THCH — TH International Limited

THCH Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Total Revenues: Decreased by 14.6% year-over-year.
• System Sales: Declined by 14.2% year-over-year.
• Same-Store Sales Growth: Negative 13.2%, with a decline of 8.3% in transactions and 4.8% in average ticket size.
• Monthly Average Transacting Customers: Dropped to 2.69 million from 2.92 million year-over-year.
• Adjusted Corporate EBITDA Margin: Negative 11.8%, worsening from negative 9.8% in Q1 2025.
• Cash and Cash Equivalents: Totaled RMB 111.4 million, down from RMB 129.7 million at the end of 2025.

2. Strategic Updates and Business Highlights

• The company is shifting focus from rapid scale growth to quality growth, optimizing operations and reducing discount-driven promotions.
• Pruning of underperforming stores is ongoing, with plans to resume new store openings in Q2 2026.
• Strong performance from 2024 and 2025 vintage stores, with expected contribution margins in the mid-teens.
• Franchise model expansion is underway, with over 10,500 applications and nearly 260 stores opened since December 2023.
• Launched 21 new products in Q1 2026, emphasizing health-conscious and localized offerings.
• Digital orders increased to 87.5% of total orders, with delivery orders up by 10.2% year-over-year.

3. Forward Guidance and Outlook

• Management anticipates improved same-store sales in Q2 2026 and expects better performance for the remainder of the year.
• The company aims to achieve corporate EBITDA breakeven and enhance store-level profitability through cost structure optimization and supply chain improvements.
• Plans to accelerate sub-franchising and expand store networks, particularly in high-density urban areas.

4. Bad News, Challenges, or Points of Concern

• The coffee industry is experiencing a seasonal slowdown and intensified competition, particularly from tea brands entering the coffee market with lower-priced offerings.
• Significant declines in same-store sales and overall revenues raise concerns about short-term growth.
• Increased costs related to delivery and operating expenses, despite some reductions in food and packaging costs.

5. Notable Q&A Insights

• Management expressed optimism about recovering same-store sales, citing recent successful marketing campaigns.
• There is an expectation for improved store margin profiles as underperforming stores are pruned and higher-margin stores become a larger percentage of revenues.
• The competitive landscape is challenging, with tea players aggressively pricing in the coffee sector; however, THCH emphasizes its unique model of combining coffee with fresh prepared food as a differentiator.

Overall, while THCH faces significant challenges in the current market environment, management remains focused on strategic adjustments and long-term growth initiatives.