Despite revenue growth driven by store restructuring and franchise transformation, Shanghai Laiyifen Co., Ltd. (603777) failed to curb its widening losses. Facing industry competition and quality control challenges, the company's path to profitability remains uncertain.
On October 29, Laiyifen released its Q3 2025 financial report, showing operating revenue of 2.85 billion yuan, up 13.1% year-on-year. However, net profit attributable to shareholders swung from a loss of 42.62 million yuan in the same period last year to a deeper loss of 125 million yuan. Non-GAAP net profit also worsened, dropping from a 75.15 million yuan loss to 136 million yuan. Operating cash flow declined 64.5% to 78.22 million yuan, while fully diluted EPS stood at -0.3748 yuan.
In the third quarter alone, revenue grew 25.2% year-on-year to 914 million yuan, but net losses expanded from 57.55 million yuan to 74.66 million yuan. Non-GAAP net loss deepened from 66.26 million yuan to 79.66 million yuan, with EPS at -0.2232 yuan.
**1. Revenue Growth Without Profitability: The Cost of Transformation** Laiyifen's simultaneous revenue growth and profit decline reflect the costs of its ongoing strategic shift. The company's "Ten Thousand Lights" strategy has pivoted from scale expansion to optimizing single-store profitability and franchise promotion. This transition has led to a reduction in directly operated stores and an increase in franchised locations. However, restructuring costs—including expenses from converting stores to franchises and phasing out underperforming locations—have weighed heavily on short-term performance. Additionally, differing gross margin structures between new and existing businesses have further pressured overall profitability.
Operational efficiency metrics paint a mixed picture. While the franchise model has reduced sales and administrative expense ratios, overall gross margins face downward pressure. This paradox highlights the challenges of transformation: while franchising cuts costs, it may also compress profit margins. Notably, weakening cash generation from core operations poses potential liquidity risks, making the balance between restructuring and cash flow stability a critical challenge.
**2. Underlying Risks and Mounting Challenges** Beyond immediate financial pressures, Laiyifen faces deeper risks amid its transformation. Intensifying industry competition, particularly from discount snack brands leveraging low prices and high inventory turnover, has eroded its market share. These competitors attract price-sensitive consumers with aggressive pricing and extensive SKUs, further squeezing Laiyifen's position.
Structural weaknesses have also been exposed. The company's online business—a vital channel in modern retail—lags behind industry averages due to missed opportunities in third-party e-commerce platforms. More concerning are recurring food safety issues, such as the "bloody bandage"粽子 scandal, which revealed quality control gaps in its outsourcing model. For a brand-dependent snack company, such risks could hinder franchise expansion.
Store network dynamics add another layer of complexity. Despite its "10,000-store target," Laiyifen's total outlets remain below expectations. Directly operated stores—once a core strength—continue to shrink, while high rents and labor costs strain profitability amid weak consumption recovery.
Management has prioritized franchise conversion and operational efficiency, even launching support programs for franchisees. Yet, as the snack industry consolidates, Laiyifen's transformation is not just a survival test for the company but also a case study on how traditional chains adapt to sector-wide disruption. Whether it can navigate these challenges successfully remains to be seen.
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