Is Three Squirrels' First Quarter Showing Genuine Recovery?

Three Squirrels Inc. recently disclosed its first-quarter report, presenting a starkly different picture compared to its 2025 annual results. In 2025, the company experienced declines in both revenue and profit, with annual revenue dropping 4.08% year-over-year to RMB 10.1 billion. Non-GAAP net profit plummeted 84.53% to just RMB 49.4 million. However, in the first quarter of 2026, revenue returned to growth, increasing 3.01% to RMB 3.835 billion. The improvement on the profit side was even more pronounced, with non-GAAP net profit surging over 50% compared to the same period last year. Signs of marginal improvement in operations are beginning to emerge. On one hand, adjustments in the supply chain and cost structure are gradually taking effect. Over the past two years, the company has advanced its strategy of "high-end cost-effectiveness" by promoting intensive production and optimizing sourcing locations. This has increased the proportion of self-produced goods and shortened the supply chain. In the first quarter, Three Squirrels' gross margin reached 27.33%, up 0.59 percentage points year-over-year. Inventory levels also decreased significantly, easing pressures related to capital occupancy and inventory write-downs, indicating an improvement in operational quality. On the other hand, the optimization of the sales channel structure is starting to yield results. Against the backdrop of rising dominance of short-video e-commerce, the company has strengthened its omni-channel coordination through its "D+N" model. It has shifted from relying heavily on paid traffic in content e-commerce to refined operations—driving conversions with hero products and focusing on ROI as the core objective. This has led to profit improvement outpacing revenue growth. From a strategic perspective, the company is transitioning from a snack brand to a full-category, private-label retailer covering family consumption scenarios. Its newly incubated "Life Hall" format, positioned as "good products at fair prices, essential for three meals a day," is entering the community retail market through a model of "direct sourcing from origin + regional cold chain + private brand." This distinct channel and category strategy, which differs significantly from peers, has resulted in differentiated performance. While other brands have leveraged emerging channels to focus resources on hero products, Three Squirrels saw revenue from its core nut category decline approximately 10% in 2025. However, baked goods and meat products provided structural support, achieving growth of about 26% and 15%, respectively. Nevertheless, compared horizontally within the industry, the company's 3.01% revenue growth in the first quarter ranks relatively low among disclosed snack food companies. For instance, Qiaqia Food achieved over 40% revenue growth in the same period, while Jinzai Food maintained robust growth of 24%. Additionally, e-commerce remains the foundation of Three Squirrels' revenue but is also a significant drag on profitability. In 2025, third-party e-commerce platforms generated revenue of RMB 7.176 billion, accounting for 70.42% of total revenue. Within this, Douyin contributed RMB 2.272 billion, or 22.3% of total revenue, surpassing Taobao & Tmall's 16.87% and JD.com's 14.85%. Until the company addresses its weaknesses in offline channels, the market will require more data to confirm a genuine turning point in its growth trajectory.