On October 14, Shanghai Laiyifen Co.,Ltd. (603777.SH), known as the "first snack stock," held its 2025 mid-year performance briefing, with management addressing investor concerns regarding business performance.
The company faces dual challenges of transformation difficulties and market confidence issues amid first-half losses and controlling shareholder share reductions.
**Gross Margin Drops 8.67 Percentage Points**
In the first half, Shanghai Laiyifen Co.,Ltd. achieved revenue of 1.94 billion yuan, up 8.21% year-over-year; however, net profit attributable to shareholders turned from profit to loss at -50.68 million yuan, a significant decline of 439.6% year-over-year. The company attributed the first-half losses to declining gross profit margins.
During the period, operating costs rose 24.2% year-over-year to 1.307 billion yuan, with cost pressures directly eroding profit margins. The gross margin stood at 32.61%, down 8.67 percentage points year-over-year.
At the performance briefing, an investor inquired about factors affecting costs. CFO Xu Peishan indicated that gross margin changes were primarily due to different margin structures from expanding new businesses.
Breaking down by business segments, Shanghai Laiyifen Co.,Ltd.'s highest-margin operations are direct retail stores, with mid-2025 levels above 46%, but revenue declined from 1.112 billion yuan in the same period last year to 875 million yuan, shrinking by over 20%.
In contrast, franchise business revenue grew 78.65% year-over-year to 722 million yuan, but with a gross margin of only 14.25%, creating a gap of over 30 percentage points compared to direct stores. The structural shift of contracting high-margin business and expanding low-margin operations directly pulled down overall margin levels.
Additionally, e-commerce business contributing 180 million yuan in revenue saw its gross margin decline from 35% in mid-2024 to 18%, as Shanghai Laiyifen Co.,Ltd. finds it increasingly difficult to profit amid online market "price wars."
Notably, the structural changes between direct and franchise operations stem from the company's proactive adjustments, as it has strengthened nationwide franchise promotion efforts and continuously converted direct stores over the past two years.
As of June 2025, Shanghai Laiyifen Co.,Ltd.'s total store count decreased to 2,979 from 3,472 in the same period last year, representing 493 fewer stores and a closure rate of 14.2%. This includes 1,395 direct stores (47%) and 1,584 franchise stores (53%), while franchise stores accounted for only 48.87% in the same period last year.
Regarding the contradiction between previously announcing a "Ten Thousand Lights Strategy" while continuously closing stores, Chairman Shi Yonglei responded at the performance briefing that this strategy represents a long-term goal. The company will focus on the Yangtze River Delta region while expanding nationwide markets, increasing franchise efforts while optimizing and upgrading direct stores, deepening offline channel layout to create "anytime, anywhere Shanghai Laiyifen Co.,Ltd." scenarios.
For improving store profitability, Shi Yonglei outlined two directions: first, developing and expanding innovative categories, introducing high-quality, cost-effective non-proprietary brand products to enrich the product matrix; second, accelerating digital transformation of existing stores through "cost reduction and efficiency improvement" to enhance individual store profitability.
**Controlling Shareholders Reduce Holdings by Over 80 Million Yuan**
Looking at longer time frames, Shanghai Laiyifen Co.,Ltd.'s mid-2025 revenue of 1.94 billion yuan represents the second-lowest level in five years, only higher than last year's 1.792 billion yuan but significantly below mid-2022's 2.312 billion yuan, indicating business growth has stagnated or even regressed.
Previously, the company attempted to expand into coffee and liquor businesses seeking a second growth curve, but market response was limited, causing investors to question its growth potential.
Shanghai Laiyifen Co.,Ltd. President Yu Ruifen noted at the performance briefing that current deployments in alcoholic beverages, dairy products, fresh-brewed coffee, and fresh braised products are showing results, with innovative categories achieving positive growth. Specifically, instant food products grew 16.1% year-over-year, and the beverage segment grew 6.9% year-over-year.
However, examining revenue structure reveals that the four main categories—nuts and roasted goods, bean products, meat and seafood products, candies and preserved fruits and vegetables, and pastries and puffed foods—remain the primary contributors. The faster-growing instant food and beverage segments mentioned above were not separately disclosed and may still be in development phases with low contribution ratios.
Notably, while the company faces performance difficulties, controlling shareholders have been busy reducing holdings.
In June, Shanghai Laiyifen Co.,Ltd. disclosed that controlling shareholder Aiwu Enterprise Management planned to reduce holdings of no more than 10.0327 million company shares from July 1 to October 1, representing no more than 3% of total share capital.
Aiwu Enterprise Management is wholly owned by Shanghai Laiyifen Co.,Ltd. founders and couple Shi Yonglei and Yu Ruifen. During the reduction period, Aiwu Enterprise Management reduced 6.6805 million shares totaling 82.4336 million yuan, with their shareholding ratio declining from 52.96% to 50.96%.
Performance losses combined with shareholder reductions undoubtedly add more concerns for investors regarding the company's future development.
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