Chagee (CHA) Q2 2026 Earnings Call: Gewinnmarge verbessert sich, da sich das Auslands-GMV verdoppelt

Chagee (CHA) berichtete für das zweite Quartal 2026 über ein moderates Umsatzwachstum, während eine organisatorische Umstrukturierung und eine strengere Kostenkontrolle zu einer deutlichen Verbesserung der GAAP-Rentabilität führten. Die Auslandsmärkte blieben der klarste Wachstumstreiber und glichen die schwächere Dynamik in Großchina aus.

Kernaussagen

• Der Nettoumsatz im zweiten Quartal stieg im Jahresvergleich um 2,5 % auf 3,415 Milliarden RMB, sank jedoch gegenüber dem Vorquartal um 3,7 %. Das Gesamt-GMV fiel im Quartalsvergleich um 3,3 % auf 7,663 Milliarden RMB.
• Der GAAP-Nettogewinn erreichte 464,8 Millionen RMB, wobei sich die Nettomarge von 2,3 % im Vorjahr auf 13,6 % verbesserte. Der Non-GAAP-Nettogewinn lag bei 488,7 Millionen RMB, was einer Marge von 14,3 % entspricht, die im Vergleich zum Vorquartal unverändert blieb.
• Das Auslands-GMV stieg im Jahresvergleich um 114,3 % und gegenüber dem Vorquartal um 18,2 % auf 504,0 Millionen RMB. Das GMV in Großchina verringerte sich gegenüber dem Vorquartal um 4,5 % auf 7,156 Milliarden RMB.
• Chagee schloss den Juni mit 7.639 Teehäusern ab, was einem Anstieg von 8,5 % gegenüber dem Vorjahr und einem Nettozuwachs von 108 Standorten gegenüber Q1 entspricht. Das Netz umfasste 7.240 Filialen in Großchina und 399 Auslandsfilialen.
• Das Management gab bekannt, dass die flächenbereinigten Umsätze im Juli im Jahresvergleich einen Rückgang im niedrigen einstelligen Prozentbereich verzeichneten, und erwartet für August wieder positive flächenbereinigte Umsätze, unterstützt durch neue Produkte, saisonale Nachfrage und Serviceverbesserungen.
• Chagee hatte bis zum 24. August etwa 30 Millionen US-Dollar seines genehmigten Aktienrückkaufprogramms im Umfang von 150 Millionen US-Dollar ausgeführt. Das Management prüft zudem Optionen wie regelmäßige Dividenden, vorbehaltlich der Zustimmung des Board of Directors.

Wichtigste Finanzergebnisse

Chagee blieb das 14. Quartal in Folge sowohl auf GAAP- als auch auf Non-GAAP-Basis profitabel. Die Non-GAAP-Gemeinkosten fielen von 13,2 % im Vorjahr und 11,6 % in Q1 auf 9,1 % des Umsatzes. Die Non-GAAP-Vertriebs- und Marketingkosten machten 8,8 % des Umsatzes aus, verglichen mit 10,6 % im Vorjahr und 8,6 % in Q1.

Geschäfts- und operative Entwicklung

Produkt-Expansion unterstützt Neukundengewinnung

Chagee brachte im Laufe des Quartals 17 Produkte auf den Markt – der bisher höchste Quartalswert. Das Unternehmen expandierte über frischen Milchtee aus losem Tee hinaus in Spezialgetränke, Zitronentee-Latte, Matcha-Latte und Gelato.

Der wieder erhältliche Malino-Tee verzeichnete in seiner ersten Woche durchschnittlich 110 Tassen pro Teehaus und Tag und näherte sich einem Tassenanteil von 20 %. Der Relaunch des Long Jing Tea Latte steigerte das Gesamt-GMV im betreffenden Einführungszeitraum im Vergleich zum Vorquartal um fast 25 %.

Spezialgetränke verzeichneten in den ersten drei Tagen durchschnittlich 124 Tassen pro Teehaus und Tag und unterstützten ein zweistelliges GMV-Wachstum an den Wochenenden. Zitronentee-Latte steigerte die Erstmitgliedergewinnung während des Einführungszeitraums um 45 %.

Bis August hatte Gelato mehr als 190 Teehäuser erreicht. Das Management gab an, dass Pilotfilialen ein durchschnittliches Offline-GMV-Wachstum von über 20 % verzeichneten, begleitet von einer höheren Kundenfrequenz und der Reaktivierung inaktiver Mitglieder.

Auslandsmärkte bleiben der Hauptwachstumstreiber

Chagee war zum Quartalsende in acht Auslandsmärkten tätig. Das Unternehmen trat im Laufe des Quartals in Südkorea ein, wo seine ersten drei Teehäuser in den ersten drei Tagen mehr als 16.000 Tassen verkauften. Das durchschnittliche tägliche Tassenvolumen pro Teehaus erreichte im Mai 1.648.

Die Serie „BOYA Tea Latte“ steigerte den durchschnittlichen Tassenabsatz pro Teehaus im asiatisch-pazifischen Raum in den ersten 15 Tagen um 52 %. In Vietnam, Thailand und Indonesien machte sie mehr als 30 % des Tassenvolumens aus.

Filialnetz und Mitgliedschaften

Das globale Netz umfasste 6.756 Franchise-Teehäuser und 883 konzerneigene Standorte. Der Umsatz aus konzerneigenen Teehäusern stieg im Jahresvergleich um 222,2 % auf 940,6 Millionen RMB, was die kontinuierliche Netzentwicklung in Großchina und Übersee widerspiegelt.

Das durchschnittliche monatliche GMV pro Teehaus in Großchina sank von 356.080 RMB in Q1 auf 338.259 RMB. Das Management gab jedoch an, dass sich das flächenbereinigte GMV-Wachstum in Großchina gegenüber dem Vorjahr um 7 Prozentpunkte verbesserte und im Vergleich zum Vorquartal weitgehend stabil war.

Die Zahl der registrierten Mitglieder erreichte Ende Juni 257 Millionen. Die Wiederkaufquote unter den aktiven Mitgliedern lag weiterhin über 43 %, während Mitglieder mit mindestens zwei Käufen mehr als 78 % aller Bestellungen ausmachten.

Ausblick des Managements

Das Management bezeichnete das Jahr 2026 als ein Jahr der Anpassung und Stabilisierung statt der raschen Expansion. Für die zweite Jahreshälfte plant Chagee, die Erkenntnisse aus der Umstrukturierung und den Produkttests des ersten Halbjahres zu nutzen und gleichzeitig den Fokus auf Produktqualität, Mitgliederbindung und Kundenerlebnis zu legen.

Das Unternehmen plant, das Tempo der Produkteinführungen beizubehalten, in weitere Kategorien einzusteigen und Zutaten wie Zucker und Milchbasen zu verbessern. Es wird einer qualitativ hochwertigeren Expansion in Großchina und einem disziplinierten Wachstum im Ausland Priorität einräumen und gleichzeitig die Ladenausstattung und das Design modernisieren.

Das Management erwartet, dass die flächenbereinigten Umsätze im August nach einem Rückgang im niedrigen einstelligen Prozentbereich im Juli im Jahresvergleich wieder positiv ausfallen werden. Diese Erwartung basiert auf den zum Zeitpunkt der Telefonkonferenz beobachteten Trends und unterliegt weiterhin externen Marktunsicherheiten.

Risiken und Beobachtungspunkte

• Das Management beschrieb das makroökonomische Umfeld als schwächer und den Teegetränkemarkt als zunehmend umkämpft.
• Das GMV in Großchina und das durchschnittliche monatliche GMV pro Teehaus verringerten sich im zweiten Quartal gegenüber dem Vorquartal.
• Der Wettbewerb zwischen Lieferplattformen verändert das Verbraucherverhalten, während sich die Traffic-Verteilung zunehmend diversifiziert und fragmentiert.
• Die Non-GAAP-Nettomarge blieb trotz erheblicher Verbesserungen bei der GAAP-Rentabilität und der operativen Effizienz unter dem Niveau des Vorjahres.
• Das Management räumte bei der Erörterung der erwarteten Erholung der flächenbereinigten Umsätze anhaltende Unsicherheiten im externen Umfeld ein.

Highlights der Fragerunde

Das Management gab an, dass die Verbesserung im Juli und das für August erwartete positive flächenbereinigte Umsatzwachstum auf neue Produkteinführungen, die Sommernachfrage, Gelato und Spezialgetränke sowie eine effizientere Zubereitung und einen besseren Service im Laden zurückzuführen seien.

Zu den Kapitalrückzahlungen merkte Chagee an, dass im vierten Quartal 2025 eine Sonderdividende von 177 Millionen US-Dollar gezahlt wurde. Der Vorstand und das Management prüfen ein regelmäßigeres Rahmenwerk für Aktionärsrenditen, einschließlich möglicher regulärer Dividenden, unter Berücksichtigung der Expansionsfinanzierung, der langfristigen Strategie und der Marktbedingungen. Jeder Vorschlag bleibt vorbehaltlich der Überprüfung und Genehmigung durch das Board of Directors.

Vollständiges Transkript der Telefonkonferenz zu den Ergebnissen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Chagee's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. With that, I will now turn the call over to the first speaker today, Ms. Alicia Guo, Investor Relations Director of the company. Please go ahead, ma'am.

Alicia Guo

Thank you. Hello, everyone, and welcome to Chagee's Second Quarter 2026 Earnings Call. With us today are Mr. Junjie Zhang, our CEO, Mr. [indiscernible], our COO; and Mr. Aaron Huang, our CFO.

The company's financial and operating results were released by the Newswire earlier today and are currently available online.

Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call. Any forward-looking statements that we make on this call are based on assumptions as of today and Chagee does not undertake any obligations to update these statements.

Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release which contains a reconciliation of non-GAAP measures to GAAP measures.

With that, I will turn the call to our CEO, Mr. Junjie Zhang. Please go ahead, sir.

Junjie Zhang

[Interpreted] Hello, everyone. Welcome to Chagee's Second Quarter 2026 Earnings Call. As we enter 2026, our strategy has stayed focused on the fundamentals of the business centered on doing well by the things our consumers truly care about. In the first quarter, we completed a systematic review of our organization, product and marketing road map, laying the foundation for high-quality growth.

While the external environment saw some volatility in the second quarter, these changes have only reinforced our conviction. The ability to navigate cycles ultimately comes down to genuine consumer recognition. The more complex the market, the more important it is to return to the fundamentals. The more intense competition, the more important it is to perfect every consumer touch point. All of our work in the second quarter was built around this logic, not as reactive response, but as a more focused commitment to our proven path.

The tea beverage industry is going through a structural change. On the supply side, the fresh milk tea category is now quoted with more players and a competitive landscape has shaped from shared growth in an expanding market to competition over a fixed base, raising the intensity of competition. On demand side, shifting generational value require brands to find new ways of telling their story. The old playbook built on high-profile positioning and loud marketing has lost its effectiveness. While customers are looking for today, it is individual self-expression and a genuine sense of comfort. Brands need to become a gentle touch points that resonates with the individual, connecting through sincerity and responding to consumers with care.

On the channel side, intensified competition among delivering platforms is reshaping consumer behavior. The public domain has expanded meaningfully and become a key competitive arena for brands. Meanwhile, traffic distribution has become increasingly the diversified and fragmented. Brands must closely track where consumers are moving and allocate resources efficiently.

In response to these changes, we're building our capabilities across 4 dimensions: First, strengthening our core capabilities. At the front end, we're enhancing our innovation capabilities, striving for excellence, embracing new directions and fully unlocking the creativity of our branding and product teams. In the middle office, we're reinforcing our support infrastructure. Innovation alone is not enough. We also need strong capabilities to mobilize resources and deliver our goals. We're therefore continuing to upgrading our operating system channel capabilities, consumer operations and IT infrastructure to support our growing scale.

Second, broadening our product mix beyond [indiscernible] fresh milk tea, we're actively exploring additional categories, including the special deals and gelato recently launched in the second quarter. We want to test more product formats to meet our consumers' increasingly diverse needs. This requires us to continue reforming our supply chain capabilities and operating system to provide a solid foundation for category expansion.

Third, enhancing consumer reach. On one hand, we're using flexible and diverse content marketing to connect with consumers and expand our traffic funnel. On the other hand, we are expanding our reach through penetration across more consumer scenarios.

Fourth, we're evolving our value proposition. As consumer needs evolve, our brand value proposition also needs to iterate with the times. Through emotional resonance and experience-driven retention, we aim to turn new customers into loyal long-term Chagee friends.

Connecting through tea is our [indiscernible], bringing Chagee to the world and building a premium brand with exceptional user experiences. This is our unwavering direction and standard. We continue to build our capabilities towards fiscal with every step deliberate and grounded. We believe that the more complex the environment, the more important it is to return to the fundamentals, making great products serving our consumers well and refining every teahouse. As we continue to deepen our capabilities across product innovation, marketing innovation, organizational efficiency, consumer operations and overseas expansion, we're confident in achieving high-quality sustainable growth in any market environment.

Last quarter, we announced a share repurchase program of up to USD 150 million. As of August 24, we have executed approximately USD 30 million in repurchases. Through continued action, we want to demonstrate the company's firm confidence in its long-term value and deliver a tangible return on our shareholders' trust.

Next, I will hand the call over to our COO, Eden, who will walk you through the execution during the quarter. Thank you.

Unknown Executive

[Interpreted] Thank you, Junjie Zhang, and thank you all for joining our earnings call today. Let me begin by sharing our overall performance for the second quarter. Total revenue reached RMB 3,415 million representing a 2.5% increase year-over-year and a 3.7% decrease quarter-over-quarter. GAAP net income was RMB 465 million, representing a net income margin of 13.6%, a substantial improvement from 2.3% in the same period last year. Non-GAAP net income was RMB 489 million. Non-GAAP net margin was 14.3%, stable on a sequential basis.

Total GMV for the second quarter was RMB 7,660 million, down 3.3% sequentially. Greater China GMV was RMB 7,156 million, down 4.5% sequentially. Overseas markets stood out with GMV reaching RMB 504 million, up 18.2% sequentially and 114.3% year-over-year, continuing to serve an important growth engine for us.

This quarter, we continued to advance our high-quality growth strategy across 4 key dimensions. First, we accelerated new product launches. We launched a total of 17 new products this quarter, the highest number in a single quarter in our history. Our offerings have expanded from loose leaf fresh milk tea to include special deals, lemon tea latte, Matcho latte, gelato and other series. Within loose tea fresh milk tea, we successfully brought back 2 classic products, Malino tea reached an average of 110 cups per teahouse per day in its first week with a cap share of nearly 20% and the highest first-time member penetration of any new product this year. The return of Long Jing tea latte drove overall GMV up nearly 25% sequentially during the [indiscernible] day period, outperforming last year.

On category expansion, the special deals designed for weekend leisure occasions averaged 124 cups per teahouse per day during its first 3 days and contributed to double-digit weakened GMV growth. The launch of the lemon tea latte also increased the first-time member acquisition by 45% during the launch period underscoring for its effectiveness in attracting new customers.

In addition, we piloted gelato in selected teahouses, combining loose tea leaves with Italian gelato craftsmanship. As of August, gelato has been introduced in more than 190 teahouses and have been well received by our Chagee friends. Great and pilot store performance indicates meaningful improvement with average offline channel GMV increasing by more than 20%. Gelato has also demonstrated a strong ability to attract new customers, reactivate dormant members and increased in-store traffic.

Second, our marketing continues to build a high-value brand core deepening brand capture and cultural residents through a series of high-impact collaborations, exploring upgrades at the intersection of culture and tea. In June, we formed a strategic partnership with the [indiscernible] Theater Festival and opened our first Chagee imaging teaspace in July. We also partnered with the Hubei Provincial Museum to launch the country's first museum teahouse drawing on traditional culture and intangible cultural heritage to position tea as a meaningful cultural medium. By clearly communicating with our brand values and philosophy, we have strengthened emotional connections with consumers and translated that engagement into consumer acquisition and loyalty. As of the end of June, our total registered members reached 257 million. The repurchase rate among active members remain above 43%, while members who made 2 or more purchases accounted for more than 78% of total orders.

Third, we continue to benefit from our more streamlined and efficient organizational structure. In the second quarter, our non-GAAP G&A expense ratio declined to 9.1% compared with 13.2% in the prior year and down 2.5 percentage points sequentially. Our non-GAAP sales and marketing expense ratio narrowed down to 8.8% from 10.6% a year ago, remaining within a healthy single-digit range and broadly in line with the 8.6% level reported in the first quarter. These improvements are not simply cutting spending, they reflect a more disciplined and efficient approach to resource allocation. We're executing faster with greater precision and stronger coordination while focusing our resources on initiatives that creates the most value for consumers.

Fourth, we continue to prioritize high-quality growth across our tea health network while advancing our teahouse expansion. As of the end of June, our global network totaled 7,639 teahouses, representing a net increase of 108 locations from the prior quarter. This includes 7,240 teahouses in Greater China and 399 overseas. We're now present in 8 overseas markets, including Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam and the United States and South Korea.

This quarter marked our first entry into South Korean market. Our 3 teahouses sold over 16,000 cuts combined in their first 3 days, with preopening app downloads exceeding 46,000. Average daily cup volume per teahouse reached 1,648 in May, demonstrating the strong regional appeal and competitiveness of the Chagee brand. During World Tea Day, we introduced new offerings under the BOYA Tea Latte series across the Asia Pacific region. The series has increased average caps sold per teahouse across the region by 52% during its first 15 days. In Vietnam, Thailand and Indonesia, the BOYA Tea Latte series accounted for more than 30% of cup volume, underscoring the cross-market appeal of our core product offerings.

Looking ahead, we remain focused on a clear set of priorities. On products, we will maintain a consistent launch cadence, expand into new categories and continue enhancing ingredients, including sugar and dairy bases to lead the development of healthier tea beverages. On service, we will further optimize our membership program and overall consumer experience. Across our teahouses network, we will prioritize high-quality growth in Greater China while expanding overseas in a disciplined manner.

We will also upgrade equipment to help ensure product consistency and improve operating efficiency.

On experience, we will continue to differentiate our teahouses through thoughtful design, creating a third space where consumers generally want to spend time. Finally, on brand. we will stay closely aligned with market trends and continue elevating the key experience through brand enhancements, consistent product quality and improved consumer experience and an involving training system.

That concludes my remarks. Now let me turn the call over to our CFO, Aaron, who will walk you through the detailed financials. Thank you.

Hongfei Huang

Thank you, Edan, and hello, everyone. Thank you for joining our earnings call. Before we begin, please note that all amounts are in RMB and all comparisons are on a year-over-year basis, unless otherwise stated.

as Junjie Zhang and Edan outlined, the second quarter presented a softer macro backdrop and a more challenging competitive landscape across the industry, and our results reflect the that environment. What I want to emphasize is that even as top line growth moderated, we maintained our operating discipline, we established earlier this year, and our profitability has largely intact. We view this as evidence that our cost structure and organizational efficiency gains are durable, not a onetime and that they give us a stable foundation to keep executing our strategy priority regardless of the external environment.

With that context, let me walk through the quarter in detail. Total GMV was RMB 7,663 million in the second quarter, down 3.3% sequentially from RMB 7,917.8 million in the first quarter. As of June 30, 2026, our teahouse network totaled 7,639 locations across the Greater China and overseas, up 8.5% from 7,038 a year ago. Of this 6,756 were franchise teahouses and 883 were company-owned teahouses.

In Greater China, average monthly GMV per teahouses was RMB 338,259 in the second quarter compared to RMB 356,080 in the first quarter. Meanwhile, overseas total GMV grew 114.3% year-over-year and 18.2% quarter-over-quarter from RMB 426.4 million in the first quarter to RMB 504.0 million in this quarter.

Overseas markets remains our clearest growth engine.

Same-store GMV growth in Greater China improved by 7 percentage points year-over-year and was broadly flat sequentially. Overall, same-store GMV growth improved by 6.9% points from a year ago remained relatively stable compared with the prior quarter.

On the revenue line, our net revenues increased by 2.5% year-over-year to RMB 3,414.6 million in the second quarter. Net revenue from franchisee teahouses were RMB 2,474 million, representing 72.5% of total net revenue compared to RMB 3,020.7 million a year ago. Net revenue from company-owned teahouses were RMB 940.6 million, up 222.2% from RMB 311.2 million a year ago, mainly as a result of continued development of the company-owned tea houses network across Greater China and overseas markets.

Turning to margin. Our gross profit calculated by excluding cost of material, storage and logistics from net revenue reached RMB 1,843.4 million this quarter, resulting in a gross margin of 54%, flat year-over-year. Our organizational enhancements drove a meaningful year-over-year decline in operating expenses.

Share-based compensation expenses totaled RMB 23.9 million in the quarter, and it reflects our focus on retaining and motivating employees while aligning their interest with those of shareholders. To provide a greater clarity of our underlying operational performance. We will continue to reference non-GAAP operating results with full reconciliations available in our earnings release and the Form 6-K.

Operating income was RMB 524.7 million, representing an operating income margin of 15.4%, increased significantly from 3.2% in the same period of a year ago, benefiting from our strategic organizational adjustment and a continued disciplined cost management. Excluding share-based compensation expenses, non-GAAP operating income was RMB 548.6 million, representing a 16.1% margin compared to a 17.1% margin in the first quarter of 2026.

Operating costs for company-owned teahouses were RMB 566.8 million, up 207.8% from RMB 184.1 million a year ago, consistent with the continued buildout of our company-owned network.

Other operating costs decreased by 33.3% to RMB 115.8 million, largely due to a decrease of RMB 30.2 million in payroll expenses driven by organizational structure enhancement and headcount optimization.

On a GAAP basis, other operating costs accounts for 3.4% of revenues compared to 4.7% a year ago and 4.3% in the first quarter.

Sales and marketing expenses for the quarter were RMB 301.5 million, down 21.7% from RMB 385 million a year ago, mainly due to a more streamlined branding and marketing team, together with improved efficiency in advertising placement and precision marketing.

On a non-GAAP basis, sales and marketing expenses represented 8.8% of revenue compared to 10.6% a year ago and 8.6% in the previous quarter.

General and administrative expenses reached RMB 334.5 million, down 64.6% year-over-year from RMB 944.6 million. The decrease primarily reflected lower share-based compensation expenses, reduced payroll facility and the professional service costs and [indiscernible] of IPO-related expenses incurred in the prior year period.

On a non-GAAP basis, G&A expenses represented 9.1% of revenues compared to 13.2% in the same period a year ago and 11.6% in the first quarter.

Income tax expenses represented 20% of income before income tax compared to 62.1% a year ago and 21.2% in the first quarter, the year-over-year normalization primarily reflecting a reduced impact from share-based compensation expenses.

Notably, we continue to deliver profitability on both GAAP and a non-GAAP basis, extending our track record to 14 consecutive quarters of positive net income.

GAAP net income was RMB 464.8 million. Non-GAAP net income, excluding RMB 23.9 million of share-based compensation expenses was RMB 488.7 million, with a non-GAAP net margin of 14.3% compared to 18.9% a year ago and flat sequentially.

For the second quarter, basic and diluted net income per ordinary share was RMB 2.44 and RMB 2.42 respectively. On a non-GAAP basis, basic and diluted net income per ordinary share was RMB 2.57 and RMB 2.54, respectively.

Turning to liquidity. We ended the quarter with RMB 6,795.5 million in cash and cash equivalents, restricted cash and time deposits. This reflects the impact of our share repurchase program commencing on June 1, 2026, alongside our continued investment in teahouse network. We maintain a healthy balance sheet that gives us flexibility to keep executing our strategic priorities while returning capital to shareholders.

As we move through the remainder of 2026, we will execute against our new product pipelines, enhancement memberships and the service experience and maintain a focus on quality as we expand our teahouses network in Greater China and overseas.

Our confidence in the company's long-term value remains firm, and we are committed to return value to our shareholders in a meaningful way. With that, we are ready to begin Q&A.

Alicia Guo

[Operator Instructions] We received some questions ahead of today's call. We will now address some of the key topics raised. Our first question relates to the outlook of the second half of the year. How does management view the second half of the year amid the current competitive market environment? Our CEO, Junjie Zhang will address this question.

Junjie Zhang

[Interpreted] Thanks for the question. As we just shared, the market environment has changed significantly and competition in the industry has become more intense, but we have always believed that the more complex the market becomes, the more important high-quality growth is. We see 2026 as a year of adjustment and stabilization. In Q1, we completed the organizational restructuring and conducted a systematic review of our growth strategy. In Q2, we have started to explore areas such as new product category expansion and user experience upgrades. Our core objective this year is not to pursue rapid expansion in scale, but to build a stronger foundation for sustainable growth in the next stage.

In the second half, our work will become more focused and practical along the direction of adjustment and exploration will put into execution the results and learnings from the first half one by one. No matter how external environment changes, we will stay focused on the fundamentals making good products and doing things that matter most to our members. We remain confident in steady development in the second half.

Alicia Guo

Our next question relates to same-store trends. Could you share how same-store have trended so far in the third quarter? Our COO, Aden, will address this question.

Unknown Executive

[Interpreted] Thanks for the question. Since the start of Q3, we have seen positive signs of recovery. Same-store sales in July showed a low single-digit decline, representing a meaningful improvement from the first half. Based on trends so far, we expect same-store sales in August to turn positive year-over-year. We believe the improvement reflects that the benefit of our earlier strategic adjustments are gradually coming through.

There are a few drivers behind this trend. First, our new product strategy continues to contribute. In Q3, we maintained the pace of new launches from Q2, introducing several new products, including Guava Peach Ice tea and Limon tea Latte while also relaunching papular bestsellers, such as leachate black and milk tea and [indiscernible] milk tea. At the same time, since Q3 forth and peak season for tea consumption, recently launched products such as gelato and special deals are also better suited to the summer heat, effectively driving in-store traffic and overall performance.

Second, we continue to refine in-store service and customer experience. We have consistently emphasized a return to fundamentals. And throughout this year, we have continued to refine service details at the teahouse level, improving preparation efficiency and strengthening customer experience. We're translating these seemingly small details into real tangible outcomes in the form of repeat purchases and word of mouth.

Overall, the improved trends in July and August gave us greater confidence in same-store performance for the second half of the year while uncertainty remains in the external environment. Our product pipeline is stronger and our strategic direction is clearer, and we believe this recovery is sustainable.

Alicia Guo

The last question relates to payout. Does the company have any further payout plans. Our CFO, Aaron will address this question.

Hongfei Huang

[Interpreted] Thanks for the question. Shareholder returns have always been one of the key considerations in our capital allocation strategy. In the fourth quarter of last year, we paid a special dividend of USD 177 million, which reflects our commitment to returning value to shareholders.

Entering 2026, with the organizational optimization and continued improvement in operating efficiency, our free cash flow has remained healthy. This provides a solid foundation for us to explore a more regular and sustainable shareholder return mechanism. Currently, the Board and management are actively and prudently reviewing different options, including regular dividends, while considering our medium- to long-term strategy, funding needs for teahouse development and changes in the market environment.

We fully understand that it is important for shareholders to share in the results of the company where we maintain high-quality growth, therefore, continuously enhancing shareholder returns remain a firm direction for us. Management team is currently evaluating the specific details. We will bring a proposal to the Board at the appropriate time, subject to the Board's review and approval, provide an upgrade to the market.

Alicia Guo

That concludes today's Q&A session. If you have any further questions, please feel free to contact us or request us through our IR website. Thank you all for your time today. We look forward to reconnecting on our next call. Have a wonderful day.

Operator

This concludes today's event. Thank you for participating. You may now disconnect.