Executive Summary / Key Takeaways

• Strategic Transformation & Growth: Maison Solutions is evolving beyond a traditional Asian grocery chain into a tech-enabled solutions provider, leveraging a "center-satellite" store model and vertical integration to capture the rapidly growing Asian-American consumer market. This strategy fueled a 114% revenue increase in fiscal year 2025 to $124.2 million, meeting prior guidance.
• Technological Differentiation: The company is deploying proprietary merchandise display and supply chain management software, alongside a strategic partnership with JD.com (JD), to enhance operational efficiency, customer experience, and supply chain visibility. This technology is also generating new revenue streams, with $2.6 million from software license sales in FY2025.
• Financial Headwinds & Turnaround: Despite achieving significant revenue growth and a net income turnaround to $1.17 million in FY2025 from a $3.34 million net loss in FY2024, Maison Solutions faces substantial liquidity challenges, including negative working capital of $9.82 million and an accumulated deficit of $1.65 million.
• Competitive Dynamics & Expansion: Operating in a highly competitive niche, Maison Solutions differentiates through specialized product offerings and a hybrid online-offline model. However, it contends with larger, more established players and intense local competition, particularly in its California markets, necessitating further geographic expansion and capital investment.
• Outlook & Risks: Management plans significant capital investments of $35 million to $40 million for expansion, with $13 million to $16 million needed within the next 12 months. The company's ability to execute its growth strategy, secure additional funding, and remediate internal control weaknesses will be critical to addressing its "going concern" uncertainty and realizing its long-term potential.

Introduction: A Niche Innovator's Ambition

Maison Solutions Inc. (NASDAQ:MSS) is carving out a distinctive presence in the U.S. grocery landscape, specializing in traditional Asian food and merchandise for modern consumers, particularly the burgeoning Asian-American communities. Founded in July 2019, the company has rapidly expanded its footprint through strategic acquisitions, evolving from a regional player into a multi-state operator with an ambitious vision. Its core strategy centers on a "center-satellite" store network model, designed to blend the traditional full-service supermarket experience with agile, community-focused smaller formats.

The market opportunity is compelling. The U.S. Asian population surged by 203% from 1990 to 2020, becoming the nation's fastest-growing racial and ethnic group. This demographic also boasts a median household income exceeding the overall U.S. average, driving robust demand for specialty products and unique culinary experiences. Concurrently, consumer interest in Asian cuisines is increasing globally, and the ethnic foods market is experiencing significant growth. Maison Solutions is strategically positioned to capitalize on these trends, offering a curated selection of fresh produce, meats, seafood, and imported groceries not typically found in mainstream supermarkets.

However, the grocery retail sector is intensely competitive, with established players like 99 Ranch Market and H Mart dominating the traditional Asian supermarket space, and online grocers such as Weee competing in the digital realm. Maison Solutions aims to differentiate itself through a blend of deep cultural understanding, operational efficiency, and a significant commitment to technological innovation. This approach is foundational to its competitive strategy, seeking to create a more comprehensive and holistic shopping experience while maintaining competitive pricing.

The Technological Edge: Fueling Modern Retail

Maison Solutions is not merely a grocery retailer; it is transforming into a tech-enabled solutions provider. A cornerstone of this evolution is the deployment of proprietary software systems designed to optimize every facet of its retail operations. The company has invested in a merchandise display planning and management system and a supply chain management system, both utilizing advanced technologies such as artificial intelligence (AI), Internet of Things (IoT), and client computing.

These systems offer tangible benefits that enhance operational efficiency and customer satisfaction. The merchandise display software optimizes shelf layouts and inventory control, while the supply chain system provides data synchronization across the entire supply chain, centralized order processing, efficient refund and return handling, and optimized distribution and delivery management. This technological infrastructure allows for lean management of storage, improved production efficiency, and a reduction in operating costs. In a significant validation of this technology, Maison Solutions generated $2.6 million in income during fiscal year 2025 from licensing these software systems to four external licensees, marking a new and promising revenue stream.

Further amplifying its technological capabilities, Maison Solutions has forged a strategic partnership with JD.com, a leading online retail platform in China. This collaboration is pivotal for the company's digital transformation, aiming to upgrade store management systems, improve product inventory sourcing, and enhance the overall customer journey. Key initiatives include the development of a new product-centric mobile app featuring flash sales, daily promotions, and targeted recommendations, alongside social platform elements for gourmet sharing and product reviews. The partnership also facilitates the implementation of cloud-based servers for real-time data connectivity across all stores, enabling a holistic view of performance and identifying bulk order opportunities. Moreover, JD.com's expertise in smart warehousing and logistics technology, including big data analytics and AI, is expected to optimize distribution routes and establish satellite distribution stations for faster last-mile delivery. This technological roadmap is critical for Maison Solutions to build a sustainable competitive moat, drive operational excellence, and attract a wider, digitally-savvy customer base.

Strategic Expansion and Vertical Integration

Maison Solutions' history is characterized by strategic acquisitions aimed at expanding its market presence and enhancing its supply chain. After its initial acquisitions in Los Angeles, California, the company made a significant move in April 2024 by acquiring 100% of Lee Lee Oriental Supermart, Inc., a three-store chain in the greater Phoenix and Tucson, Arizona metro areas, for approximately $22.2 million. This acquisition marked a crucial geographic expansion beyond California, allowing Maison Solutions to tap into growing Arizona markets and leverage Lee Lee's respected, nearly three-decade-old brand to maintain a loyal customer base.

The company's "center-satellite" store model is central to its growth strategy. The seven traditional supermarkets, including the newly acquired Lee Lee stores, function as "center stores," serving traditional family-oriented customers while also acting as distribution hubs. The Alhambra Store, in which Maison Solutions holds a 10% equity interest with plans to acquire the remainder, is intended to be the first "satellite store." These smaller, community-focused stores are designed as "Meal Solution Supermarkets" (MSSMs), catering to younger demographics with ready-to-eat and ready-to-cook foods, social media trending products, and convenient shopping options like fast delivery and in-store pickup. This model aims to reduce capital expenditure for expansion and increase logistical efficiency.

Complementing its retail expansion, Maison Solutions is pursuing vertical integration. Its 10% equity interest in Dai Cheong Trading Company, Inc., a wholesale business specializing in imported Asian foods, is a strategic step towards this goal. Dai Cheong, with over 20 years of experience and relationships with major Asian suppliers, provides Maison Solutions with a wider variety of products and the benefit of preferred wholesale pricing. This integration is designed to secure the supply of popular products and boost operational profitability by reducing reliance on multi-layer intermediaries. In a move to optimize its store portfolio, the company strategically closed its Maison El Monte store in June 2025, a decision aimed at improving overall profitability and supporting sustainable growth.

Financial Performance: Growth Amidst Headwinds

Maison Solutions reported a significant financial turnaround in fiscal year 2025, demonstrating robust top-line growth despite underlying challenges. Total net revenues surged by 114.0% to $124.2 million for the year ended April 30, 2025, a substantial increase from $58.0 million in the prior fiscal year. This impressive growth was primarily driven by the full-year inclusion of revenues from the newly acquired Lee Lee subsidiary, which contributed $78.2 million.

The company's gross profit also saw a notable increase, rising to $26.3 million in FY2025 from $11.6 million in FY2024. This translated into an improved gross margin of 21.3% in FY2025, up from 20.0% in FY2024, largely attributable to the higher gross profit generated by the Lee Lee stores. However, this growth was not without its costs. Total operating expenses climbed to $27.6 million in FY2025, an increase of $13.3 million from $14.3 million in FY2024. This rise was mainly due to the Lee Lee acquisition, leading to higher payroll expenses (up $7.6 million), utility expenses (up $0.9 million), and merchant service charges (up $1.1 million).

Despite these increased operating costs, Maison Solutions achieved a net income attributable to the company of $1.17 million in FY2025, a significant reversal from a $3.34 million net loss in FY2024. This positive shift was bolstered by the increased gross profit from Lee Lee and a notable rise in other income, which included $2.6 million from the sale of software licenses and $450,000 from consulting services. However, the company's four California-based supermarkets experienced a $7.3 million decrease in sales, attributed to intense competition from nearby Asian supermarkets. This highlights the dual nature of Maison Solutions' performance: strong growth from strategic acquisitions and new revenue streams, but persistent competitive pressures in established markets.

Liquidity and Capital: The Path Forward

Maison Solutions faces significant liquidity challenges, as evidenced by its negative working capital of $9.82 million and an accumulated deficit of approximately $1.65 million as of April 30, 2025. These conditions raise substantial doubt about the company's ability to continue as a going concern, as noted by its independent registered public accounting firm. The company's cash and cash equivalents stood at $775,360 at the end of FY2025.

The company's debt profile includes approximately $2.62 million in SBA loans and a $5.64 million secured senior note related to the Lee Lee acquisition, which is due for full repayment by May 2026. The annual interest rate on this note was increased to 12% effective February 24, 2024, following a note modification agreement. Additionally, Maison Solutions has a $3.0 million convertible note, which includes a financial covenant requiring a minimum cash balance of $500,000, a condition the company did not meet as of April 30, 2025, though a waiver was obtained.

Despite these financial pressures, the company demonstrated a positive shift in cash flow from operations, generating $4.76 million in FY2025 compared to a negative $3.50 million in FY2024. Free cash flow also turned positive, reaching $4.58 million from a negative $6.84 million in the prior year. Management's strategy to address liquidity and fund future growth includes strengthening its sales force, implementing incentive programs, recruiting experienced personnel, increasing marketing activities, and seeking suppliers with competitive pricing. The company anticipates significant capital investments of $35 million to $40 million for its expansion plans, with $13 million to $16 million required within the next 12 months for new store preparations, openings on the East Coast and near California, and additional acquisitions. To support these initiatives, management may seek additional funding through strategic investors, private or public offerings, or bank loans.

Competitive Landscape: A Niche Player's Battle

Maison Solutions operates in a highly fragmented and competitive grocery market, where it contends with a diverse array of players ranging from specialized ethnic grocers to national mass retailers. Its principal direct competitors in the traditional Asian supermarket segment include 99 Ranch Market and H Mart, while online-only Asian grocery platforms like Weee also pose a significant threat.

Compared to these direct niche competitors, Maison Solutions differentiates itself through its unique "center-satellite" store model and its aggressive adoption of technology. The company's vertically integrated supply chain, including its stake in Dai Cheong, allows it to source unique Asian specialty products at competitive prices, securing supply and boosting profitability by bypassing multi-layer intermediaries. This enables Maison Solutions to offer a wider variety of specialized items, such as specific animal body parts for Asian cooking, which yield higher margins than typical mainstream offerings. The company believes its hybrid online-offline model provides a more comprehensive shopping experience than online-only grocers, while its tech-driven operational efficiencies aim to counter the scale advantages of larger players.

However, Maison Solutions faces substantial competitive disadvantages when compared to industry giants like Kroger (KR), Walmart (WMT), Target (TGT), and Costco (COST). These larger retailers benefit from immense economies of scale, established distribution networks, and significantly greater financial and marketing resources. A quantitative comparison of TTM financial ratios highlights this disparity:

• Profitability: Maison Solutions' Gross Profit Margin (21.21%) is competitive with Kroger (20%) but lags Walmart (25%) and Target (26%). Critically, its Operating Profit Margin (-1.02%) is significantly lower than all major competitors (Kroger 3%, Walmart 4%, Target 5%, Costco 4%), indicating higher operational costs relative to revenue. Its Net Profit Margin (0.94%) also trails its larger peers.
• Liquidity: Maison Solutions' Current Ratio (0.57) and Quick Ratio (0.32) are considerably weaker than its larger rivals (e.g., Kroger Current Ratio 0.96, Walmart 0.82, Target 0.94, Costco 0.97), signaling tighter short-term liquidity.
• Debt Burden: The company's Debt/Equity Ratio (4.39) is substantially higher than Kroger (3.03), Walmart (0.66), Target (1.36), and Costco (0.35), reflecting a more leveraged balance sheet.
• Valuation: Maison Solutions trades at a much lower Price/Sales Ratio (0.09) compared to Kroger (0.30), Walmart (1.16), Target (0.60), and Costco (1.56), underscoring investor perception of its smaller scale, lower profitability, and higher risk profile.

The decline in sales from Maison Solutions' California stores by $7.3 million in FY2025, explicitly attributed to "high competition from nearby Asian supermarkets," underscores the intense competitive pressures even within its niche. While its technological investments and unique store model provide differentiation, the company must effectively scale these advantages to overcome the inherent scale and resource disparities with its larger and more efficient competitors.

Risks and Challenges: A High-Wire Act

Investing in Maison Solutions involves a high degree of risk, many of which are explicitly acknowledged by the company. The most pressing concern is the "going concern" uncertainty, stemming from its accumulated deficit and negative working capital. The company's ability to generate sufficient revenue and raise additional funds on commercially acceptable terms is paramount to its survival.

The success of its innovative "center-satellite" model is not guaranteed, and the expansion of new stores could place a significant burden on existing resources. The strategic partnership with JD.com, while promising, is in its early stages, and there is no assurance of its long-term success or that JD.com will not terminate the collaboration. Furthermore, Maison Solutions' reliance on a few primary suppliers, which accounted for 19% of total purchases in FY2025, without written agreements, exposes it to supply chain disruptions and potential adverse impacts on operating results.

Related party transactions, a common feature of Maison Solutions' operations, introduce risks of conflicts of interest and terms that may not be arm's length. The company has also identified material weaknesses in its internal control over financial reporting, including insufficient accounting expertise and inadequate related party transaction monitoring, which could affect financial reporting accuracy and investor confidence. Several ongoing legal proceedings, including securities class action and shareholder derivative lawsuits, present potential financial and reputational risks, though management intends to vigorously defend against these claims.

The company's high level of fixed lease obligations and the need for significant additional capital to fund its ambitious expansion plans further compound its financial risks. The substantial control exerted by CEO John Xu, who holds approximately 90.34% of the voting power, limits the ability of other stockholders to influence corporate matters. Finally, as a relatively new public company, Maison Solutions' Class A common stock may experience significant volatility, and the risk of delisting from Nasdaq remains if it fails to meet continued listing requirements.

Conclusion

Maison Solutions Inc. stands at a pivotal juncture, embodying the ambitious spirit of a niche innovator seeking to modernize the ethnic grocery market. Its strategic pivot towards a tech-enabled "solutions provider" model, underpinned by proprietary software and the JD.com partnership, represents a compelling vision for enhancing operational efficiency and customer engagement within the rapidly expanding Asian-American consumer demographic. The impressive 114% revenue growth in fiscal year 2025, largely driven by the strategic Lee Lee acquisition, demonstrates the company's capacity for rapid expansion and its ability to capitalize on market opportunities.

However, the narrative is tempered by significant financial vulnerabilities. The "going concern" warning, negative working capital, and substantial debt obligations highlight the high-stakes nature of its current transformation. While the shift to positive operating and free cash flow in FY2025 is an encouraging sign, the company's ability to secure the necessary $13 million to $16 million in capital within the next 12 months for its ambitious expansion plans will be critical. Maison Solutions' competitive edge lies in its specialized product offerings and its technological roadmap, which aims to differentiate it from both traditional ethnic grocers and larger, more diversified retailers. For investors, the story of Maison Solutions is one of high growth potential in a specialized market, driven by technological leadership and strategic expansion, but balanced by the imperative to strengthen its financial foundation and navigate intense competitive pressures. The coming quarters will be crucial in determining if this niche grocer can successfully execute its transformation and solidify its position as a sustainable, tech-forward leader.