Chaji (CHA) Q3 2025: Overseas GMV Jumps 75%, Offsetting Domestic Traffic Headwinds
Chaji’s Q3 revealed a sharp divergence: overseas expansion delivered robust GMV growth while domestic markets faced intensified competition and declining same-store sales. Resilient margins and a special dividend reflect disciplined execution despite revenue pressure, as management leans into brand, product, and channel upgrades to defend its premium positioning. With no formal guidance, investors must weigh strong overseas momentum against persistent home-market headwinds and rising operating costs.
Summary
- Overseas Expansion Accelerates: International GMV growth and new market entries offset domestic softness.
- Margin Resilience Amid Revenue Decline: Gross margin improvement signals disciplined procurement and scale leverage.
- Strategic Focus on Brand and Product Upgrades: High-quality development strategy aims to defend premium positioning and drive long-term loyalty.
Performance Analysis
Chaji’s Q3 headline was a 9.4% YoY revenue decline to RMB 3.2 billion, reflecting domestic traffic headwinds and a high base from the prior year. The core franchisee teahouse business contributed nearly 88% of revenue, while company-owned stores, though still only 12.4% of total, grew rapidly as overseas presence scaled. Gross margin rose to 53.8%, up from 50.1% last year, driven by procurement optimization and scale benefits. Non-GAAP net margin landed at 15.7%, down from 18.3% YoY, but still healthy given the revenue contraction and stepped-up investment in global expansion and talent.
Store network expansion remained a growth lever, with 300 net new teahouses this quarter—54 of which were overseas. International GMV surged 75.3% YoY and 27.7% QoQ, now a key pillar of growth, as Chaji entered the Philippines and Vietnam and continued to scale in Malaysia, Thailand, and Indonesia. Domestic GMV fell 6.2% YoY and same-store GMV dropped nearly 28%, reflecting intensified competition, delivery platform subsidy battles, and consumer softness. Store closure rates remained low at 0.3%, supporting the health of the franchise network despite top-line pressure.
- Overseas GMV Growth Outpaces Domestic: International GMV up 75%, now a growth engine as domestic traffic lags.
- Margin Expansion Despite Top-Line Pressure: Gross margin rose to 53.8% on procurement and scale, even as revenue contracted.
- Dividend Signals Balance Sheet Strength: Special dividend of $177 million highlights capital return discipline amid profitability streak.
Operating expenses rose sharply in G&A (up 60% YoY) and company-owned teahouse costs (up 95% YoY), reflecting global build-out and R&D. Sales and marketing spend fell 13%, showing promotional discipline. Chaji’s cash position remains robust at RMB 9.1 billion, supporting both reinvestment and capital return as the board approved a special dividend.
Executive Commentary
"Our answer is clear, that is, bringing people together through tea. This founding mission and commitment drives us to focus on user value as the starting point for all strategies. Every decision and initiative aims to expand and deepen a community of people who connect with our brand values."
Junjie Zhang, Chief Executive Officer
"Despite the challenging macro environment and the intensified competition, we maintained our focus on profitable growth and the disciplined execution. Non-GAAP net income was $502.8 million with a non-GAAP net margin of 15.7%, reflecting underlying resilience of our business model."
Aaron Huang, Chief Financial Officer
Strategic Positioning
1. Overseas Markets as Growth Engine
International expansion is now Chaji’s primary growth lever. With 262 overseas stores and 54 net new additions this quarter, the company is leveraging local product innovation and brand campaigns (such as Popmart collaborations) to build regional relevance. Malaysia, Thailand, and Indonesia are showing strong product adoption and brand engagement, validating the localization strategy and providing a counterweight to domestic market saturation.
2. Premium Brand and Product Focus
Chaji’s high-quality development strategy centers on premiumization and user experience. The company is rolling out a 4.0 menu, implementing stricter quality standards, and introducing new categories like special pure tea. Emphasis is on building emotional brand resonance and a distinctive Eastern aesthetic, with flagship stores and themed locations deepening cultural roots and defending price integrity.
3. Franchise Network Health and Store Economics
Franchise stability remains a core asset, as evidenced by a low 0.3% closure rate. Company-owned stores are growing rapidly overseas, but management is closely monitoring per-store profitability and operational efficiency. Same-store GMV is under pressure both domestically and abroad, but Chaji is prioritizing long-term network health over near-term volume at any cost.
4. Capital Allocation and Shareholder Returns
Chaji’s robust cash flow and 11th consecutive quarter of profitability enabled a special dividend, reinforcing investor confidence and signaling balance sheet strength. Disciplined investment in R&D, digital infrastructure, and talent continues, with a clear bias toward long-term brand and operational capability building over aggressive promotional spend.
Key Considerations
Chaji’s Q3 underscores a strategic pivot toward international growth and brand defense as domestic competitive intensity rises. Investors should weigh the durability of overseas momentum against the risks of home-market saturation and rising costs.
Key Considerations:
- International Store Momentum: Overseas expansion is accelerating, with successful market entries and strong local product traction in Southeast Asia.
- Same-Store Sales Pressure: Domestic and overseas same-store GMV declines signal persistent traffic and competitive headwinds, especially from delivery platform subsidy wars.
- Margin Management: Gross margin gains reflect procurement discipline, but rising G&A and company-owned store costs could compress profitability if revenue pressures persist.
- Capital Return Discipline: Special dividend demonstrates management’s confidence in cash generation, but also signals limited near-term reinvestment opportunities domestically.
Risks
Chaji faces material risks from intensifying domestic competition, delivery platform subsidy battles, and consumer demand volatility. Overseas growth is promising but still subscale and exposed to execution, localization, and regulatory risks. Rising G&A and expansion costs may erode margins if same-store sales do not recover. The absence of formal guidance heightens uncertainty, requiring investors to monitor both domestic stabilization and international scaling closely.
Forward Outlook
For Q4 and full-year 2025, Chaji did not provide formal financial guidance. Management instead emphasized:
- Continued focus on high-quality product innovation and strategic brand investment
- Operational efficiency initiatives to optimize resources and support sustained growth
Management highlighted that overseas expansion, product upgrades, and franchise network health are top priorities, with a view to building long-term shareholder value even as near-term market dynamics remain challenging.
Takeaways
Chaji is at a strategic crossroads—leveraging international growth and premium brand positioning to offset domestic softness, while maintaining disciplined capital allocation and margin management.
- International Growth Is Now Essential: Overseas GMV and store expansion are offsetting domestic headwinds, but require continued localization and operational discipline to reach scale and profitability.
- Brand and Product Upgrades Defend Premium Position: Ongoing investment in quality, experience, and cultural differentiation aims to sustain pricing power and loyalty despite competitive pressures.
- Watch for Margin and Store-Level Profitability Trends: Rising costs and same-store sales declines are key risks; investors should monitor whether margin gains persist as the store network grows and international operations mature.
Conclusion
Chaji’s Q3 2025 results highlight a business in transition, balancing international momentum against domestic market saturation and cost inflation. The company’s ability to execute on its high-quality development strategy and scale overseas will determine whether it can sustain growth and margin resilience in the face of mounting competitive and operational pressures.
Industry Read-Through
Chaji’s performance reinforces two major trends for the tea beverage and broader foodservice sector: premiumization and international diversification are now critical for growth as domestic competition intensifies and same-store sales stagnate. Operators with strong brand equity and disciplined capital allocation can maintain profitability even as top-line growth slows. For global beverage and QSR peers, the ability to localize product, build emotional brand resonance, and manage franchise health will be decisive in capturing new market opportunities and defending against margin erosion.