CHA — Chagee Holdings Limited American Depositary Shares

Summary of Chagee's Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Total GMV: RMB 31.6 billion for 2025, up 7.2% from RMB 29.5 billion in 2024.
• Q4 GMV: RMB 7.32 billion, reflecting challenges in the domestic market but strong overseas growth.
• Net Revenue: Q4 net revenue was RMB 2.97 billion, down from RMB 3.33 billion in Q4 2024; full-year net revenue increased 4% to RMB 12.9 billion.
• Same-Store Sales: Declined by 25.5% year-over-year in Q4, marking a significant challenge.
• Gross Margin: Improved to 53.2% from 51.6% year-over-year due to lower costs in packaging and logistics.
• Operating Loss: RMB 35.5 million in Q4, compared to an operating income of RMB 642.5 million in the previous year, largely due to restructuring costs.
• Net Income: GAAP net income for Q4 was RMB 33.9 million; non-GAAP net income was RMB 100 million, down from RMB 1,186.3 million for the full year 2024.
• Cash Position: Ended Q4 with RMB 7.89 billion in cash and equivalents, up from RMB 4.87 billion at the end of 2024.

2. Strategic Updates and Business Highlights

• Expansion Strategy: Chagee has grown to 7,453 tea houses, with a focus on quality over quantity in new openings. The company plans to moderate expansion in 2026, targeting around 300 new locations in China and 200 overseas.
• Product Innovation: Focus on enhancing the product lineup, including new formats and offerings tailored to consumer lifestyles and occasions.
• Franchise Model Transition: Shifted to a GMV-based revenue sharing model with franchisees to foster better alignment and shared success.
• International Growth: Strong performance in overseas markets, with a 84.6% year-over-year GMV growth. The company entered four new markets in 2025 and plans to continue steady international expansion.

3. Forward Guidance and Outlook

• 2026 Focus: Chagee aims for high-quality growth, prioritizing same-store sales recovery and operational efficiency over rapid expansion. The company expects to stabilize revenue and profit year-on-year while enhancing consumer experiences.
• Operational Improvements: Continued emphasis on refining organizational structure and processes to improve efficiency and responsiveness.

4. Bad News, Challenges, or Points of Concern

• Same-Store Sales Decline: The significant drop of 25.5% in Q4 same-store sales is a major concern, reflecting both internal strategy adjustments and external competitive pressures.
• Operating Loss: The transition phase has resulted in operating losses, raising questions about the effectiveness of the current strategy and execution.
• Competitive Pressures: Intense competition from third-party delivery platforms has impacted offline sales and market tactics, necessitating a reevaluation of short-term strategies.

5. Notable Q&A Insights

• Management Reflection: CEO Junjie Zhang acknowledged the challenges faced in 2025, including underestimating market competition and the complexities of managing a large workforce. He emphasized the importance of learning from these experiences.
• Cost Reduction Initiatives: CFO Hongfei Huang highlighted ongoing efforts to streamline operations and improve budgeting, indicating early positive results from these initiatives.
• Overseas Market Performance: Management noted that overseas tea houses are outperforming domestic ones, suggesting a potential for replicable success in international markets.
• Long-Term Vision: The management reiterated a commitment to building a high-value brand and lifestyle-oriented company, despite short-term financial volatility.

Overall, Chagee is navigating a challenging landscape with a focus on long-term growth and operational excellence, while addressing immediate financial pressures and competitive challenges.