By He Xi
Source: GPLP
In the Spring Festival of 2020, the food retail industry has come to a standstill and the Three Squirrels (300783.SZ ) , who are highly dependent on e-commerce channels, have not been spared.
On Feb. 9, Three Squirrels told the media that the company had shut down its operations and would reduce its losses through annual fee extensions, deal with temporary products and subsidize store lengths.
By the end of 2019, the Three Squirrels had 108 stores and 278 affiliate stores, according to public data.
The Three Squirrels, whose numbers are getting worse, will have more to overcome.
A sudden reversal in earnings after the IPO
The IPO marks a watershed for the Three Squirrels.
In July 2019, the seven-year-old Three Squirrels went IPO, trading up to 81.50 yuan per share. By the close of trading on February 11,2020, the Three Squirrels were trading at 58.95 yuan, down 27.67% from their peak.
The Three Squirrels’ share price fell down because of performance.
On January 23,2020, the Three Squirrels released the 2019 annual results forecast that the net profit is expected to be 230-280 million yuan, down 8%-24% from the same period last year.
From 2015 to 2018, the net profit of the Three Squirrels was 8.9739 million yuan, 237 million yuan, 302 million yuan and 304 million yuan, up 2535.44% increase, 27.70% and 0.61%, respectively, according to the IPO prospectus.
The Three Squirrels’ turnning time came three months after they went IPO. The Three Squirrels achieved revenue of 4.5 billion yuan in the first half of 2019, up 39.58% year by year, and realized net profit of 270 million yuan, up 27.94% year by year.
Three Squirrels in 2019, the third quarter of the results showed a big reversal, revenue rose 53% year-by-year, net profit fell 50.95% , revenue and net profit between the reverse relationship, the Three Squirrels also fell in the stock price.
The performance of the Three Squirrels showed a continuous fell trend. The Three Squirrels achieved a net profit of 298 million yuan in the first three quarters of 2019 and are expected to make a net profit of 230-280 million yuan in 2019, meaning that the Three Squirrels lost money again in the fourth quarter of 2019.
“Quality Gate” frequent occurrence, over-reliance on e-commerce “Sequela”
In the fourth quarter, the “double 11” and “double 12” e-commerce promotion festivals are all concentrated. The Three Squirrels also announced that the “double 11” event had a sales volume of 1.049 billion yuan in all channels; in December 2019, the sales volume of 10 billion yuan in all channels, But Three Squirrels still can’t hide the embarrassment of falling sales.
As to the reasons for the decline in 2019, the Three Squirrels explained that costs had risen as a result of reduced government subsidies and strategies to gain new users and market share through product upgrades, enhanced marketing and a combination of all channels.
On the cost side, the Three Squirrels fee control is still rising, with the third quarter 2019 report showing a 43.89% increase in operating costs, 49.12% increase in sales expenses and a 71.38% increase in management fees due to increased sales.
The Three Squirrels reliance on e-commerce platforms and contract-manufacturing models has also had an impact on their performance. In recent years, Three Squirrels were frequently involved in the “quality gate” disturbance, and the products became moldy, hair, worms, foreign matter and so on.
Although the Three Squirrels also have their own channels, they still heavily rely on e-commerce. The e-commerce platforms accounted for 88.62% of revenue in the 2019 half-yearly report. Over-reliance on e-commerce also eroded the profits of the Three Squirrels to a certain extent.
Plans are also under way for the Three Squirrels to open 1,000 eateries and 10,000 squirrel stores by 2025, according to IPO records.
