Maison Solutions Inc., a specialty grocery retailer offering traditional Asian food and merchandise, issued a letter to shareholders on July 29, outlining an operational reset that includes the divestiture of two underperforming California stores, a proposed litigation settlement and the planned formation of an AI technology subsidiary.
Maison Solutions is a Monterey Park, California-based specialty grocery retailer offering traditional Asian food and merchandise, particularly to members of Asian American communities. Its retail operations are located in Southern California and Arizona under the HK Good Fortune and Lee Lee International brands.
The company, which trades on Nasdaq under the ticker MSS, has agreed to divest the assets and operations of its San Gabriel and Monrovia store locations for aggregate purchase consideration of $4.5 million, excluding inventory, which is to be purchased separately. The allocation represents about $2.25 million per location, and the company expects the transaction to close on or before Dec. 31, subject to closing conditions.
According to the letter from John Xu, chairman, president and CEO, the two stores had been operating at a loss and required continuing working capital and management resources.
“Continuing to support persistently loss-generating operations would not have been responsible,” Xu said. “We therefore made the difficult but necessary decision to exit these locations and concentrate the company’s resources on the parts of the business that we believe have stronger operating fundamentals and greater long-term potential.”
Following the divestiture, Maison Solutions will continue to operate one supermarket in California under the HK Good Fortune brand and three Lee Lee International Supermarkets in the greater Phoenix and Tucson, Arizona, markets. The company acquired the Lee Lee stores in April 2024 for about $22.2 million.
Litigation settlement, governance reforms
“The past year has not been easy for our shareholders,” Xu said. “Our stock price has experienced significant volatility, while the company has faced underperforming store operations, pending stockholder derivative litigation, corporate governance matters, capital structure challenges and concerns regarding dilution and shareholder value.
“We recognize that the company has not yet delivered the results that our shareholders reasonably expect,” Xu continued. “We also understand that confidence cannot be rebuilt through announcements alone. It must be earned through completed transactions, stronger operating performance, financial discipline, improved governance and measurable progress.”
Regarding the pending stockholder derivative litigation, he noted that the parties have entered into a proposed settlement that remains subject to final approval by the U.S. District Court for the Central District of California. A settlement hearing is scheduled for Aug. 12.
Under the proposed settlement, Maison Solutions has agreed to adopt and maintain certain corporate governance reforms for five years. The company’s insurers have agreed to fund a proposed $400,000 payment for plaintiffs’ counsel’s attorneys’ fees and expenses, subject to court approval. The company has denied the claims and allegations asserted in the action.
Xu acknowledged shareholder concerns about the company’s capital structure and potential dilution, stating that the board may evaluate a share repurchase program in the future. “When we are in a position to repurchase its shares, the company intends to do so,” he said.
Maison AI subsidiary planned
Maison Solutions recently signed a definitive agreement for the proposed establishment of Maison AI Limited, a majority-controlled technology platform focused on artificial intelligence applications for grocery retail, supply chain management and enterprise operations. Upon completion of the contemplated formation and capitalization, the company, through its wholly owned subsidiary AZLL LLC, is expected to own about 90 percent of the platform.
Xu said the strategy draws on the company’s direct experience with the fragmented systems and manual workflows common among grocery retailers, wholesalers and distributors.
“We are still at an early stage, and we do not intend to overstate what has been achieved,” he said. “The real test will be whether we complete the formation and capitalization of Maison AI, integrate the relevant software assets, deploy useful products and convert those capabilities into measurable operational and commercial value.”