A Heated Debate On Revenue And Profit: Three Squirrels In The Post Dividend Era

Three squirrels, which were widely criticized as "increasing income but not increasing profits" in 2019, will finally reverse this situation in 2020.

On the evening of March 26, the 2020 annual report released by three squirrels showed that the operating revenue was 9.79 billion yuan, a year-on-year decrease of 3.72%; the net profit was 300 million yuan, with a year-on-year growth of 26.21%; the non net profit of deduction was 240 million yuan, with a year-on-year increase of 19.34%.

A new problem has arisen: Although the three squirrels achieved net profit growth, their revenue has declined.

This is not good news for A-share companies which have just been listed for less than two years.

Especially for the three squirrels with double-digit or even triple-digit growth in the previous five years, the first drop in revenue will inevitably cause market concern.

Is the company touching the growth ceiling?

The 21st century economic reporter interviewed many experts and tried to answer the above questions.

The decline of online dividend is obvious

In the special historical context of 2020, the new epidemic has a huge impact on the whole industry, especially the optional consumption. As the latter, the leisure snack industry is obviously not immune.

In the same industry, the main business location of good quality shops is in Central China, where the epidemic situation is serious. However, the revenue and net profit of these shops increased last year.

As one of the leading leisure snack industry, what are the main reasons for the decline in revenue of three squirrels?

After the rapid rise of e-commerce, what measures has it taken to cope with the decline of online dividends?

What is the significance of offline market development to the company?

How do three squirrels build their own moat compared to other snack companies?

The turning point of the story, in fact, has been signaled as early as 2019.

In 2019, the revenue of the three squirrels exceeded 10 billion yuan, with an increase of nearly 50%, but the net profit attributable to it decreased by 21.43%. This is the first time in recent years that three squirrels have seen net profit decline.

At that time, the market's interpretation of this was that the three squirrels growing up on the Internet were enjoying declining online dividends. Facing the attack from other snack giants, they exchanged profits for scale and stabilized their leading position.

By 2020, the three squirrels who have been questioned about "increasing income but not increasing profit" for a year may have delivered a result of "increasing interest but not increasing income" in response to market concerns: at least, they have made more money than before.

But investors will not only focus on one indicator, the falling revenue data is still dazzling.

In 2020, the company's operating revenue was 9.79 billion yuan, a slight decrease of 3.72% over the same period of last year, which was basically the same as that of the same period of last year; the net profit attributable to the parent company was 300 million yuan, with a year-on-year increase of 26.21%. Three squirrels said that after half a year of operation, the new brand contributed 76.1117 million yuan in revenue and a net loss of 40.4279 million yuan. If the impact of the new brand is not considered, the company's net profit will increase by 43%.

In contrast, the good food store, which is also a snack giant, achieved a revenue of 7.89 billion yuan last year, a year-on-year increase of 2.32%, and a net profit of 344 million yuan, a year-on-year increase of 0.95%.

In other words, although the revenue scale of liangpin shop is less than that of three squirrels, the scale of net profit has been reversed.

Compared with the gross profit data, the three squirrels are also low: the gross profit rate of liangpinpu is 30.47%, and the net profit rate is 4.36%; the gross profit rate of the three squirrels is 23.9%, and the net profit rate is 3.08%.

However, the problem of low gross profit rate of three squirrels has a long history. "Squirrel father" Zhang Liaoyuan has always disagreed with this problem. "The gross profit rate is low, is it not good for us to give profits to consumers?"

What caused the three squirrels to lose revenue? The impact of online dividend recession is becoming more and more obvious.

Three squirrels explained that "due to the further decentralization of online traffic in 2020, the drainage effect of nut products as a core category will begin to weaken.". Last year, the revenue of nut products reached 4.85 billion yuan, down 10.93% year on year.

Online dividend decline is a cliche. According to the annual report, in 2020, the traffic differentiation of three squirrels' online platforms will lead to a decline in the number of visitors.

Before that, the online traffic of the three squirrels mainly came from tmall, which made the platform have a higher voice. The company's service fee proportion in the third-party platforms such as tmall has increased year by year.

With the rise of short video platform, life sharing platform and live broadcast platform in 2020, traffic will be redistributed, and three squirrels will begin to adjust the online structure. In 2020, in the online business revenue of three squirrels (online business accounts for about 74%), tmall channel accounts for 52% and Jingdong channel accounts for 38%. The development of online platforms will be further balanced.

In 2019, the proportion of online revenue of three squirrels is about 90%, which is concentrated in tmall.

"The disappearance of Internet dividends and the high cost of acquiring customers and marketing are the reasons why the overall revenue of the three squirrels is not ideal." Zhu danpeng, an analyst of China's food industry, told reporters of the 21st century economic report.

Short board under mending line

In fact, since 2018, the three squirrels have been aware of the problem of relying on online channels and started to turn offline.

In 2019, Zhang Liaoyuan assumed in an interview with the 21st century economic reporter that "in 2020, three squirrels will reshape the supply chain completely based on offline scenarios and consumer demand."

However, the outbreak in 2020 will bring variables to the three squirrels that were originally to be vigorously expanded.

"In offline channels, the epidemic has a certain impact on offline entities, and has an impact on consumers' willingness to consume non essential products. Investment food stores and alliance stores actively adjust their strategies." Three squirrels said.

At the beginning of 2020, the offline sales of the three squirrels will inevitably decline in consideration of the epidemic situation or the continuation of the epidemic situation, once shifting the focus of business to online.

This can be seen from the previous half yearly report. In the first half of 2020, online sales still contributed most of the revenue. The third-party e-commerce platform is an important part of the sales of three squirrels, accounting for 84.54% of the revenue. The operating revenue of self operated app was 25 million yuan, accounting for 0.48%. In other words, the proportion of online sales is still as high as 85%.

For the offline part, the three squirrels said that although affected by the epidemic situation to a certain extent, but the overall steady growth, is further deepening the national layout. In the first half of the year, 38 new squirrel feeding shops and 209 small league stores were added.

In the second half of the year, with the gradual weakening of the impact of the epidemic, the pace of the layout of the three squirrels accelerated.

In 2020, 78 new stores will be opened in three squirrel feeding shops, with 171 stores in total at the end of the period, with a revenue of 874 million yuan, an increase of 16.4% year-on-year. At the end of the period, a total of 872 stores were opened in 641 small shops of the alliance, with a revenue of 459 million yuan, a year-on-year increase of 63.3%. At the end of the new distribution, the total number of retail terminals reached more than 400000, with a revenue of 1.165 billion yuan, a year-on-year increase of 37.7%. In other words, in the second half of last year, 40 new feeding shops and 432 alliance stores were opened for three squirrels, greatly speeding up the opening speed compared with the first half of last year.

What's more, it is worth noting that in 2020, the feeding shops and alliance stores of the three squirrels will be profitable as a whole.

According to the annual report, the offline business of three squirrels will account for 26% in 2020, and only 4.5% in 2017. It is estimated that offline business will account for 33% - 35% in 2021.

Scale or profit?

So, how did the three squirrels maintain the growth of net profit while the revenue decreased while the offline expansion was not enough to make up for the online recession?

"The reason why the three squirrels have increased income but not increased profits in the past few years is that they have spent a lot of capital to buy flow, and most of their profits have been eroded by the consumption platform. As the cost of acquiring customers on the platform becomes higher and higher, three squirrels begin to go offline, thus saving part of the platform costs, resulting in the emergence of the phenomenon of increasing profits. Increasing profits but not increasing revenues means that this part of the profits increased by the three squirrels comes from "cutting down" rather than "opening up sources." Guo Yuxuan, a researcher at Beijing Institute of understanding economics, pointed out in an interview.

How to cut down? According to the annual report, in 2020, the traffic differentiation of the three squirrels' online platforms led to a decline in the number of visitors. The company actively adjusted its online operation strategy, reduced invalid price competition, and optimized product mix sales. The overall online sales volume and order number declined, but the customer unit price and gross profit rate were better improved.

For the interpretation of "increasing profits without increasing income", Hejun consulting partner humanistic Zhihong, who has long been concerned about the retail industry, believes that "there are advantages and disadvantages". This shows that the three squirrels have taken corresponding measures to maintain profit growth by reducing costs and increasing efficiency, which is worthy of affirmation. On the other hand, the three squirrels took conservative measures and did not face the price competition in order to maintain a higher gross profit. This strategy is relatively conservative.

"The essence behind this is that last year, the three squirrels were more inclined to seek profits in the choice of profit or scale. The disadvantage is that the market share has not been expanded rapidly. " Wen Zhihong further said.

So, does this indicate that the growth of the three squirrels has reached a bottleneck? There are different opinions on the answer to this question.

Guo Yuxuan believes that this is a transition of three squirrels from a growth period to a stable period, and also an inevitable result of the transition from pure online to offline, that is, the slowdown in growth. "In the past, the three squirrels relied more on the financing funds and purchased a large number of traffic on the platform to achieve rapid development. In this initial stage, user growth and revenue are the core, and profit is not important. However, such a mode of burning money is not sustainable. When the rapid development is approaching saturation and the flow is bottleneck, only by paying attention to the growth of profits can enterprises survive smoothly. "

Wen Zhihong said that although the leisure food retail industry did not grow as fast as it had benefited from the market dividend in the past, it should be one of the important strategies for a head enterprise like three squirrels to continuously expand its market share.

Or, this is also the helpless action of three squirrels under the epidemic situation.

"The strategic choice of profit rather than sales volume is a prudent and conservative approach under special circumstances last year, and can not be used as a strategic choice in the next few years. In my opinion, although the leisure food retail industry does not grow rapidly due to the market dividend in the past, it should be one of the important strategies for a head enterprise like three squirrels to continuously expand its market share. " Wen Zhihong said, "of course, we should find a balance between profits and revenues. Especially for A-share companies, it's not good to completely require income without profits."

K-line anxiety

On March 26, the first trading day after the annual report was released, the shares of the three squirrels soared by 6.59%, and the profit growth gave them a shot in the arm to their previously depressed stock prices.

In July 2019, three squirrels landed in the capital market in the halo. Two months later, the issue price rose from 14.68 yuan to 81.25 yuan. In May 2020, the stock price of three squirrels even reached the peak of 91.31 yuan. But since then, it has been falling all the way, closing at 39 yuan on March 31.

Its trend is similar to that of liangpin shop, which peaked at 87.24 yuan in July 2020, and has recently fallen below 50 yuan. The price earnings ratio of the two is at a similar level.

If we extrapolate from the current node, what was the premium given to the three squirrels by the capital market a year ago?

Wen Zhihong believes that "for leisure food retail enterprises, the future must be online and offline integration. Before listing, the three squirrels were considered to be more Internet oriented enterprises, relying on the Internet for rapid growth. After going public, more and more people understand its essence, so we value it according to the retail enterprises of leisure food. "

So, in a year's time, where will the imagination space of three squirrels bring to the capital market come from?

The answer is offline.

"Because of the attributes of leisure food and the characteristics of consumers, it is decided that the main battlefield of the industry is offline, and three squirrels are right offline." Wen Zhihong told reporters of the 21st century economic report.

According to frost Sullivan data, the retail sales of China's leisure food industry will reach 1.56 trillion in 2022, of which online retail sales account for about 17%, and 83% of the market is still offline.

The staff of the three squirrels once told reporters, "the frequency of online consumption is far lower than that of offline consumption, and most of them are planned and purposeful purchases. However, offline consumption is impulsive and random. For example, when a girl sees a doll of three squirrels, she will buy it after experiencing it. "

Wen Zhihong believes that "although the three squirrels started on the Internet, they are just a sales channel or platform, and they are still a leisure food retail enterprise in essence. Through online or offline sales, it mainly depends on operational efficiency and growth space, which is the most critical point to distinguish the growth and value of an enterprise. "

Of course, the real cost pressure of offline business development of three squirrels is often criticized by investors.

In this regard, Wen Zhihong believes that "the layout of offline stores is not necessarily heavy assets. There are two forms of offline stores for three squirrels: Direct stores and alliance stores. The latter can be understood as franchise stores. If the proportion of Direct stores is too large, the risk of heavy assets is relatively large. Now, three squirrels should be franchised stores, which is a relatively light asset model. "

"The scale of Direct stores is large, focusing on experience and display. The alliance stores add up to nearly a thousand, and still have a lot of room for expansion. But how to operate, three squirrels need to accumulate experience. "

The three squirrels also admitted that from e-commerce operation to online and offline Omni channel operation, there is no perfect offline management mode at present. In the new year, the company will further improve the overall offline revenue level through channel collaborative planning, price management, organization construction, etc.

In the current battle between the snack giants, Wen also said that the three squirrels should continue to strengthen their position as the number one nut category. In addition, we can continue to build advantages in shaping the IP image of the three squirrels, especially the differentiated experience offline.