Chagee's Q1-Q2 2025 Earnings Calls: Contradictions Emerge in Strategic Priorities, International Expansion, and Same-Store Sales Trends

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 29, 2025

Financials Results

• Revenue: RMB 3.33B, up 10.2% YOY
• EPS: RMB 0.35 per diluted share (RMB 0.36 basic)
• Gross Margin: 53.9%, up from 48.4% in Q2 last year and 53.1% in Q1 2025
• Operating Margin: 19.8% non-GAAP (operating income excluding SBC)

Guidance:

• No formal FY25 financial guidance; focus on long-term execution.
• Expect continued pressure on same-store GMV in H2 2025 due to high base and delivery-platform subsidies.
• Plan to open >200 overseas stores in 2025; Philippines is the last new country entry this year; second U.S. store soft-opened in August.
• Singapore nearing country-level breakeven in the coming quarter; Malaysia profitability ahead of plan.
• Rolling out 4.0 automated machine by year-end to lower labor costs and improve efficiency.
• H2 raw-materials upgrade (tea, milk, syrups) to reinforce premium positioning.

Business Commentary:

* Financial Performance and Market Conditions: - Chagee Holdings reported revenue of RMB 3.3 billion in Q2 2025, up 10.2% year-over-year, with GMV reaching RMB 8.1 billion, a 15.5% increase year-over-year. - The growth was driven by the expansion of the teahouse network and overseas market development, but was tempered by intensified delivery platform subsidy competition in China.

• Overseas Market Expansion:
• Overseas markets showed significant traction with GMV increasing by 77.4% year-over-year and 31.8% quarter-over-quarter.

• This growth was primarily due to strategic store expansion in markets like Indonesia and the United States, and enhanced brand awareness.

• Product Innovation and Brand Strategy:

• New product launches, such as Hojicha Genmai milk tea and the Earl Grey series, contributed to strong regional performance and increased brand visibility.

• The company focused on enhancing the high-value brand image and maintaining a disciplined pricing framework, rather than engaging in price wars.

• Talent and Leadership Development:

• Chagee appointed Ms. Emily Chang as Chief Commercial Officer for North America and Mr. Aaron Harris as Chief Development Officer for North America.
• These appointments are part of a strategic global talent acquisition effort to drive North American market expansion and support overseas market growth.

Sentiment Analysis:

• Revenue up 10.2% YOY and GMV up 15.5%; gross margin expanded to 53.9% (48.4% prior year). Management cited headwinds from delivery-platform subsidies and expects continued pressure on same-store GMV in H2 2025. Non-GAAP net margin declined to 18.9% (20.8% last year). Company will not provide formal FY guidance while investing in overseas expansion and operational capabilities.

Q&A:

• Question from Lillian Lou (Morgan Stanley): What was the operational impact of delivery-platform subsidies on pricing, franchisee margins, and store stability, and how will you respond in H2?
  Response: Chagee will avoid subsidy-driven price wars, stick to premium positioning and product quality, improve efficiency (incl. year-end rollout of 4.0 automation), and revamp the menu while protecting pricing integrity.

• Question from Xiaopo Wei (Citigroup): Please update overseas and China expansion plans for the next few quarters and key learnings shaping overseas strategy.
  Response: Overseas will accelerate with >200 store openings in 2025; Philippines launched (last new country in 2025), second U.S. store opened in August; strong traction (e.g., LA, Singapore near breakeven), and localized products/campaigns will drive growth.

• Question from Sijie Lin (CICC): Color on Q2 same-store sales and the outlook for SSSG.
  Response: Same-store GMV softened due to a high base and avoiding subsidies; continued pressure expected in H2, with moderated expansion and a focus on product quality and customer experience to rebuild traffic.