Strategic Performance and Operational Philosophy
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Performance growth was driven by a 'quality first, growth second' logic, prioritizing existing store efficiency and table turnover over aggressive footprint expansion.
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Management attributed margin expansion to the release of operating leverage as proactive investments in employee training and customer experience from 2025 began to yield higher personal efficiency.
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The company is pivoting toward localized product innovation, such as spicy braised dishes for late-night scenarios and premium Australian beef, to meet specific regional dining habits.
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Strategic positioning focuses on 'intangible value,' where service quality and dining ambiance are leveraged to justify price points to increasingly rational and value-conscious consumers.
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Operational decentralization remains a core pillar, granting store managers more on-site discretion and mentoring to foster personalized service and flexible operations.
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The 'Red Pomegranate' project is evolving into a multi-brand matrix, incubating diverse formats like Malatang and BBQ to diversify revenue beyond the core Haidilao hot pot brand.
Outlook and Strategic Priorities
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Future expansion will adhere to a principle of balancing stability and quality, with a double-digit pipeline of reserved stores currently in the contract stage.
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Management expects to maintain stable margins by utilizing localized supply chains and flexible product mixes to buffer against rising commodity and oil prices.
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The company plans to mitigate seasonal hot pot troughs by expanding dining scenarios, including summer-specific products like BBQ, sushi, and interactive IP marketing events.
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Strategic continuity is emphasized following leadership changes, with no planned shifts in the established framework of prioritizing employee benefits and customer satisfaction.
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Digitalization of the membership system will be a key focus to refine point systems and benefit designs for a member base that now exceeds 9 million.
Risk Factors and Structural Adjustments
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Reported net profit was significantly impacted by a non-operating foreign exchange loss of approximately $4.292 million, contrasting with a gain in the prior year.
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Geopolitical volatility in the Middle East was explicitly cited as a headwind, causing a 0.4x decrease in table turnover rates for that region.
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Extreme weather in North America during early 2026 led to a 5.1% decline in same-store sales as cold conditions deterred in-store dining.
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Central Kitchen excess capacity is being commercially converted for external B2B use, which dilutes fixed costs despite having lower gross margins than the core restaurant business.
Q&A Session Insights
Impact of leadership changes on long-term corporate strategy
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Management confirmed that the departure of Mr. Yang will not alter the strategy of prioritizing customer and employee benefits.
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The system of regional and store manager autonomy for operations and openings remains unchanged to ensure stability.
Decision-making authority for the Red Pomegranate multi-brand project
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The project uses a hybrid model: regional managers drive bottom-up incubation based on local research, while headquarters provides top-down resource mobilization.
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Some brands, like Spark Cora BBQ, are inspired by successful Chinese formats but managed locally to ensure adaptation.
Consumer demand trends and medium-term market assessment
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Consumers are becoming more 'rational' rather than the market deteriorating; they are seeking clear reasons to choose a brand based on cost-performance.
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North American customers are noted as being particularly cautious in ordering, while Southeast Asian markets prioritize convenience and delivery.
Optimization of labor and rental cost ratios
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Labor costs are viewed as having a 'certain rigidity' to protect service quality, with current levels at 34% considered reasonable.
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Future improvements will come from flexible labor allocation and stricter site selection for new stores to improve rental negotiation power.
