TH International NASDAQ: THCH, operator of Tims China, reported lower second-quarter revenue and system sales as comparable-store transactions declined, underperforming stores closed and delivery-platform subsidies were reduced. Management said it is responding with greater product innovation, marketing investment, operational improvements and a more selective store-development strategy.
Total revenue fell 21.7% year over year to RMB207.4 million in the second quarter, while system sales declined 15.1% to RMB347.8 million, Chief Financial Officer Albert Lee said on the company’s earnings call. Same-store sales decreased 17.8%, reflecting a 16.3% decline in comparable transactions and a 1.5% decline in average comparable ticket size.
Traffic Declines and Store Portfolio Changes
Lee said the company’s monthly average transacting customers fell to 2.85 million from 3.59 million in the prior-year quarter. He attributed the same-store sales decline partly to delivery aggregators “backing down their subsidies significantly,” as well as the company’s lower marketing and advertising spending and discount controls.
The company recorded two net new store openings during the quarter, consisting of 15 net new Made to Order stores and 13 net closures of non-MTO locations. The company-owned and operated store base totaled 544 at June 30, down from 566 a year earlier.
Digital orders represented 91.8% of total orders, up from 90.4% a year earlier. Tims China also reported that its loyalty program surpassed 37.1 million registered members, a 41.7% year-over-year increase. Average members per store exceeded 36,000.
During the quarter, the company introduced 27 products, including 20 beverages and seven food items, as part of its effort to expand its all-day menu.
Margins Pressured Despite Cost Reductions
While sales declined, Lee said the company continued to reduce selected costs through supply-chain efficiencies and lower raw-material, logistics and warehousing expenses. Food and packaging costs at company-owned stores declined to 28.3% of revenue from 30.1% a year earlier.
Rental and property management fees fell 15.6% to RMB47.9 million, primarily because of the smaller company-operated store base. However, rent as a percentage of company-owned store revenue rose to 21.7% from 20.2%, while comparable-store rental and property management fees declined 5.2% year over year as the company negotiated rent concessions with landlords.
Payroll and employee benefits expenses declined 12.6% to RMB43.9 million, but increased as a percentage of company-owned store revenue to 19.9% from 17.8%. Delivery costs decreased 13.3% to RMB28.9 million, alongside an 11.9% decline in delivery orders to 7.2 million. Delivery costs represented 13.1% of company-owned store revenue, compared with 11.8% a year earlier, as delivery revenue became a larger portion of sales.
Company-owned and operated store contribution margin declined to 5.7% from 9.6% in the prior-year quarter. Adjusted general and administrative expenses increased 14.4% to RMB39.6 million, largely due to higher professional and other service fees. Adjusted corporate EBITDA margin was negative 7.6%, compared with positive 0.6% cited by the company on the call.
New CEO Outlines Turnaround Priorities
John Chen, who joined Tims China as chief executive officer in mid-June, called the quarter “a period of transition” and said the results were disappointing. He said the company was losing share to competitors, while revenue also was affected by the closure of underperforming stores and a reduction from the elevated delivery business of the previous year.
Chen said Tims China’s immediate priority is to improve its product offering and customer experience. The company is reviewing feedback from more than 10,000 loyalty members and has engaged external advisers to support its consumer-insight work. It is also working with coffee-bean suppliers and in-house coffee specialists to better tailor coffee products to Chinese consumer preferences.
Management plans to strengthen core offerings during breakfast and lunch, including bagels, while introducing products such as melts and additional bakery items for other dayparts. Chen specifically identified milk-based coffee drinks, including lattes, and the afternoon daypart as areas of opportunity.
- Expand product innovation and improve marketing capabilities.
- Improve store economics through work on rent, labor and food costs.
- Continue closing underperforming stores while selectively opening new locations.
- Use technology and artificial intelligence in inventory management, labor scheduling, marketing production and personalized promotions.
For expansion, Chen said the company will emphasize top-tier cities and locations with more predictable traffic, including office districts, train stations, transportation hubs, airports and universities. He said future openings will be more evenly balanced between company-owned and franchise-supported stores, though management did not provide a store-opening target for the second half of 2026 or 2027.
Financing and Marketing Plans
Cash, cash equivalents and restricted cash totaled RMB121.1 million at June 30, compared with RMB129.7 million at the end of 2025. The decline reflected operating cash disbursements, partly offset by additional bank borrowings, Lee said.
In July, the company closed an initial $15.8 million tranche of additional senior secured convertible notes issued to Tim Hortons Restaurants International GmbH, its brand owner and founding shareholder. The financing is part of a proposed $55 million series that management said will support product innovation, marketing and a balanced company-owned and franchised store expansion strategy.
Lee said marketing investment is expected to rise in the second half, particularly beginning in September around the company’s annual brewed coffee and Bagel Festival. Management said it intends to focus on the return and effectiveness of marketing spending, rather than a specific marketing-expense target, as it seeks to rebuild traffic, attract customers beyond its loyalty base and improve customer frequency and spending.
About TH International (NASDAQ:THCH)
TH International Limited operates Tim Hortons coffee shops in mainland China, Hong Kong, and Macau. The company offers brewed tea, coffee, milk tea, lemonade, hot chocolate, and coffee drinks. It is also involved in franchise related business. The company is based in Shanghai, the People's Republic of China.
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