[Yibang Original] On October 27, Three Squirrels (300783) recently released its third quarter financial report for 2022. The report shows that Three Squirrels' revenue in the third quarter reached 1.21 billion yuan, a year-on-year decrease of 32.63%; the net profit attributable t

[Yibang Original] On October 27, Three Squirrels (300783) recently released its third quarter financial report for 2022. The report shows that Three Squirrels' revenue in the third quarter reached 1.21 billion yuan, a year-on-year decrease of 32.63%; the net profit attributable to shareholders of listed companies was 11.37 million yuan, a year-on-year decrease of 87.43%.

In April this year, Three Squirrels issued a strategic transformation announcement, clarifying the new strategic direction of "focusing on the nut industry, creating a multi-brand model, and gradually moving towards health, digitalization and globalization" in the next ten years.

's third-quarter financial report mentioned that during the reporting period, Three Squirrels continued to promote four reform measures: " Daily Nut HTML Demonstration Factory Building, Full Distribution Layout, Offline Store Optimization, and Business Division Reform", among which the active reduction of some businesses and products has an impact on current performance.

revenue and net profit both decreased year-on-year

financial report shows that in the third quarter, Three Squirrels' operating income was 1.219 billion yuan, a year-on-year decrease of 32.63%; net profit attributable to shareholders of listed companies was 11.37 million yuan, a year-on-year decrease of 87.43%. It is reported that the reason for the significant decline in net profit attributable to shareholders of listed companies compared with the same period is the fluctuations in the revenue and gross profit of the three squirrels' strategic transformation, as well as the increase in the publicity of nut categories.

In the first three quarters of 2022, Three Squirrels' operating income was 5.333 billion yuan, a year-on-year decrease of 24.57%; net profit attributable to shareholders of listed companies reached 93.5 million yuan, a year-on-year decrease of 78.86%. In terms of operating costs, from January to September, sales expenses reached 1.205 billion yuan, accounting for 22.6% of revenue, compared with 1.466 billion yuan in the same period last year, accounting for 20.7%; R&D expenses were 28.59 million yuan, accounting for 0.5% of total revenue, compared with 40.72 million yuan in the same period last year.

During the same period, the net cash flow generated by the operating activities of Three Squirrels was RMB 253 million, compared with RMB 407 million in the same period last year, a year-on-year decrease of 37.8%. The financial report mentioned that the net cash flow generated by operating activities has changed significantly compared with the same period last year, mainly due to the increase in the promotional expenses for nut category paid by Three Squirrels.

financial report mentioned that the company is still in a period of strategic adjustment, and it takes a certain amount of time to generate supply chain, channel and other layout and benefits.

reduce costs and improve efficiency: completely suspend store expansion and continue to reduce SKU

Currently, the three squirrels adopt a "1+N" multi-brand matrix business model, including the main brand "Three Squirrels" focusing on nuts, the baby food sub-brand "Xiaolu Lanlan", the pet food sub-brand "Hao a Hairy Child", the food sub-brand "Shu Sanxiang", etc.

The third quarter financial report did not disclose data on various business and channel. It can be seen from the semi-annual report that the main brand Three Squirrels had revenue in the first half of the year of 3.851 billion yuan, accounting for 93.6% of the total revenue; Xiaolu Lanlan's operating income was 261 million yuan, accounting for 6.3%.

In the first six months of this year, the three squirrels' big products include daily nuts with annual sales of billions, pecan fruit , hawaiian nuts, pistachio, paper-carved walnut hand-peeled badanmu , Shuxiang beef and other products. In terms of sub-brands, the annual sales of more than 10 products such as Xiaolu Blue's fragrant rice cakes, cod sausages, and freeze-dried cheese blocks have reached tens of millions. In terms of channel sales of

, as of the first half of the year, Three Squirrels' revenue on third-party e-commerce platforms reached 3.013 billion yuan, accounting for 73.25% of the total revenue. Among them, the revenue of Tmall series and JD series is relatively balanced, with revenue from Tmall 1.197 billion yuan and 1.119 billion yuan from JD 1.119 billion yuan.

Since this year, Three Squirrels have begun to close offline stores in large numbers. Data shows that in the first half of the year, San Squirrels only opened one direct store, 56 closed, and a total of 85 direct stores were opened; 37 new alliance stores were opened, 182 closed, and a total of 780 alliance stores were opened.

At a performance briefing this year, Three Squirrels said that from the perspective of 's high-quality development of , there were problems with the scale and extensive development model of stores in the past. Three Squirrels has suspended store expansion in a comprehensive manner and vigorously closed stores that do not conform to their long-term positioning and have poor performance. The next step will be to improve the profitability of a single store.At the same time, the main brand Three Squirrels will continue to reduce SKUs and incubate subdivided single product brands. Sales will be gradually stopped from selling multiple categories that do not meet the brand awareness of , lack of single product scale, weak profitability, and insufficient core competitiveness.

Supply chain innovation model and new distribution business become the focus of layout

In April this year, Three Squirrels issued the "Important Announcement on Comprehensively Promoting Strategic Transformation and Upgrading and Moving to High-Quality Development". The announcement pointed out that in the next ten years, Three Squirrels will transform and upgrade their development concepts, development paths and development models. Three Squirrels upgraded its brand mission to "make nuts and healthy foods popular with the public." At the same time, it indirectly enters the secondary industry to penetrate the primary industry by establishing supply chain innovation models such as demonstration or alliance factories, and promotes the deep integration of the primary, secondary and tertiary industries. In terms of development model, Three Squirrels will transform from e-commerce to omni-channel, from a single brand to a multi-brand.

In terms of specific practices, Three Squirrels will continue to promote the "focus on nuts" strategy, concentrate high-quality resources in the supply chain to carry out research and development of healthy foods with nuts as the core, establish demonstration or alliance factories, etc., and comprehensively upgrade core products mainly based on daily nuts, nut gifts, etc. In addition, Three Squirrels will also focus on promoting offline distribution business layout, quickly cover the mid- and offline markets of county-level cities and above across the country, and promote the development of dealer combinations of KA channels, traditional channels, special channels, and circulation and city-wide distribution.

According to the financial report content, during the reporting period, Three Squirrels have focused on supply chain and new distribution business.

The first daily nut demonstration factory started construction in April this year, and in July, the first batch of planned two production lines were implemented to trial operation. As of the end of the third quarter, a total of 36 sets of equipment in six production lines have been officially put into production. It is reported that the two production lines of the Hawaiian and Pecan demonstration factories have also been completed and are expected to be put into production by the end of this year. In terms of new distribution business of

, in the third quarter, Three Squirrels laid out key national subsidies and county-level sinking markets. At present, a total of 885 dealers have established long-term and stable brand authorized distribution cooperation. In terms of organizational construction, it has improved the overseas sales teams in various regions across the country; in terms of products, special products for distribution have been initially developed.

It is reported that in terms of sub-brands, Three Squirrels will also promote the healthy development of Xiaolu Lanlan, including focusing on popular products and promoting the optimization and upgrading of products and supply chains; at the same time, Xiaolu Lanlan will continue to consolidate its e-commerce business, and initially build an offline distribution network, strengthen private domain operations, further increase the speed of attracting new products, and broaden customer acquisition channels.