Th International Earnings Call Signals Profitable Reset

Th International Limited ((THCH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Th International Limited’s latest earnings call struck a cautiously optimistic tone, as management highlighted solid full‑year growth and improving margins while acknowledging pressure from discounts, delivery costs, and store pruning. Executives framed 2025 as a transition year, with groundwork laid for leaner operations and more profitable expansion starting in 2026.

System Sales Growth and Network Expansion

Total system sales climbed 7.6% in 2025 to RMB 1.57 billion, underscoring the strength of the brand despite macro and competitive headwinds. The network expanded to 1,047 stores across 92 cities, with 25 net new openings during the year as management balanced growth with selective closures.

Loyalty Engine and Customer Engagement

The company’s loyalty flywheel accelerated, with registered members surging 29% year over year to more than 31 million by year‑end. Average members per store exceeded 29,600, and monthly average transacting customers in the fourth quarter jumped 14.3% to 3.43 million, pointing to deeper engagement.

Digital and Delivery as Growth Drivers

Digitalization continued to reshape the business, with digital orders rising to 89.3% of total orders in the fourth quarter from 86.1% a year earlier. Delivery orders grew 33.7% year over year in the same period, helping push Q4 system sales up 4.0% to RMB 359.4 million.

Product Innovation and Mix Optimization

Innovation remained a key revenue lever as Th International launched 178 new products in 2025, including 96 beverages and 82 food items that generated over a quarter of total sales. Non‑coffee beverages expanded their share of beverage cups to about 18.3% from 14%, while cumulative bagel and bagel sandwich sales surpassed 80 million.

Franchise Pipeline and Expansion Strategy

The franchise model is gaining traction, with more than 10,000 applications received since the individual franchise business launched in late 2023 and over 300 franchise stores opened by the end of 2025. Franchised locations increased from 446 to 485 year over year, and management is targeting at least 100 net store openings in 2026.

Corporate Margin Improvement and Efficiency

Profitability at the corporate level improved as adjusted EBITDA margin expanded by about 1 percentage point for the full year, with a 3.3‑point jump in the fourth quarter. Management credited operational efficiencies, supply‑chain optimization, and tighter cost controls for the uplift, even as revenue growth moderated.

Unit Economics of New Store Vintages

Newer company‑owned stores are delivering attractive returns, with the 2024 vintage generating nearly 15% store contribution margins in 2025. These units are expected to achieve payback in two to three years, and management anticipates similar unit economics for 2024 and 2025 openings.

Cost Efficiency Gains Across the P&L

The company reported broad‑based cost improvements, with food and packaging costs as a percentage of company‑owned store revenue falling 1.4 points to 30.1%. Store labor and other operating expenses also edged lower as a share of revenue, while adjusted G&A dropped 7.4 points, helped by lower credit losses.

Revenue Pressure and Q4 Decline

Despite full‑year growth, total revenue in the fourth quarter fell 7.3% year over year as Th International pruned underperforming company‑owned stores. Management framed these closures, especially of remote made‑to‑order express sites, as necessary to clean up the base and support healthier long‑term unit economics.

Same‑Store Sales and Discount Headwinds

Comparable transactions rose 2.7% in 2025, but system‑wide same‑store sales slipped 2.4% as heftier delivery discounts weighed on average ticket. The company cited aggressive subsidy tactics from delivery aggregators and intensifying competition from low‑priced local chains as key sources of pressure.

Store Contribution Margin Compression

Company‑owned store contribution margin narrowed to 7.0% in 2025 from 7.4% a year earlier, reflecting elevated delivery‑related costs and promotional intensity. Management characterized these pressures as temporary and tied to current aggregator dynamics rather than structural deterioration in the store model.

Liquidity and Cash Position

The balance sheet showed strain from expansion and restructuring, with cash, equivalents, time deposits, and restricted cash dropping to RMB 129.7 million from RMB 184.2 million. This decline came even after drawing on bank lines and issuing convertible notes, highlighting the capital demands of the growth plan.

Marketing Spend and Competitive Positioning

Marketing expenses rose by 1.2 percentage points as a share of revenue as the company pushed promotions to drive traffic in a crowded market. Management signaled that elevated marketing remains part of defending and growing share while newer products and channels scale.

Delivery Dependency and Margin Trade‑Offs

The strong ramp in delivery orders has become a double‑edged sword, adding volume but squeezing margins through higher fees and platform discounts. Th International is responding by negotiating with aggregators and selectively raising delivery prices in an effort to rebalance growth and profitability.

Store Pruning and Portfolio Optimization

Strategic pruning of weaker stores, especially in remote locations, weighed on near‑term revenue and shrank the company‑owned footprint. Management stressed that these cuts should enhance average unit economics, enabling more sustainable growth as future openings focus on higher‑quality sites.

Leverage and Financing Complexity

The company refinanced part of its balance sheet in December by issuing USD 89.9 million in senior secured convertible notes and amending existing instruments, which repaid variable‑rate notes due 2026. While the move extends maturities, it also underscores reliance on capital markets and adds complexity to the firm’s liquidity profile.

Guidance and Outlook for 2026

For 2026, management is prioritizing profitability and disciplined expansion, targeting at least 100 net new stores across company‑owned and franchised formats, including special channels such as railways and hospitals. They aim to cut food and packaging costs by 1–2 percentage points, mitigate delivery‑related costs via pricing and aggregator talks, sustain or improve store contribution margins above the 7% 2025 level, and further widen adjusted EBITDA margins.

Th International’s call painted a picture of a brand with strong customer traction and improving cost discipline, but also one navigating intense price competition and rising delivery dependence. Investors will watch whether the 2026 focus on unit economics, cost reduction, and targeted expansion can convert today’s cautious optimism into durable earnings growth.