CHA (CHA) Q4 2025: Same-Store Sales Drop 25.5% as Business Model Shifts and Global Expansion Accelerates

2026-03-31 | By EarningsIQ Research

Chaji’s pivotal quarter reflects the pain of major internal restructuring, with a sharp same-store sales decline and margin volatility as the company pivots to a new franchise model and global expansion. Management signals the worst is behind, prioritizing operational health and long-term brand value over rapid scale, while overseas markets emerge as a bright spot and a core pillar for future growth. The year ahead will test whether organizational changes and renewed focus on consumer experience can restore domestic momentum and deliver on the promise of international scale.

Summary

• Domestic Operations Reset: Major internal overhaul and product cadence pause led to a steep same-store sales drop, but management asserts operational stability is restored.
• Business Model Overhaul: Franchise model transitions to GMV-based revenue sharing, aiming for tighter alignment and resilience amid industry price wars.
• Global Expansion as Growth Engine: Overseas tea house count and GMV surged, with international markets set as a long-term growth lever and testbed for scalable formats.

Performance Analysis

Chaji closed 2025 navigating a turbulent domestic tea market, marked by a 25.5% year-over-year decline in same-store sales in Q4. This contraction was the direct result of deliberate organizational restructuring and a strategic slowdown in new product launches, as management sought to recalibrate for quality growth rather than scale at any cost. The competitive intensity of third-party delivery platform price wars further pressured offline performance, exposing the vulnerability of prior expansion-heavy tactics.

Despite this, total GMV increased 7.2% for the year, underpinned by a robust international showing. Overseas GMV soared 84.6% in Q4, and the overseas tea house network grew to 345 locations, now spanning seven countries. The company-owned tea house segment also expanded rapidly, reflecting a deliberate shift to tighter operational control. Gross margin improved to 53.2% in Q4, aided by lower input and supply chain costs, but operating profit was impacted by restructuring expenses and increased G&A tied to global expansion and digital infrastructure investments.

• Franchise Model Transition: Franchisee tea houses contributed 81.9% of Q4 net revenue, but a new GMV-based revenue sharing model aims to better align incentives and buffer franchisee performance swings.
• Cost Structure Volatility: G&A expenses nearly doubled year-over-year, reflecting both restructuring and upfront investments for future overseas growth.
• Profitability Maintained: Despite margin pressure, Chaji delivered its twelfth consecutive profitable quarter on a non-GAAP net basis, signaling underlying business resilience through transition.

The company’s strong cash position, with cash and equivalents up to RMB 7.9 billion, provides flexibility for continued investment in international markets and digital upgrades, even as domestic recovery remains a top priority.

Executive Commentary

Strategic Positioning

1. Franchise Model Transformation

Chaji is moving from a traditional raw material sales model to a GMV-based revenue-sharing franchise model, aligning incentives with franchisees and sharing both risk and reward. This shift is designed to provide franchisees with more support during downturns and to create a more resilient ecosystem, particularly as price competition intensifies in the sector.

2. Brand and Experience Focus

The company is doubling down on premium brand positioning and consumer experience, investing in store ambience, differentiated formats (flagship, boutique, regular), and enhanced service (including SVIP hotlines and direct feedback channels). Product innovation will be tailored to core demographics and a wider range of consumption scenarios, aiming to reactivate dormant members and deepen daily relevance.

3. Organizational Realignment and Efficiency

Major organizational restructuring has been completed, with integrated back office functions and tighter cost controls. The company is shifting resources to front-line operations, aiming for faster execution and a leaner, more responsive structure. Digital infrastructure investments support this pivot, with a focus on scalable processes for both domestic and overseas operations.

4. Global Expansion as a Decade-Long Bet

International markets are now positioned as a core growth engine. Chaji is laying groundwork for a 10-year globalization cycle, with particular emphasis on building a sustainable, repeatable model in the U.S. and Southeast Asia. The company is prioritizing brand-building and operational excellence over rapid, low-quality expansion, accepting near-term margin pressure for long-term market leadership.

Key Considerations

Chaji’s Q4 and full-year results reflect a company in the midst of significant strategic transformation, facing both the costs and opportunities of recalibration. The balance between short-term pain and long-term positioning is central to the investment debate for 2026.

Key Considerations:

• Recovery vs. Expansion: Management is prioritizing stabilization and same-store sales recovery over new store openings in China, with a target of only 300 domestic additions in 2026.
• International Profitability Path: Overseas store growth is robust, but management stresses the need to refine unit economics and business models before scaling further, especially in the challenging U.S. market.
• Margin Management: Gross margin improvements are offset by higher G&A and operating costs tied to restructuring and global investments, requiring close monitoring as the business scales internationally.
• Brand Equity as Moat: The company’s large membership base and focus on premium experience are intended to serve as a durable moat, but require ongoing innovation and operational discipline to maintain relevance.

Risks

Prolonged domestic weakness and further price wars could delay same-store sales recovery and strain franchisee relationships. Execution risk remains high as the company juggles internal restructuring, a new franchise model, and aggressive global expansion, particularly in unfamiliar markets with higher capex requirements. Margin compression from elevated G&A and upfront global investments could persist if international profitability ramps slower than planned.

Forward Outlook

For 2026, Chaji guided to:

• Flat revenue and profit year-over-year, with stabilization in the first half and improvement expected in the second half
• Domestic store additions capped at 300, with a focus on high-quality locations and operational health
• Target of 200 net new overseas tea houses, with expansion into Korea and continued focus on the U.S. as a strategic priority

Management highlighted several factors that will shape 2026:

• Recovery in same-store sales is the top KPI, with operational excellence and consumer experience as central levers
• Global expansion will be paced to ensure each new market achieves sustainable profitability before accelerating scale

Takeaways

Chaji’s Q4 marked an inflection point, with deep internal changes and a renewed emphasis on operational health, brand experience, and global ambition. The year ahead will test whether these adjustments can restore domestic momentum and deliver on the promise of international scale.

• Domestic Reset: Organizational overhaul and product cadence pause drove same-store sales down, but management is betting on a return to operational health and brand-led growth over chasing low-quality traffic.
• Global Bet: Overseas growth is now a core pillar, but profitability and unit economics in new markets remain a critical watchpoint as the company invests for long-term category leadership.
• 2026 Watch: Investors should monitor the pace of domestic recovery, franchisee alignment under the new model, and the ability to convert international expansion into sustainable margin growth.

Conclusion

Chaji’s Q4 2025 results spotlight the cost of transformation but also the company’s willingness to make hard choices for long-term positioning. With the domestic market in reset mode and global ambitions rising, 2026 will be a proving ground for the new franchise model and operational discipline. Execution on same-store recovery and international profitability will determine whether this strategy delivers sustainable value creation.

Industry Read-Through

Chaji’s experience highlights the growing pains facing China’s branded beverage sector as price wars and market saturation force a pivot from rapid expansion to operational quality and franchise alignment. The shift to GMV-based franchise revenue sharing may signal a new industry norm, with risk-sharing and tighter brand control becoming prerequisites for durability. Meanwhile, the company’s global push underscores both the opportunity and complexity of exporting Chinese consumer concepts, with lessons for any retail brand eyeing cross-border expansion. Margin volatility and the need for patient capital are likely to remain central themes for the sector in 2026 and beyond.

CHA Consumer Discretionary Restaurants Franchise Global Expansion Brand Experience Same-Store Sales Organizational Restructuring