The festive seasons, across cultures, typically represent a surge in consumer spendingFamilies stockpile a variety of snacks not only for their guilty pleasure while binge-watching shows but also for hosting gatherings with friends and relativesConsequently, snack companies experience a significant boost in sales during these periodsIf these companies are publicly traded, such performance increases are usually reflected in their stock prices.

However, the correlation between performance metrics and stock price is far from straightforwardIn the real world, markets frequently witness patterns of overbuying and overselling, leading to unpredictable fluctuationsTake, for example, the recent roller-coaster ride of the snack giant known as the "first stock for snacks," which observed drastic swings in its share valuation.

Specifically, from January 9 to January 16, a remarkable sequence of events unfolded

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Over six trading days, the stock price of Laiyifen surged impressively from 13.88 yuan to 24.76 yuan, marking an astonishing increase of 78.4%—a new high for 2023.

As this upward trend gained momentum, capital from various investors flooded into the stock, with speculative investments playing a significant role in propelling the price skywardBy January 16, trading volume reached 2.2 billion yuan in a single day, with the stock experiencing a daily fluctuation of 16% and a turnover rate nearing 30%. Notably, a group of speculators based in Lhasa emerged as the dominant force behind the trading frenzy, collectively pouring nearly 120 million yuan into the stock.

However, the scenario took a dramatic turn that very evening when the company unexpectedly announced a dismal profit forecast for the upcoming year—shocking investors and abruptly dousing the euphoria with a bucket of cold water.

In detail, that night, Laiyifen issued its 2024 annual performance forecast, which alarmingly indicated a shift from profit to loss

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The company anticipated a net profit loss of around 86 million yuan, representing a staggering drop of approximately 251% year-on-yearThe expected net profit after excluding certain factors was predicted to be around 76 million yuan—down an astonishing 750%.

For context, in 2023, Laiyifen had made a net profit of 57.05 million yuan attributable to its shareholders, but when adjusted for certain exclusions, this figure plummeted to just 11.7 million yuan.

The immediate aftermath of the announcement saw the stock's rising tide haltedBy January 21, it had fallen for three consecutive days, closing below 19 yuanInvestors who previously anticipated profits must surely have regretted their haste in chasing stocks during periods of high valuation—a classic reminder of the risks associated with following momentum without proper foresight.

While the company's shift from profit to loss in its 2024 forecast caught many off guard, it was somewhat expected

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Laiyifen had already been facing difficulties, having entered the loss zone in the first three quarters of the current year.

To be precise, the company reported total revenue of 2.523 billion yuan in the first three quarters of 2024—a decline of nearly 16% year-on-year, coupled with a staggering net loss of approximately 42.62 million yuanThe third quarter alone accounted for a massive loss of over 57 million yuan, indicating a shift to red in profits from previously positive results in the first half.

The reasons behind this downturn included a noticeable trend of consumers opting for lower-priced goods in certain cities and an increasingly competitive landscape in the leisure snacks sectorThe company's restructuring efforts over the past year, although leading to slight increases in franchise revenues, had a detrimental impact on direct sales, resulting in profits lower than expectations.

Since its IPO in 2019, Laiyifen's net profits have oscillated between gains and losses

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The company's reported net profits between the years 2019 and 2023 were 10.37 million yuan, -65.2 million yuan, 31 million yuan, 102 million yuan, and finally 57.05 million yuan, reflective of an unstable financial performance.

Is it all purely dependent on the surge of RedNote?

Contrary to popular belief, in the A-share market, the rise and fall of stock prices are often not directly correlated with actual financial performanceEmotional sentiment can drive significant market oscillationsThis recent spike in Laiyifen stock showcases precisely this phenomenon—a classic case of emotional trading.

This backdrop leads us to the growing influence of the social application, RedNote

In light of the impending TikTok ban, users flocked to RedNote—a popular social media platform in ChinaThe app quickly gained traction, eventually becoming the top downloaded free application in the app stores of multiple countries.

On RedNote’s homepage, a swell of users, who referred to themselves as “TikTok Refugees,” engaged energetically with Chinese usersThis influx of newfound users not only translated into massive traffic for various brands tied closely with RedNote's narrative but also led to wild speculation and rapid stock price increases for those brands.

How exactly did Laiyifen tap into this “RedNote” current? Remarkably, on January 14, Laiyifen was listed as a "RedNote concept stock" on the Eastern Fortune Board, just as its stock reached its fourth consecutive limit-up

Smart money must have anticipated this movement preceding the surge.

The origin of this concept stems from strategies laid as far back as six months priorIn its 2024 semi-annual report, Laiyifen outlined strategic partnerships with multiple platforms including Douyin, Kuaishou, RedNote, and others, establishing flagship stores to provide customers with suitable products and outstanding servicesSuch major moves laid a foundation for the current rush in traffic.

However, there remain doubts about whether RedNote can effectively convert this international user base into tangible financial successDespite their increasing engagement and interest, logistical challenges and language barriers could hinder practical transactions.

For instance, even if users from across oceans place orders, Laiyifen must ensure that packages reach them efficiently—a significant hurdle currently appears to be the comprehension of the marketplace and product descriptions by a majority of overseas customers.

Additionally, with TikTok’s resurgence, excitement surrounding RedNote appears to be waning

Many users have reported a return to the app’s “normal” interfaceThe uniqueness that attracted “TikTok refugees” seems to have faded, potentially jeopardizing the audience’s engagement.

As international audiences begin migrating back to their respective platforms, stocks associated with concepts driven by RedNote, including Laiyifen, are experiencing declinesThis moment serves as a reminder of the risks inherent in relying on trends that may be transient.

Ultimately, Laiyifen's strategy to pivot toward online platforms could be crucial in compensating for its earlier neglect of e-commerce opportunities, a significant shortfall against competitors.

It is noteworthy that, since the company's inception, the overwhelming focus has been on brick-and-mortar operations, which have only marginally expanded in the face of rapidly shifting consumer habits

The company has found itself at a standstill in growth, with store counts experiencing a decline as it heads into 2024.

According to the semi-annual report, by June 2024, Laiyifen operated a total of 3,472 stores across the country, a decrease of 213 from the start of the yearThe figures reveal a concerning trend of both direct and franchise stores declining.

Most of Laiyifen's outlets are predominantly in the eastern regions, especially in Jiangsu and Shanghai, which comprise around 80% of the total storesThe inflated commercial rent, renovation, and operational expenses have undeniably inflated the overall costs and dulled profit margins.

Entering a Laiyifen store radiates a sense of spaciousness and abundance; however, the reality of profitability remains questionable.

To give credence to these observations, the figures speak volumes: Between 2021 and the first three quarters of 2024, the average ratio of expenses in the leisure snack industry tracked at 26.19%, 24.20%, 21.94%, and 21.69% respectively

Meanwhile, Laiyifen’s expense ratios soared to 44.61%, 40.60%, 41.48%, and 43.27%, more than double that of competitors, significantly draining its net profits.

The company’s insistence on sticking to traditional brick-and-mortar experiences without a simultaneous investment in online traffic represents yet another tactical miscalculation which has led to its current plight—being outpaced decidedly by industry rivals.

When Laiyifen went public in 2019, its online business revenue hovered around 240 million yuan, contributing to only about 7.42% of its overall income, while competitors like Three Squirrels and Liangpin Shop registered online sales ratios of 96.82% and 33.69% respectivelyClearly, Laiyifen's proficiency in tapping online channels has lagged far behind.

Even in 2023, Laiyifen’s e-commerce income only accounted for 8.26% of total revenue, with retail from physical stores still contributing over 60%. This disparity highlights the urgent need for Laiyifen to strive to revamp its online strategy, entering collaborations with multiple e-commerce platforms—a late yet necessary shift.

Moreover, the company has consistently professed its stance against engaging in price wars, vowing to uphold quality over a race to the bottom in pricing

While this resolves integrity issues, it also subjects them to the risk of consumers opting for more affordable substitutes amid stiff market pressures characterized by the emergence of lower-priced competitors.

Faced with mounting internal and external challenges, Laiyifen has indeed attempted various innovative strategies; however, the effectiveness of these initiatives remains uncertain, with little impact noted across the industry or business ecosystem.

For example, in 2017, Laiyifen launched its freshly brewed coffee venture, later upgraded as “Laicup Coffee” in 2021, focusing primarily on serving freshly brewed coffeeFollowing this, they introduced their first sparkling water—Lemonade SurgeThe company even ventured into the liquor market via its fully-owned subsidiary to launch its own brand of aromatic liquor titled “Drunken Love.”

However, none of these maneuvers have yielded effects comparable to their entry into the membership store industry.

In August of last year, the first warehouse membership store by Laiyifen opened its doors in the Jiuting area of Shanghai, targeting specifically “black-gold” members, with an annual membership fee of 99 yuan