CHA — Chagee Holdings Limited American Depositary Shares

Summary of Chagee's Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: RMB 3,546 million, up 4.5% year-over-year and 19.2% quarter-over-quarter.
• Gross Margin: 55.6%, improved from 53.1% a year ago.
• Non-GAAP Net Income: RMB 506.7 million, a significant increase from the previous quarter.
• Total GMV: RMB 7,917.8 million, reflecting an 8.1% sequential increase.
• Same-store GMV Growth: Improved by 9.4 percentage points sequentially in Greater China.
• Teahouse Network: Expanded to 7,531 locations, a 12.7% increase year-over-year.

2. Strategic Updates and Business Highlights

• Operational Focus: The company is concentrating on enhancing consumer touchpoints and improving organizational efficiency, resulting in better execution and resource allocation.
• Product Launches: Introduced 12 new products, including successful offerings like the Da Hong Pao Tea Latte and Caramel Pour Latte, which contributed to sales growth.
• Marketing Initiatives: Implemented campaigns such as Buy One Get One Free, which doubled morning sales, and improved private domain traffic through in-store promotions.
• Share Repurchase Program: Authorized a buyback of up to USD 150 million to demonstrate confidence in the company’s long-term prospects.

3. Forward Guidance and Outlook

• The company aims to maintain a steady product launch cadence and continue expanding into new categories.
• Plans to enhance the membership system and consumer experience while prioritizing quality in teahouse operations, particularly in Greater China.
• Management expresses confidence in achieving high-quality growth and improving operational efficiency throughout 2026.

4. Bad News, Challenges, or Points of Concern

• Declining Same-store GMV Growth: Although improved, same-store GMV growth was still down 16% year-over-year, indicating ongoing challenges in the domestic market.
• Increased Operating Costs: Operating costs for company-owned teahouses rose significantly, reflecting the costs associated with expanding the company-owned network.
• Profitability Concerns: While gross margins improved, the shift to a GMV-based revenue model for franchisees raises questions about long-term profitability and revenue mix sustainability.

5. Notable Q&A Insights

• Factors Driving GMV Improvement: Management highlighted the successful Qian Wen campaign and new product launches as key drivers of improved performance.
• Impact of New Business Model: The GMV-based revenue sharing model is expected to enhance profitability by aligning interests between the company and franchisees, despite changes in revenue mix.
• Shareholder Returns: The decision to implement a share repurchase program reflects management's belief that the current share price does not accurately represent the company's growth potential.

Overall, Chagee's Q1 2026 results indicate a recovery in operational performance and strategic focus, although challenges remain in sustaining growth and managing costs.