Key Takeaways:
Chagee reported second-quarter net income of RMB 464.8 million, a 13.6% margin versus 2.3% a year earlier, as cost controls offset slower revenue growth.
"The results indicate that cost-structure and organizational-efficiency improvements were durable rather than one-time measures," CFO Aaron Huang said.
Total net revenue rose 2.5% year over year to RMB 3.41 billion (US$503.3 million), while total operating expenses fell 10.4% to RMB 2.89 billion. Gross margin held at 54%, and operating income reached RMB 524.7 million, a 15.4% margin versus 3.2% a year earlier. Non-GAAP net income was RMB 488.7 million, a 14.3% margin, and the company has now recorded positive net income for 14 consecutive quarters.
Total gross merchandise value was RMB 7.66 billion in the quarter, down 3.3% from the first quarter. Greater China GMV declined 4.5% sequentially to RMB 7.16 billion, while average monthly GMV per tea house in the region fell to RMB 338,259 from RMB 356,080. Overseas markets remained the growth driver: international GMV totaled RMB 504 million, rising 18.2% sequentially and 114.3% year over year.
Chagee's network reached 7,639 tea houses as of June 30, up from 7,038 a year earlier, including 7,240 locations in Greater China and 399 overseas. The company entered South Korea during the quarter, opening three tea houses in Seoul that sold more than 16,000 cups combined over their first three days, according to COO Aiden Yin. Chagee now operates in eight overseas markets, including Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, the United States and South Korea.
Management introduced 17 products during the quarter, its highest number of launches in a single period, and piloted Geelato, a loose-leaf tea and Italian gelato product, in more than 190 tea houses by August. Registered members totaled 257 million at the end of June, with the repurchase rate among active members above 43%.
CEO Junjie Zhang called 2026 "a year of adjustment and stabilization" rather than rapid expansion. For the third quarter, Yin said same-store sales showed a low-single-digit year-over-year decline in July, a meaningful improvement from the first half, and the company expected them to turn positive year over year in August.
Chagee had repurchased about $30 million of shares as of Aug. 24 under its authorization of up to $150 million, and management is reviewing possible regular dividend plans following a $177 million special dividend paid in the fourth quarter of the prior year. Cash, cash equivalents, restricted cash and time deposits totaled RMB 6.80 billion at quarter-end. Shares traded at $10.27, down 0.8%, giving the company a market value of about $1.96 billion.
The margin expansion signals that Chagee's efficiency push is holding even as top-line growth moderates in its core China market. Investors will watch whether same-store sales turn positive in August as management projected, and whether the board approves a regular dividend on the next earnings call.
