Three squirrels (300783. SZ) recently released its 2021 annual report and 2022 first quarter report.
According to the annual report, the operating income of the three squirrels in 2021 was 9.770 billion yuan, down 0.24% year-on-year; the net profit attributable to the parent company was 411 million yuan, an increase of 36.43% year-on-year. It is worth noting that the financial report data of the three squirrels in 2020 is also a decline in revenue and a rise in profits; and in the first quarter of 2022, the revenue and profit of the three squirrels have both declined.
The phenomenon of increasing profits without increasing income is mainly due to the business transformation that the three squirrels have been carrying out in the past two years.
Red Star Capital Bureau noted that the three squirrels have significantly reduced their SKUs (minimum stock keeping unit) since 2020, and reduced their direct stores by more than 20% in 2021. In addition, in the 2021 annual report, among the multiple sub-brands, three squirrels also only mentioned "fawn blue blue". "Transformation and upgrading means a huge change in the status quo, while firmly believing that the long-term is good, with the implementation of a series of measures, the company's short-term performance is expected to be affected to a certain extent." Three squirrels said.
The three squirrels that "broke their arms" for profit are also facing great pressure in the capital market. As of the press release of Red Star Capital Bureau, the market value of the three squirrels is 8.910 billion yuan, which is about 75% lower than the total market value of more than 36 billion yuan at its peak.
Image according to ICphoto
Shrink SKUs and chop brands
Three squirrels broke their arms for profit
The three squirrels today are very different from the appearance of the newly listed ones.
At the time of the prospectus in 2019, the product range of the three squirrels also included nuts, dried fruits, dried fruits, flower tea and snacks, and the number of single products of its own brand products exceeded 500. In the 2020 annual report, the SKUs of the three squirrels became less, becoming "more than 400 snacks in the whole category", and it also said that in 2020, "more than 300 long-tail SKUs will be cleaned up and eliminated".
The 2021 annual report has no specific number of SKUs, and the three squirrels have also shifted their product positioning from "full category coverage" to "focus on nuts".
In addition to the reduction of SKUs, among the sub-brands of the three squirrels, the 2020 annual report also mentioned the two brands of "fawn blue blue" and "raising a hairy child", but in 2021, only "fawn blue blue" was mentioned.
Red Star Capital Bureau checked the e-commerce platform and found that the "Raising a Hairy Child" store was still selling products normally, and the "TieGongji" store only had the commodity "Duck Blood Vermicelli Soup" and the "Xixiaoque Lychee Wine" that had checked no related products.
Screenshot from the 2021 annual report of Three Squirrels
On April 25, three squirrels told Red Star Capital Bureau that at present, only "three squirrels" and "deer blue" two brands are currently done. Although "raising a hairy child" is in operation, it is no longer the main body of the three squirrels.
After the above series of operations to reduce the business, the decline in revenue of the three squirrels is also expected, and the three squirrels said at the 2021 annual online performance briefing: "In the first half of 2021, the company is profit-oriented, focusing on profit output for subsequent strategic investment. ”
The three squirrels reduced the number of SKUs by "gradually stopping sales for multiple categories that do not meet brand recognition, insufficient scale of single products, weak profitability, and insufficient core competitiveness", focusing on products with higher gross margins. According to the financial report, the gross profit margin of the three squirrel nuts reached 29.14%, which was higher than that of baked and meat products.
Cutting off some sub-brands is similar to the underlying logic of reducing the SKU, and the three squirrels explained to Red Star Capital Bureau: "We (before) launched 4 sub-brands, after a period of operation, we feel that (fawn) blue blue it is more likely to run out, then we will also focus more on the incubation of (fawn) blue blue." ”
As for whether actions such as reducing SKUs and cutting sub-brands will compress future growth space, the three squirrels responded that in the short term, it will bring about a loss of channel revenue, but "have to do it, because there will be problems in the long term."
Online growth is weak
Offline suspension of store expansion
Reducing the SKU, reducing the sub-brand, the change of the three squirrels is not only that.
Red Star Capital Bureau noted that the three squirrels that were once positioned as "providing healthy snack food through the Internet" have shown weakness in online revenue growth.
The operating income of the three squirrels Tmall has declined for two consecutive years: 22.32% year-on-year in 2021 and 27.63% year-on-year in 2020. Jingdong's revenue in 2021 also fell by 11.84% year-on-year. Today, the three squirrels announced that they have "fully entered the mainstream channels offline", changing their original positioning.
Red Star Capital Bureau noted that it can also be seen from the financial report that the number of stores of the three squirrels in 2021 is still growing, but the proportion of franchised stores has gradually expanded, increasing by 53, and the direct-operated stores have decreased by more than 20%; in addition, the new online-based distribution business has also increased in 2021.
Zhang Liaoyuan, the founder of Three Squirrels, has previously publicly stated: "Three squirrels and Internet red brands should forget the traffic era and get used to the irreversibility of slowing down growth." In the second half of 2020, the end of the super traffic era was said within the company, and it is impossible to build online traffic barriers in the future. The three squirrels also said in an interview with Red Star Capital Bureau: "The traffic distribution mechanism has changed, the cost of paid traffic is higher, and the investment may not be able to pull such new traffic in the past." ”
The three squirrels also told the Red Star Capital Bureau that their positioning online has changed, "the future growth point lies more in the offline," the three squirrels explained, "We count the entire offline terminals have 6 million." ”
The increasingly heavy offline layout is getting farther and farther away from its previous positioning of "providing consumers with healthy and high-quality snack food through Internet channels", and the sales model of traditional snack brands is getting closer and closer. Three squirrels said: "We feel that it is inevitable to enter the tradition. Now, we actually need to respect tradition and respect the law. ”
However, although it has entered the offline, the three squirrels are gradually slowing down the pace of offline stores.
The three squirrels told the Red Star Capital Bureau that from the fourth quarter of 2021, the three squirrels are gradually optimizing offline stores, one is to optimize store operations - on the one hand, to optimize the direct stores, on the other hand, to actively improve the operating capabilities of potential store owners of franchised stores, the second is to adjust the category structure, and the third is to reformulate the rules.
"In the future, we may completely suspend the expansion, do a good job of the existing stores, and the stores may be eliminated after a round." The three squirrels also said that the feeding store (direct store) will not open new stores at present, and the alliance store (franchise store) will add new stores in the short term, "but after a while, it will not be, and after our entire optimization, we will start to expand again." ”
Red Star News reporter Yuan Ye intern reporter Zhang Luxi
Edited by Yu Dongmei