Chagee (CHA) Q4 2025 earnings review
Growth Engine Stalls as Margins Turn Negative
Chagee’s hyper-growth story hit a wall in Q4. Intense subsidy competition in Greater China drove an 11% YoY decline in total revenue, while aggressive global infrastructure investments and restructuring costs pushed operating margins into negative territory (-1.2%). Same-store GMV remains in severe contraction (-25.5%), indicating structural issues in domestic demand. While overseas expansion is accelerating and providing a bright spot, the collapse of the core franchised revenue base and soaring G&A expenses paint a concerning picture for near-term profitability.
🐂 Bull Case
Overseas GMV surged 84.6% YoY to RMB 371.9 million. The company added significant international scale, proving the viability of its premium tea model outside Greater China.
Despite operating losses, Chagee ended the year with RMB 7.89 billion in cash and equivalents, providing ample runway to fund its international expansion and survive domestic price wars.
🐻 Bear Case
Operating income reversed from a RMB 642.5 million profit in 24Q4 to a RMB 35.5 million loss. G&A expenses skyrocketed 89% YoY, consuming 21.4% of total revenue.
Net revenues from franchised teahouses fell 21.3% YoY. With domestic same-store GMV shrinking 25.5%, franchisee health and future network stability are at serious risk.
⚖️ Verdict: 🔴
Bearish. The combination of shrinking top-line revenues in the core market and exploding operating expenses signals a broken operating leverage model in the short term. Until domestic same-store sales stabilize, the aggressive international expansion carries high execution risk.
Key Themes
Operating Profit Reverses to a Loss
Profitability completely unraveled in Q4. Operating income plummeted to a loss of RMB 35.5 million (from +RMB 642.5 million a year ago). The culprit was a massive 89% YoY increase in General & Administrative expenses to RMB 635.6 million, driven by organizational restructuring, global infrastructure investments, and elevated share-based compensation. This indicates severe negative operating leverage as revenue falls.
Persistent Same-Store Sales Contraction
Same-store GMV growth remains in a deep, stable contraction, coming in at -25.5% for Q4 (compared to -27.8% in Q3 and -23.0% in Q2). Management continues to blame the evolving dynamics of subsidy competition among online delivery platforms. A persistent decline of this magnitude suggests Chagee is losing market share and struggling to defend its premium positioning in a discount-driven environment.
Overseas Market Expansion
International growth is accelerating and remains the primary driver of top-line optimism. Overseas GMV hit RMB 371.9 million, an 84.6% YoY increase. The overseas store count grew to 345 (138 franchised, 207 company-owned). This geographic diversification is critical to offset the deteriorating domestic landscape.
Business Model Mix Shift
A notable mix shift is occurring from franchised to company-owned operations. Net revenues from franchised teahouses fell 21.3% YoY to RMB 2.43B, while company-owned revenues surged 126.2% YoY to RMB 539.6M. This transition significantly increases the company's capital intensity and operating costs (company-owned operating costs rose 130.8% YoY), explaining the sudden margin compression.
Supply Chain Cost Discipline
Cost of materials, storage, and logistics decreased 13.7% YoY to RMB 1,392.6 million. This decline outpaced the 10.8% drop in total net revenues, reflecting improved pricing power with suppliers and better cost management initiatives, though it was insufficient to offset the massive G&A and store operating cost spikes.
Other KPIs
Decelerating. Total GMV fell both YoY and sequentially (down from RMB 7,929.5M in 25Q3). While the company added over 1,000 stores year-over-year, the volume generated by new stores is no longer enough to mask the severe traffic declines at existing locations.
Decelerating. This metric has steadily collapsed throughout the year (from RMB 455,996 in 24Q4 to RMB 431,973 in 25Q1 to its current low). It highlights the cannibalization impact of new store openings and the severe toll of competitor discounting.
Key Questions
Same-Store Sales Bottom
With domestic same-store GMV declining 25.5% this quarter following heavy drops throughout 2025, at what point do you expect the base effect to trigger stabilization, and what specific operational interventions will drive that recovery?
Restructuring vs Structural Cost Increases
G&A expenses surged 89% YoY. Can you quantify exactly how much of the RMB 635.6M expense was related to one-time organizational optimization versus permanent infrastructure costs for the global rollout?
Franchisee Health
Given the 21% decline in franchised teahouse revenue and severe SSSG contraction, what is the current profitability profile of your average domestic franchisee, and are you considering financial support mechanisms to prevent store closures?