Chagee Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 29, 2025

Key Takeaways

  • Positive Sentiment: Q2 results showed continued growth with RMB 3.332 billion revenue (+10.2% YoY), RMB 8.1 billion GMV (+15.5% YoY), non‑GAAP net income RMB 629.8 million, the company’s 10th consecutive profitable quarter, and cash up to ¥8.9 billion.
  • Positive Sentiment: Overseas expansion is accelerating: international GMV rose 77.4% YoY, the company now operates 208 overseas stores (notable rollouts in Malaysia, Indonesia and a high‑volume LA opening) and expects significant store additions through year‑end.
  • Positive Sentiment: Leadership hires to support North America — Emily Zhang (North America CCO) and Aaron Harris (North America CDO) — signal ramped investment in local teams and market build‑out.
  • Negative Sentiment: Costs and one‑off share‑based compensation pressured reported profitability: G&A jumped ~301% YoY (SBC from IPO vesting), sales & marketing rose ~54.6%, and non‑GAAP net margin fell to 18.9% from 20.8%, with a higher effective tax rate this quarter.
  • Negative Sentiment: Domestic headwinds from intensified delivery platform subsidy competition weighed on same‑store GMV and ASP; management refuses to join price wars and expects continued near‑term same‑store pressure while focusing on product upgrades and efficiency improvements (e.g., rollout of 4.0 automation).
AI Generated. May Contain Errors.

There are 7 speakers on the call.

Speaker 6

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Chagee Holdings Limited's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. We will be hosting a question-and-answer session after management prepares remarks. Please note that today's event is being recorded. With that, I will now turn the call over to the first speaker today, Ms. Alicia Guo, Investor Relations Director of the company. Please go ahead, ma'am.

Speaker 1

Thank you. Hello everyone, and welcome to Chagee Holdings Limited's second quarter 2025 earnings call. With us today are Mr. Junjie Zhang, our CEO, and Mr. Aaron Huang, our CFO. The company's financial and operating results were released by the newswire earlier today and are currently available online. Before we continue, I refer you to our safe harbor statements in the earnings press release, which applies to this call. Any forward-looking statements that we make on this call are based on assumptions as of today, and Chagee Holdings Limited does not undertake any obligations to update these statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. With that, I will turn the call to our CEO, Mr. Junjie Zhang. Please go ahead, sir.

Speaker 4

2025年第二季度的业绩发布会。我们深知，正是各位长期以来的支持与信任，才让Chagee Holdings Limited能够在充满挑战的市场环境中砥砺前行。

Speaker 1

Hello everyone, thank you all for joining Chagee's second quarter 2025 earnings conference call. We truly appreciate your continued trust and support, which has enabled us to forge ahead steadily in this dynamic market environment.

Speaker 4

在进入正式业绩讨论前，请允许我分享一个重要的人才战略进展。为加速北美市场布局，我们近期成功组建了全新的北美领导团队。我们非常荣幸地邀请到了Emily Zhang女士加盟，出任北美首席营销官。Emily女士拥有丰富的国际品牌建设经验，曾担任VML和McCann World Group中国区部分公司首席执行官，以及星巴克中国的首席营销官。

Speaker 1

Before we dive into our quarterly performance, I'm delighted to share an important update in our talent strategy. To accelerate our North American market expansion, we have successfully assembled a new North American leadership team. We're honored to welcome Ms. Emily Zhang as our Chief Commercial Officer for North America. Emily brings extensive international brand building experience, having served as CEO at West at VML and McCann World Group China, and Chief Marketing Officer at Starbucks China.

Speaker 4

Dutch Bros Café 的业务拓展 SVP。他的丰富的规模化运营经验将助力 Chagee Holdings Limited 在美国市场的快速发展。

Speaker 1

Additionally, we welcome Mr. Aaron Harris as our Chief Development Officer for North America. As a chain restaurant industry expert, Aaron has successfully led market expansion for multiple national and international QSR brands, most recently as Senior Vice President of Development at Dutch Bros Coffee. His rich experience in scaled operations will drive our development in the U.S. market.

Speaker 4

这不仅仅是一次关键人才引进，更是公司全球化战略布局的重要落子。我们已在亚太及北美等核心市场前瞻性地建设了本土化团队，进行系统性、前置性的组织能力投入。今年下半年，公司还将持续加大对海外市场的战略性投入，不断完善全球人才梯队和运营体系建设。我们坚信，这支由顶尖人才组成的本土化团队将推动Chagee Holdings Limited在关键市场实现战略性突破，为公司的全球化征程注入可持续的增长动能。

Speaker 1

This is not just a key talent acquisition, but also an important move for our global strategic layout. We have proactively established a local team in core markets such as Asia Pacific and North America, making systematic investments in organizational capabilities. In the second half of this year, we will continue to invest strategically in overseas markets, steadily enhancing the development of a global talent pipeline and operational system. With our elite local teams, we're confident that we will achieve a pivotal breakthrough and sustain strong growth momentum globally.

Speaker 4

接下来, 我将向大家详细介绍本季度的经营成果与业务进展。在全球茶饮市场持续变化的背景下, 我们坚持以品牌价值和产品创新为核心的发展路径, 展现出稳健的经营韧性和清晰的战略执行力。本季度, 公司整体业务保持健康增长态势, 营收持续双位同比增长, 盈利能力保持稳定。

Speaker 1

Next, I will walk you through the operating results and business updates. Despite the evolving dynamics of the global tea beverage market, we have stayed committed to growth strategy driven by brand value and product innovation. This has reinforced our operational resilience and sharpened strategic focus. This quarter, we achieved solid progress, with revenue sustained double-digit year-over-year growth and consistent profitability.

Speaker 4

取得这样的成绩，首先得益于我们始终如一的品牌战略。在当前行业普遍以价格战换取市场份额的环境下，我们坚持价值优先的差异化定位。这一战略取得了获得市场的积极反馈。在保持价格策略一致性的前提下，我们的第三方外卖GMV贡献提升，注册会员复购行为活跃。这一成绩不仅验证了我们品牌定位的正确性，更体现了消费者对我们产品价值的认可。

Speaker 1

One of the most important factors behind these results is our consistent commitment to a clearly defined brand strategy. In an environment where many in the industry compete for market share through aggressive price promotions, we remain committed to our differentiated value-first positioning, a strategy that is earning positive market feedback while maintaining a disciplined pricing framework. Our third-party delivery GMV has seen growing contributions, with strong repeat purchasing behavior among registered members. These results validate our brand positioning and confirm that consumers recognize and appreciate the value we offer.

Speaker 4

为了持续夯实这一优势，并进一步强化我们的品质护城河，公司将于今年下半年全面启动核心原料的升级计划，涵盖茶叶、奶源、檀香等所有关键原料品类。我们相信，通过对产品源头的持续投入和升级，将为消费者带来更高品质的产品体验。这也是我们价值优先战略最根本的践行。

Speaker 1

To strengthen this advantage and deepen our competitive moat, we will launch a comprehensive upgrade plan for essential raw materials in the second half of the year, focusing on key ingredients such as tea, milk, and syrups. We believe that ongoing investment and sourcing improvements will deliver an elevated product experience to our customers, reflecting the core of our value-first strategy.

Speaker 4

在全球化战略推进方面，本季度我们取得了阶段性进展，海外市场展现出强劲的增长动能，已逐步成为公司驱动公司整体增长的重要引擎。

Speaker 1

On the global stage, our strategy continues to deliver strong momentum. The overseas markets have demonstrated strong growth momentum and are becoming an increasingly important growth engine for the company.

Speaker 4

这一成绩主要体现在三个关键维度。首先，我们独特的本地产品以及营销创新取得了显著的成效。今年4月份，我们在东南亚推出的古香培茶成为现象级产品，不仅获得消费者强烈的反响，热烈的喜欢，销售售罄。在刚刚过去的6月，我们与British Library联名推出的Earl Grey系列取得了令人振奋的市场反响。该系列产品在社交媒体上引发广泛和热烈的互动。同期，我们在新加坡和马来西亚打造的线下快闪体验店也收获了巨大的反响，成功吸引了消费者的踊跃参与，极大提升了品牌影响力与好感度。这股热潮也直接转化为了强劲的购买力，推动新加坡市场在活动期间的销售飞量实现可观的增长。

Speaker 1

This progress has been driven by a combination of localized product and marketing innovation, disciplined geographic expansion, and operational excellence. In April, our Hojicha Jemai milk tea captured customer attention across Southeast Asia, propelling us to the top position and share of voice among tea brands in the region. In Malaysia, the product was sold out in major cities within two weeks of launch. In June, our Earl Grey series, co-branded with the British Library, performed equally well. The collection sparked vibrant engagement on social media. Simultaneously, our pop-up experiential events in Singapore and Malaysia drew tens of thousands of visitors, providing immersive brand experiences and significantly elevating brand visibility. Cup sales during these events recorded decent sequential growth, especially in Singapore.

Speaker 4

其次, 我们的市场拓展战略正在扎实稳健地向前推进, 并取得了阶段性成果。上半年, 我们在印尼及美国战略市场的布局推进工作取得积极进展, 同时深化了泰国市场的战略合作伙伴。

Speaker 1

At the same time, we continue to make steady and solid progress with our overseas store expansion. In the first half of the year, we advanced our strategic positioning in critical markets, including Indonesia and the United States, while further strengthening our strategic collaboration in Thailand.

Speaker 4

the continuous enhancement of the brand's bargaining power.

Speaker 1

Operational quality across all regions continues to improve. Our Singapore stores sustained solid and stable sales momentum, consistently delivering leading daily average sales. Profitability in our Malaysian stores exceeded expectations. More importantly, we have achieved a sequential increase in the sales price for our products in the overseas markets, demonstrating the strength of our premium brand positioning.

Speaker 4

在国内市场，我们也同样取得了创新突破。二季度，我们推出了独具特色的威夷文化主题门店以及活动，比如广东的天词艺术概念活动和山东的风筝文化快闪店，成功将传统文化与现代消费体验完美融合。这一系列成果充分证明我们的全球化战略不仅实现了规模扩展，更在品牌价值和运营质量方面持续优化。

Speaker 1

Domestically, we're pushing boundaries by integrating modern consumer experience with traditional cultural elements. In the second quarter, we introduced a themed concept store, such as the Samaric inlay art activity in Guangdong and the Kite Culture pop-up store in Shandong, successfully blending heritage tea culture with contemporary retail design. This demonstrates that our globalization strategy is not just about growing our footprint, but equally about reinforcing brand value and elevating operational quality.

Speaker 4

popular single product list.

Speaker 1

Product innovation remains at the heart of our growth. In the second quarter, our new product, Lychee Black Tea Milk Tea, showcased strong first-week sales alongside other recent introductions. The two products drove a meaningful sequential increase in GMV during their launch period. Moreover, the time-limited return of Melon Oolong Milk Tea proved highly popular, ranking prominently among the quarter's most favorite products.

Speaker 4

在产品创新和用户运营的双轮驱动下，我们的会员生态体系持续健康发展。截止二季度末，注册会员数环比以及同比均录得强劲增长。这些成果不仅反映了我们在用户运营方面的专业能力，更证明了健康茶饮品牌主张的市场共鸣。

Speaker 1

Driven by the dual engines of product innovation and user operations, our member ecosystem continues healthy development. By the end of the second quarter, the number of registered members achieved strong growth both sequentially and year over year. This reflects not only our ability to operate with efficiency at scale, but also the deep market renaissance of our mission to champion health-oriented tea beverages.

Speaker 4

在这个充满挑战的市场环境中，我们始终坚信，坚持品质为本才是公司长期指导。无论外部环境变化如何，我们都将坚持为消费者提供一杯健康无负担的好茶，绝不为了短期增长而妥协品质标准。作为中国现代茶饮的代表，我们肩负着双重使命，既要传承中国茶文化精髓，又要以创新方式呈现给全球消费者。我们将继续以匠心守初心，用每一杯健康高品质的茶饮传递真诚。我们坚信，唯有真诚对待产品与消费者，才能赢得市场的持久认可，让中国茶饮的美好体验走向世界。

Speaker 1

In the face of ongoing market challenges, we remain steadfast in our belief that quality is the foundation of lasting growth. As market conditions shift, our promise is clear: we will consistently offer tea that is both wholesome and promising in quality. Short-term results will never come at the expense of our enduring commitment to excellence. As a representative of modern tea, Chinese tea, our mission is twofold: to preserve the essence of Chinese tea culture and to modernize it for global consumers through innovation and creativity. We will honor our craft, truly hold to our values, and use every cup of high-quality tea as a gesture of sincerity. We firmly believe that genuine care for both our product and our customer is the key to earning market trust and sharing the authentic experience of Chinese tea with the world.

Speaker 4

接下来，我将把时间交给我们的 CFO Aaron Huang，他将为大家详细介绍公司的财务与经营数据的结果。

Speaker 1

This concludes my remarks. Now, I will turn the call to our CFO Aaron Huang, who will provide detailed insights into our financial performance. Thank you.

Speaker 3

Thank you, Jay, and good evening, good morning, everyone. Thank you for joining our earnings call. Before we dive into the details, please note that all amounts are in RMB, and all comparisons are on a year-over-year basis, unless otherwise stated. In the second quarter, our revenue reached RMB 3.3 billion, up by 10.2% year-over-year. GMV came in at RMB 8.1 billion, a year-over-year increase of 15.5%. Non-GAAP net income was RMB 629.8 million, up by 0.1% year-over-year. For the first half of 2025, non-GAAP net income rose by 6.8% year-over-year to RMB 1.3 billion. By the end of the second quarter, our total membership exceeded 200 million, increasing by 14.5 million from the first quarter and 42.7% year-over-year. These results underscore the resilience of our business model and strengthen our execution under dynamic market conditions. Now, let me provide some context around the market conditions we faced this quarter.

Speaker 3

The intensified delivery platform subsidy competition in China created headwinds for our business, while we remained disciplined in protecting our pricing integrity and premium brand positioning. We recognized that this competitive environment weighed on near-term performance. At the same time, we are advancing our strategic expansion into international markets. This involves deliberate investments in organizational infrastructure, including talent acquisition, as Jay shared, and operational capabilities. While these initiatives are currently affecting profitability in the short term, they are very critical investments as we work towards achieving operational leverage in these new markets. Next, let me go through the financials. Our total net revenue for the second quarter increased by 10.2% year-over-year to RMB 3,331.9 million, mainly driven by the continued expansion of our tea house network. Among them, net revenue from franchisee tea houses grew by 6.1% to RMB 3,020.7 million, representing 90.7% of our total net revenue.

Speaker 3

Net revenue from company-owned tea houses increased by 77.3% to RMB 311.2 million, accounting for 9.3% of the total revenue. The increase was primarily driven by the expansion of the company-owned tea house network. Our total GMV for the second quarter increased 15.5% year-over-year. The average monthly GMV per tea house in Greater China was RMB 404,352, a year-over-year decline, reflecting both high base from last year's outstanding quarter and a more severe competitive environment. Even so, our commitment to maintaining the premium position and brand integrity remains central as we navigate the current backdrop and prepare for improving market conditions. Meanwhile, our overseas markets have gained significant traction, with GMV increasing 77.4% year-over-year and 31.8% quarter-over-quarter. This growth is mainly driven by strategic store expansion and our growing brand awareness, positioning the overseas market as a key pillar of our future growth.

Speaker 3

In the first half of 2025, we expanded our overseas presence by adding a net of 52 stores compared to year-end 2024, bringing our total to 208 stores as of June 30, 2025. The opening of a store in Indonesia attracted approximately 35,000 new members' registration during the launch week. In Thailand, the average daily cup sales rose by 54% following our grand openings, with 15,000 new members joining in just the first three days. Our Los Angeles store in the United States set a record with 5,000 cups sold in a single day. Turning to margin, our gross profit, calculated by excluding costs of material, storage, and logistics from net revenue, reached ¥1.8 billion this quarter, resulting in a strong gross margin of 53.9%.

Speaker 3

This marks solid improvements both year-over-year, up from 48.4% in the second quarter of last year, and sequentially from 53.1% in the first quarter of 2025. This margin expansion was primarily driven by two key factors. First, we continue to benefit from a growing economy of scale as our businesses expand. Second, lower purchasing costs achieved through our ongoing procurement optimization initiatives have played a significant role. On operating expenses, share-based compensation expenses rose significantly this quarter, which is reflected across our expense categories. The significant amount of share-based compensation expenses recognized in the second quarter of 2025 were related to the vesting of share-based awards, with the performance conditions related to ITO success. The breakdown includes ¥505.6 million in G&A, ¥31.1 million in sales and marketing expenses, and ¥15.8 million in other operating costs.

Speaker 3

To provide greater clarity on underlying performance, we will also reference non-GAAP operating results, with full reconciliation available in our earnings release and Form 6K. Operating income was ¥107.6 million. Excluding share-based compensation expenses, operating income was ¥660.1 million, representing a 19.8% margin. This margin change reflects a step-up investment in the brand building and marketing to support a new product launch, R&D to ensure our offering, digital infrastructure, and to elevate customer experience, and talent recruitment for global expansion. Operating costs for the company-owned tea house were RMB 184.1 million, up 72.8% from a year ago, and up 17.2% from the first quarter of 2025. As of June 30, 2025, we operated 239 company-owned tea houses, up from 191 at the first quarter of 2025. On a per-store basis, operating costs have decreased compared to the first quarter of 2025, showing improved efficiency at the store level.

Speaker 3

The other operating costs increased by 36.2% to RMB 173.7 million, largely due to higher payrolls supporting the expansion of the franchisee network. On a non-GAAP basis, other operating costs account for 1.7% of revenue compared to 1.2% a year ago. Sales and marketing expenses for the quarter were RMB 385 million, up 54.6% from a year ago, reflecting higher advertising costs tied to new tea product launch and related campaigns, along with payroll growth and to support the business expansion. On a non-GAAP basis, sales and marketing represented 10.6% of revenue compared to 8.2% a year ago. G&A expenses reached RMB 944.6 million, up 301.1% year-over-year, driven by SBC costs I just mentioned, related to the IPO, and expanded the team to support global operations, increased R&D for product upgrades and innovation, and higher IT service costs to enhance operational efficiency.

Speaker 3

On a non-GAAP basis, G&A expenses represented 13.2% of revenue compared to 7.8% a year ago. Income tax expenses represented 62.1% of income before tax, significantly higher than 20.1% a year ago. This was primarily driven by the impact of share-based compensation expenses recognized during the quarter. We achieved our 10th consecutive quarter of profitability, with a net income of RMB 77.2 million. Non-GAAP net income, excluding share-based compensation expenses, was RMB 629.8 million, with a non-GAAP net margin of 18.9% compared to 20.8% last year. The margin decline reflects our continued investment in new products and overseas markets, and the net losses from overseas operations that are still ramping up. Our Greater China business remains healthy, delivering profitability growth from last year. During the quarter, basic net income per ordinary share was RMB 0.0036, and the diluted net income per ordinary share was RMB 0.0035.

Speaker 3

We ended the quarter with ¥8.9 billion in cash and cash equivalents, receipt cash, and time deposit, up from ¥4.9 billion at the end of 2024. While near-term headwinds persist, we are confident in our strategic trajectory. Our overseas operations are gaining encouraging consumer traction, and we are building the organizational and operational foundation to sustain our long-term growth. The investments we are making today in people, infrastructure, and capabilities will position us to capture significant opportunities as these markets mature and operational leverage takes hold. At this time, we will not be providing the formal financial guidance for the whole year. Our priority is to execute our long-term growth strategy and deliver lasting value to our shareholders. We may revisit the possibility of offering guidance in the future as the condition evolves.

Speaker 3

In closing, I want to reaffirm our unwavering commitment to our premium brand strategy in today's dynamic competitive landscape. We remain focused on delivering healthy, high-quality tea offerings that our customers trust and value. We are deeply grateful for the continued support of our team, Chagee friends, and valued shareholders. Through disciplined capital allocation and our commitment to strengthening and diversifying our global business, we will continue creating sustainable long-term value for our shareholders. Our focus remains on protecting margin and delivering profitable growth that stands the test of time. With that, I will turn the call back to the operator to begin the Q&A session. Operator, please go ahead.

Speaker 3

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one one again. We will now take the first question from the line of Lillian Lou from Morgan Stanley. Please go ahead.

Speaker 3

Hello. Thank you for the opportunity to ask the question. Thanks a lot for Junjie Zhang and Aaron's detailed introduction, and I look forward to a big step forward in the global expansion. I have a question, actually, on China right now. Obviously, we saw it in the second quarter results as there was an impact from the delivery platform subsidy program. My question is related. One is, what kind of operational impact we've been seeing? For example, the impact on general ASP, the franchise work on stores' profit margin and stability. Related to that, what company strategy going forward related to dealing with platforms' subsidy program, how we defend our positioning in the industry, and how we look at the second half general operation focus? Then I'll translate my question. Since Junjie Zhang和 Aaron详细的介绍, 我们也期望这个公司在整个的全球化更进一步。我的问题呢, 实际上是关于中国, 当然从二季度以来大家也看到了外卖平台大战对公司业务的一些干扰。那么我想再进一步理解一下, 首先在二季度这个外卖平台的补贴对公司的运营, 特别是加盟商的稳定性, 加盟门店的啊, 这个整个的利润情况以及公司实际的这个价格啊, 有一些什么样的影响。那么更重要的是下一步啊, 在这个外卖平台补贴持续的一个情况下, 我们啊策略上是怎么去应对啊, 然后把这个公司整个的不光是从GMV的角度, 还是从公司整个运营的稳定度上啊, 这个策略和啊这个重点的发力点是什么? 谢谢。

Speaker 4

好的, 谢谢你的问题啊。其实最近, 这个外卖平台的这场大战肯定是全世界可能都关注中国的一个热门话题, 但我们是这么来看待。第一个是通过短期的补贴为主导的这种竞争行为, 对于长期的市场发展来讲, 这个肯定是不可持续的。短期竞争可能是有益的, 但对长期来讲, 它肯定是一个不利的现象。那么平台怎么来做这件事, 我们且不评论了, 但是对于限制饮料企业自身而言, 对于茶姬而言, 这场战争如果参战呢, 坦率讲, 对于我们的门店的GMV增长是有所帮助的, 对于我们的货品销售也是有所帮助的, 但是对于门店加盟商的利润和折扣会有巨大的伤害, 同时对于茶姬的品牌的定位, 高质量的产品、高质量的品牌都会带来巨大的伤害。因此我们对于这场外卖大战呢, 我们的基本看法是, 通过这种短期的补贴和价格战而拉来的这些短期的用户, 这本身就不是茶姬的核心用户群体。那通过低价而吸引进来的用户, 他也没有办法长期构建起一个品牌的忠诚度。所以坦率说, 茶姬是在这场外卖大战中为数不多没有参战的选手, 所以我们有几个原则。第一个原则呢, 是公司坚决不会盲目跟风, 卷入到价格战的漩涡。我们会坚持核心的策略, 是坚定不移地做高价值的品牌, 为消费者提供高质量的产品和服务, 这是我们的第一大原则, 坚决不打价格战, 坚决不降低产品品质和服务质量, 这是我们的第一点。第二件事呢, 是茶姬长期以来对于高价值品牌的定位, 其实跟我们的价格和品牌的形象是息息相关。一直以来, 茶姬都不是以折扣、派券的方式来赢得顾客, 我们一直都是通过更高质量的产品和更高质量的服务, 以及更加有形象、有体验的门店线下体验一系列来赢得顾客的信任。第三, 我们会不断提升优化运营的效率, 在避免依赖补贴的同时, 公司会持续通过技术的创新、精细化的运营来提升效率, 来降低成本。茶姬现在在今年第四季度会逐步推出我们的4.0自动化设备, 这台设备在现有的门店人力成本上会进行大幅度的降低, 也会大幅度提升我们的生产效率和运营效率。在不损害价值的前提下, 我们保持合理的价格竞争力, 将节省的成本部分回馈给真正重视价值的这些用户和合作伙伴。第四点, 也是今年到年底, 茶姬会在这场大战之中, 还是以高价值的去做结构性的新品创新。我们在今年年底, 茶姬的门店菜单也会迎来一次大幅度的新品上新, 这个大家就敬请期待吧。好, 谢谢。

Speaker 1

much. Junjie Zhang.

Speaker 1

好的, 谢谢 Lillian, 我简单翻译一下。Thank you so much for your question. We see our delivery platform competition keeping up quite a bit in the second quarter and attract a lot of attention globally. Competition can be really good for the market, and the heavy reliance on the subsidy right now isn't really sustainable for the industry as a whole. We don't really count on the platform or the discount to attract more customers. It might help us with the GMV in a short period of time, but it doesn't really help with the profitability to our partners or to our franchisees as well. We believe that it puts a lot of pressure on the merchant margin and shakes up delivery platforms' income instability and creates financial stress for the platform as well.

Speaker 1

The key issue with the subsidy is that they mainly attract price-sensitive customers who don't have strong brand loyalty and will switch quickly to whoever offers the lowest price. That makes it really hard to build lasting customer relationships. For the company, we have three principles. The first principle is to build around we stay firmly committed to delivering high-quality products and services. We're not going to get pulled into price wars. Instead, our focus is on offering superior product quality and an outstanding customer experience. Secondly, we're not doubling down on our premium brand positioning. We believe real long-term value comes from brand building trust and delivering greater user experience, not from short-term price cuts or discounts or coupons. Our strategy is all about enhancing the high-value brand image. Thirdly, we are focusing on optimizing operational efficiency to boost our competitiveness.

Speaker 1

Without relying on subsidies, we keep investing in technology and process improvements to improve efficiency. For example, the 4.0 automated machine will be rolled out at the end of the year. It will largely lower the labor cost and increase the efficiency of the operation at the store level. When we pass those savings onto the customers and partners who truly appreciate our quality, we can stay reasonably competitive on price without compromising our core value. Also, at last, our product R&D will have something different at the end of the year, and the menu will be changed totally. We welcome you guys to look forward to our changes at the end of the year. Thank you for your question.

Speaker 1

Thank you. We will now take the next question.

Speaker 1

我这里再补充一个。

Speaker 1

From the line of Xiaopo Wei, please go ahead.

Speaker 1

Sorry, Sandra, can we hold on for a second? The CEO has a little comment to add.

Speaker 1

My apologies, of course.

Speaker 4

go global and create Chinese brands and Chinese quality products. Thank you.

Speaker 1

We believe right now China has been transferring from the Chinese manufacturing or made-in-China mode to the brand positioning mode at the moment. We believe the lower pricing strategy doesn't really consist with the high-quality life experience or branding positioning for the Chinese market overall trend at the moment. Keeping the lower voice does not really help with the higher value positioning. We firmly believe that we're going to stick to the high-quality brand positioning and also offer a high-quality product to our customers. Thank you. Sandra, please go ahead with the next question.

Speaker 1

Thank you. We will now take the next question from the line of Xiaopo Wei from Citigroup. Please go ahead.

Speaker 1

Hi, can you hear me?

Speaker 1

Yes.

Speaker 1

Hello?

Speaker 1

Yes, please.

Speaker 1

Okay, good. Yeah, I have two questions on overseas business. In the prepared remarks, you mentioned a very exciting new hire in the U.S. leadership and also many exciting new products in the overseas market locally. Could you update us on the expansion plan for overseas and China in the next few quarters? Secondly, in the operation of overseas market, did you observe anything you want to share with us? How could you translate those observations into the future strategy for the overseas business? 那我中文翻译一下，谢谢你的Junjie总，还有Aaron总。刚才也是公司刚开始的时候分享了一些美国的领导岗位的一些重要的雇佣，还有一些非常好的一些产品在海外市场。能不能给我们分享一下，就是在未来几个quarter里边我们怎么对海外开店呢，还有中国开店的计划怎么样的？第二个就是在二季度的时候呢，我们在海外市场里有什么重要的一些发现，那这些发现怎么去帮助我们去更好的开拓未来的海外市场？谢谢。

Speaker 3

All right, thanks for the question. Let me answer it. Let me first just go through a little bit more detail on the overseas development market by market. That would give you a full picture of where we are now in the overseas market. I will not talk about domestic growth, but more focus on the overseas market. In the international market, now we have 208 stores in total, including 178 in Malaysia, 16 in Singapore, 8 in Indonesia, 5 in Thailand, and 1 in the U.S. Overall, we have 39 new stores added in the second quarter. We also successfully entered Indonesia, first ever with new 8 stores in one quarter. At the same time, we made new strides in North America too. We opened our very first store in Los Angeles in May, with the second U.S. store now self-opening in August.

Speaker 3

Overall, from a GMV perspective, the international markets keep up the strong course, as I just mentioned that in the quarter we have a 77.4% growth year over year. To break it down by market, we see a lot of very good signals in the performance country by country. In Singapore, we see the daily sales stayed very strong in the second quarter, holding steadily above 1,500 cups a day a store. We are still continually optimizing the single store model to really maximize our potential in Singapore. By June, our average payback period of a mature store in Singapore improved to less than 12 months. We see, as soon as an overall country, we will be going break even in the coming quarter. That's really a very robust business development in Singapore.

Speaker 3

In Malaysia, we have 178 stores now running very smoothly, and overall, the profitability performance of our store exceeded our plan, our internal plan. In Thailand, we relaunched the market with three net new stores in the quarter. Average store performance very well, and at a daily basis, it's 800 cups a day a store. We see a very welcome by the local customers. In Los Angeles, our first store opening, I just mentioned that, with the 5,000 cups sold a day, it's a very long line, like three, four hours, and now still keep at 1,000 cups a day for the first store. Going forward, we'll push hard on two fronts, strengthening our presence in those mature markets like Malaysia, and we will continue to have rapid growth in those markets. In the meantime, we prepare to enter in more countries.

Speaker 3

Like today is the first grand opening day in the Philippines. We see that more and more exciting news coming in. For the second half, the first one that, you know, the Philippines will be the last country in this year as a new market we enter into. For the BNM as well, as just I mentioned. In Q4 and Q3, we definitely, you know, we've established a team there. We were ramping up the growth, and we estimated that for the full year, we will open more than 200 stores as all in the total overseas markets. That's, you know, for the overall overseas market expansion. As from a business perspective, there are some highlights that, you know, Jay mentioned as well. For example, we have a lot of local product launch.

Speaker 3

You know, it's not a product that actually, you know, launched before in China, like, you know, Hojicha Jemai milk tea. That's very popular in Singapore. We see, you know, a lot of local relevant campaigns well received by local customers. I think that, as Jay just mentioned, that, you know, we are played as a very important lifestyle brand, and we are focused on, you know, building a relevant experience to local customers, not just like simply say it's a Chinese, you know, brand. I think that that's something that we see very well felt, you know, by the different markets.

Speaker 4

Operator, next question, please.

Speaker 1

Thank you.

Speaker 1

Thank you. We will now take the next question from the line of Sijie Lin from CICC. Please go ahead.

Speaker 1

Thank you, management, for taking my question. My question is on same-store sales. Could you please provide more color on the same-store sales performance in Q2? What's your view of the same-store sales growth trend going forward? 那我也把我的问题翻译成中文。那谢谢Junjie总、Aaron总。我就是一个关于这个同店的一个问题, 那可不可以给我们再多阐释分析一下咱们二季度的一个同店的表现, 然后以及对于未来的同店增速趋势怎么展望? 谢谢。

Speaker 3

Thank you, thank you. It's a good question. Yeah, the same store GMV continues softening this quarter, mainly due to two reasons. The first reason that we talked about before is because we've compared against a very strong second quarter in last year. Secondly, of course, the overall delivery platform price war intensified. We chose not to engage heavily to protect our brand positioning. That's definitely where we have a little more market share challenges leading to temporary customer diversion and impacted the sales a little bit. Given the high base from the comparable period last year, we expected continued pressure on the same store GMV in the second half of 2025. We are moderating store expansion in 2025, which eases growth pressure on the same stores. Also, we believe that a subsidy-driven price war will not last indefinitely, right? Its impact will gradually fade.

Speaker 3

As Junjie Zhang just mentioned, we will do what we are strong at. We will focus on the product quality elevation, and we will continue to improve better sugar, better milk, and better tea. Really providing the high-quality product to our customers and to bring the customer back, focus on the customer experience, right? Stay away from those price competitions and really focus on our customer long-term strategy. Delivering high-quality product and experience to build a premium brand and earning the customer trust through the consistent excellence. I think we believe that that is something that Chagee should play, and we are very confident that that would be appreciated by customers as well. Thank you.

Speaker 3

Thank you. I would like to hand the conference back to our management for closing remarks.

Speaker 1

Thank you. Thank you again for joining our call today. Because we're short of time, if you have any other further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next call. Have a good day. Thank you.

Speaker 3

All right. Bye-bye.

Speaker 4

Thank you. Bye.

Speaker 4

This concludes today's event. Thank you for participating. You may now disconnect.

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