6 million in the year-ago period.

New Oriental’s net revenue totaled $1.97 billion for the six-month period, a year-on-year increase of 5%. TAL’s net revenue in the quarter decreased 8.8% on the year to $1 billion.

Both New Oriental and TAL have ceased tutoring related to academic subjects for students from kindergarten through grade nine, a substantial majority of their revenue, in all their learning centers nationwide and have paid considerable costs to terminate facility lease agreements and employee contracts.

New Oriental is pivoting toward livestream sales of agricultural products amid the regulatory crackdown. The company said it will continue to shift focus toward providing test preparation courses and language training courses for adults, while exploring other business opportunities by “leveraging its brand recognition and educational resources.”

Yu Minhong, the chairman and a co-founder of the company, said in a social media post last month that New Oriental laid off 60,000, or 60%, of its employees last year. Restructuring the company and refunding prepaid tutoring fees cost about 20 billion yuan ($3.16 billion) as New Oriental shut most of its tutoring centers in China, he said.

TAL cut staff to less than 15,000 by the end of last year from about 60,000 in July, when Beijing’s clampdown on the sector began, a senior executive from TAL told Nikkei Asia.

Hong Kong-listed Koolearn Technology Holding, New Oriental’s subsidiary that focuses on online after-school tutoring and test preparation, reported earlier that its revenue fell 15.3% on the year to 573.5 million yuan for the six months ended November.

Beijing’s overhaul seemed to target core curriculum for kindergarten to grade nine, but China’s Education Ministry said recently it will ensure that the implementation on high school tutoring “will be in strict accordance” with the rules for the compulsory education stage. Chinese law requires that all children attend school for a minimum of nine years.

Shortly before the ministry’s recent announcement, a few after-school tutoring companies including TAL had ceased such service for high school students. The TAL unit covering online tutorials for high schoolers laid off all employees this month, and those who wished to stay could sign contracts with the group’s newly established nonprofit educational company with salaries being slashed by 30%, an employee from TAL told Nikkei Asia.


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