Chagee Holdings Limited (CHA) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reveals a mixed picture: while there is strong overseas growth and a special dividend announcement, there are significant challenges such as declining same-store sales, increased operating costs, and margin pressures. The Q&A provided some clarity on strategic initiatives, but ongoing economic uncertainty and competitive pressures present risks. The overall sentiment is negative due to the decline in net revenue, increased costs, and margin pressures, despite some positive developments in overseas markets and shareholder returns.
Key Financial Performance
Total Net Revenue RMB 3,208.3 million, a decrease of 9.4% year-over-year and 3.7% sequentially. The decline was attributed to challenging macro environment and intensified competition.
Total GMV RMB 7,929.5 million. In Greater China, GMV decreased by 6.2% year-over-year to RMB 7,629.2 million due to a high base last year and competitive pressures. Overseas GMV increased by 75.3% year-over-year and 27.7% quarter-over-quarter to RMB 300.3 million, driven by strategic store expansion and growing brand awareness.
Non-GAAP Net Income RMB 502.8 million with a non-GAAP net margin of 15.7%. This reflects the underlying resilience of the business model.
Gross Profit RMB 1,726.5 million with a gross margin of 53.8%, up from 50.1% in the third quarter of last year. The improvement was due to expanding economies of scale and decreased purchase costs from procurement optimization.
Operating Income RMB 454.4 million with an operating margin of 14.2%. Non-GAAP operating income was RMB 559.3 million with a 17.4% margin. The margin differences reflect investments in talent recruitment, brand building, R&D, and digital infrastructure.
Sales and Marketing Expenses RMB 304.5 million, down 13.4% year-over-year. On a non-GAAP basis, these expenses represented 9.2% of revenue compared to 9.9% a year ago, reflecting strong discipline in branding promotion.
General and Administrative Expenses RMB 517.4 million, up 59.7% year-over-year. On a non-GAAP basis, these expenses represented 13.4% of revenue compared to 9.1% a year ago, driven by an expanded workforce and additional office facilities for global operations.
Income Tax Expenses 21.4% of income before tax, slightly higher than 20% a year ago, primarily due to the impact of share-based compensation expenses.
Cash and Cash Equivalents RMB 9,142 million, reflecting a robust balance sheet and strong cash generation ability.
Operating Highlights
Low Caffeine Jasmine Green Tea Latte: Launched in the home market and became a top 3 best seller, driving strong user acquisition.
BOYA Jasmine Green Milk Tea: Earned the 'Best in Nature or Organic Beverage' title at the 2025 World Beverage Innovation Awards, highlighting product quality and leadership in healthy beverage innovation.
Asia Pacific Regional Product Strategy: The launch of a new tea product performed exceptionally well, validating the regional product strategy.
Global Teahouse Network Expansion: Reached 7,338 teahouses with a net addition of 300 in Q3, including 54 new overseas stores in markets like the Philippines and Vietnam.
Overseas Market Growth: Overseas GMV increased by 75.3% year-over-year and 27.7% quarter-over-quarter, driven by strategic store expansion and growing brand awareness.
New Market Entries: Successfully entered the Philippines and Vietnam, with continued expansion in Malaysia, Thailand, and Indonesia.
Franchisee Network Stability: Store closure rate remained low at 0.3% for three consecutive quarters, indicating strong franchisee health and confidence.
Operational Efficiency: Operating costs per store decreased compared to the previous quarter, showing improved efficiency at the store level.
Commitment to Premium Positioning: Maintained brand integrity and premium positioning despite competitive pressures.
Special Cash Dividend: Board approved a special cash dividend of USD 0.92 per share, totaling approximately USD 177 million, reflecting strong cash generation and commitment to shareholder value.
Risk or Challenges
Revenue Decline: Total net revenue decreased by 9.4% year-over-year and 3.7% sequentially, indicating challenges in maintaining growth.
Competitive Pressure: Intensified competition in the market, including delivery platform subsidy competition, has impacted GMV and same-store sales.
Same-Store Sales Decline: Domestic and overseas same-store sales GMV declined by 27.9% and 23.4%, respectively, due to a high base from last year and competitive pressures.
Operating Costs: Operating costs for company-owned teahouses increased by 94.7% year-over-year, driven by global expansion and talent recruitment, which could pressure margins.
Economic Uncertainty: Challenging macroeconomic environment has affected consumer spending and overall market conditions.
Overseas Expansion Risks: While overseas markets show growth, the expansion into new regions like the Philippines and Vietnam carries risks related to market entry and operational challenges.
Margin Pressure: Non-GAAP net income margin decreased to 15.7% from 18.3% last year, reflecting increased costs and competitive dynamics.
Supply Chain Costs: Although procurement optimization has reduced costs, supply chain disruptions or cost increases could pose future risks.
Guidance & Outlook
Overseas Market Growth: Overseas markets are positioned as a key pillar of future growth, with GMV increasing 75.3% year-over-year and 27.7% quarter-over-quarter. The company plans to continue expanding its overseas presence, having added 54 new stores in Q3 2025, including entries into the Philippines and Vietnam, and further expansion in Malaysia, Thailand, and Indonesia.
Store Expansion: The company plans to continue its global store expansion strategy, with a focus on identifying high-potential locations and ensuring store health and profitability. As of Q3 2025, the company operates 7,338 teahouses globally, with 262 stores overseas.
Product Innovation: The company will continue to focus on product innovation to drive growth, as evidenced by the success of new product launches like the Jasmine Green Tea Latte and BOYA Jasmine Green Milk Tea. Regional product strategies will also be emphasized to cater to specific markets.
Operational Efficiency: The company aims to boost operational efficiency through procurement optimization and scaling economies, which have already contributed to improved gross margins (53.8% in Q3 2025).
Financial Strategy: The company will not provide formal financial guidance but will focus on sustainable long-term shareholder value through product innovation, strategic brand investment, and operational efficiency. A special cash dividend of USD 0.92 per share has been approved, reflecting confidence in the company's trajectory.
Shareholder Return Plan
Special Cash Dividend: The Board has approved a special cash dividend of USD 0.92 per ordinary share or ADS, totaling approximately USD 177 million. This dividend is payable on or around December 15, 2025, to shareholders of record as of December 8, 2025.
Key Q&A
Earnings Word Cloud
CHA Transcript
The earnings call summary reveals a mixed picture: while there is strong overseas growth and a special dividend announcement, there are significant challenges such as declining same-store sales, increased operating costs, and margin pressures. The Q&A provided some clarity on strategic initiatives, but ongoing economic uncertainty and competitive pressures present risks. The overall sentiment is negative due to the decline in net revenue, increased costs, and margin pressures, despite some positive developments in overseas markets and shareholder returns.
Despite strong revenue and GMV growth, positive overseas expansion, and increased membership, the lack of formal guidance, rising operating costs, and competitive pressures in Greater China weigh on sentiment. The Q&A highlighted management's avoidance of specific financial impacts, adding uncertainty. The decision not to provide guidance, coupled with increased expenses, offsets the positives, leading to a neutral outlook.
The earnings call reveals mixed results: strong revenue growth and IPO proceeds are positive, but declining operating margins, negative same-store sales growth, and refusal to provide guidance are concerning. The Q&A highlights international expansion success, but also significant challenges in same-store sales. Given these factors, coupled with competitive pressures and rising costs, the stock is likely to react negatively over the next two weeks, especially without guidance, which typically unnerves investors.
CHA Report
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