Chagee Holdings Q3 2025 Earnings Call: Contradictions Emerge on Product Strategy, Overseas Expansion, and Same-Store Sales Growth

Date of Call: November 28, 2025

Financials Results

• Revenue: RMB 3,208.3 million, down 9.4% YOY and 3.7% sequentially
• EPS: Diluted net income per ordinary share RMB 2.03 (basic RMB 2.07); non-GAAP diluted RMB 2.57 (non-GAAP basic RMB 2.63)
• Gross Margin: 53.8%, compared to 50.1% in the prior year (gross profit RMB 1,726.5 million)
• Operating Margin: 14.2% GAAP operating margin (operating income RMB 454.4 million); non-GAAP operating margin 17.4% excluding RMB 104.9 million share-based compensation

Business Commentary:

* Revenue Decline and Market Conditions: - Chagee's total net revenue was RMB 3,208.3 million in Q3 2025, a 9.4% decrease year-over-year and 3.7% sequentially. - The decline was attributed to a challenging macro environment and intensified competition, particularly in the delivery platform subsidy competition.

• Overseas Expansion and Market Growth:
• Overseas markets showed 75.3% year-over-year and 27.7% quarter-over-quarter growth in GMV, reaching RMB 300.3 million.
• The growth was mainly driven by strategic store expansion and growing brand awareness in markets like the Philippines, Vietnam, Malaysia, Thailand, and Indonesia.

• High-Quality Development Strategy:
• Chagee's focus on high-quality products and user experience has resulted in a robust member ecosystem with 222 million registered members, up 36.7% year-over-year.

• This strategy also includes strict product standards, cultural emphasis, and expansion of teahouse networks, contributing to brand differentiation and sustained growth.

• Profitability and Margin Improvement:

• The company reported a non-GAAP net margin of 15.7%, reflecting the resilience of its business model despite revenue declines.
• The improvement in gross margin to 53.8%, up from 50.1% in the previous year, was due to expanding economic upscale and procurement optimization initiatives.

Sentiment Analysis:

Overall Tone: Neutral

• Mixed results: 'total net revenue were RMB 3,208.3 million, a decrease of 9.4% year-over-year' and same-store GMV fell ~27.9% domestically, yet company achieved its '11th consecutive quarter of profitability', reported improved gross margin of 53.8% (up from 50.1% YoY), strong overseas GMV growth and announced a special cash dividend.

Q&A:

• Question from Sijie Lin (China International Capital Corporation Limited, Research Division): Could you please speak more about how will the high-quality development strategy be executed?
  Response: Execute across four pillars—brand, product, experience and channels—by upgrading brand experiences and specialty teahouses, enforcing premium raw-material and 4.0 menu standards, expanding consumption scenarios and improving membership engagement, and continuing steady teahouse expansion with flagship stores to deepen cultural positioning.

• Question from Xiaopo Wei (Citigroup Inc., Research Division): Could you share more color on the overseas network -- overseas market network expansion as well as a store operating in the non-China regions?
  Response: Overseas is a key growth driver: entered Philippines and Vietnam this quarter, Malaysia stores exceed 200; overseas GMV RMB 300.3 million, up 75.3% YoY and 27.7% QoQ; localized products and marketing drove strong per-store sales—company will steadily expand and focus on improving per-store profitability.

Contradiction Point 1

Product and Subsidy Strategy

It highlights a contradiction in the company's strategic approach to product focus and subsidy programs, which are crucial for market positioning and financial health.

How will the high-quality development strategy be executed? - Sijie Lin(Morgan Stanley)

2025Q3: The high-quality development strategy will be executed across four core dimensions: brand, product, experience, and channels. Key initiatives include upgrading the brand, enhancing product quality, improving customer experience, and expanding the teahouse network. - Junjie Zhang(CEO & Chairman of the Board)

What operational impact have the delivery platform subsidies had? - Lillian Lou(Morgan Stanley)

2025Q2: Delivery platform competition is intense, but reliance on subsidies isn't sustainable. Focus remains on product quality and customer experience, not price wars. Product R&D and menu changes are planned for the end of the year. - Junjie Zhang(CEO & Chairman of the Board)

Contradiction Point 2

Overseas Market Expansion

It involves differing perspectives on the pace and success of overseas market expansion, which are critical for growth and market penetration.

Can you elaborate on the international network expansion and store operations in regions outside China? - Xiaopo Wei(Citigroup Inc.)

2025Q3: Overseas markets are a significant growth driver. This quarter, expansion included entering the Philippines and Vietnam, with Malaysia exceeding 200 stores. - Hongfei Huang(CFO)

Could you update us on your expansion plans for overseas markets and China over the next few quarters? - Xiaopo Wei(Citigroup Inc., Research Division)

2025Q2: Overseas expansion is strong, with 208 stores in total. 77.4% year-over-year GMV growth. Singapore achieves payback period of less than 12 months. 200 stores planned to open in total by the end of the year. - Hongfei Huang(CFO)

Contradiction Point 3

Overseas Market Expansion and GMV Growth

It involves the reported growth and expansion of the company's overseas markets, which are crucial for assessing business growth and strategic direction.

Can you provide details on overseas expansion and store operations outside China? - Xiaopo Wei (Citigroup Inc.)

2025Q3: Overseas markets are a significant growth driver. This quarter, expansion included entering the Philippines and Vietnam, with Malaysia exceeding 200 stores. Successful localization efforts and store expansion are leading to strong overseas growth in Southeast Asia. - Hongfei Huang(CFO)

Could you update us on your overseas market expansion and development? - Unidentified Analyst (CICC)

2025Q1: As of March 31st, 2025, we have 169 overseas stores, including 157 in Malaysia, 10 in Singapore, and 2 in Thailand. Overseas GMV reached RMB178 million, growing 85.3% year-over-year. Stores in Singapore and new locations in Indonesia and the US exhibited strong performance. - Aaron Huang(CFO)

Contradiction Point 4

Same-Store Sales Growth (SSSG) Trends

It involves the reported trends in same-store sales growth, which are critical for assessing the company's operational performance and growth strategy.

Can you elaborate on how the high-quality development strategy will be executed? - Sijie Lin (Morgan Stanley)

2025Q3: The high-quality development strategy will be executed across four core dimensions: brand, product, experience, and channels. Key initiatives include upgrading the brand, enhancing product quality, improving customer experience, and expanding the teahouse network. - Junjie Zhang(CEO & Chairman of the Board)

Can you provide details on Q1 same-store sales growth? - Xinwei Liu (Citi)

2025Q1: SSSG is measured for stores open at least 13 months. 3,300 stores met criteria, comprising 50.6% of our total portfolio. SSSG experienced a decline due to rapid expansion, with growth ranging from high-single-digit to high-teen in mature markets. Transitioning from rapid market penetration to focus on same-store sales growth through new products and customer experience improvements. - Aaron Huang(CFO)