Summary of Chagee's Q1 2026 Earnings Call

1Key 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.

2Strategic 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.

3Forward 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.

4Bad 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.

5Notable 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.