TH International Limited Reports Q1 2025 Financial Results with 3.5% Year-over-Year Increase in System Sales and Growth in Loyalty Club Membership

TH International Limited (Tims China) reported a mixed first quarter 2025, with system sales increasing 3.5% to RMB376.3 million, yet total revenues declined 9.5% to RMB300.7 million, impacted by underperforming store closures and a 6.5% decrease in same-store sales for company-owned locations. Despite the revenue dip, the company demonstrated significant operational improvements, boosting company-owned store contribution margin to 6.7% and nearly halving its adjusted corporate EBITDA loss. This focus on efficiency, coupled with a 25.7% surge in loyalty members and strategic new product launches, signals a concerted effort towards profitable growth and optimized unit economics amidst a challenging market.

Analysis

TH International Limited (Tims China) presented a conflicting financial profile for Q1 2025, characterized by strategic repositioning amidst underlying revenue pressures. While system-wide sales grew by 3.5% to RMB376.3 million, this was overshadowed by a 9.5% year-over-year decline in total revenues to RMB300.7 million. This top-line weakness is directly attributable to a 6.5% decrease in same-store sales for company-owned and operated stores and a net closure of seven such locations, indicating persistent challenges in driving organic growth and maintaining store performance. Conversely, the company demonstrated significant progress in operational efficiency. The contribution margin for company-owned stores saw a substantial improvement of 5.9 percentage points to 6.7%, driven by successful cost controls in food, packaging, and payroll. This discipline is further reflected in the narrowing of the operating loss to RMB85.3 million from RMB121.3 million and a nearly 50% reduction in the adjusted corporate EBITDA loss. The company's strategy appears to be pivoting towards a more capital-light franchise model, evidenced by the net addition of nine franchised stores, and leveraging its growing digital footprint, with loyalty club membership increasing 25.7% to 25.1 million. However, the stark institutional selling, with nine funds decreasing their positions and zero adding in the recent quarter, signals significant investor skepticism that outweighs the positive operational narrative.

Key Decisions for Investors

• Investors should weigh the significant operational improvements, such as the 5.9 percentage point increase in company-owned store contribution margin, against the fundamental weakness of a 9.5% revenue decline and a 6.5% drop in same-store sales.
• The complete liquidation of positions by multiple institutional investors, including Citadel and Geode, serves as a strong bearish signal, suggesting that near-term risks related to top-line growth may outweigh the company's cost-cutting achievements.
• Monitor future reports for a reversal in same-store sales trends and an acceleration of the franchise model, as these are the critical catalysts needed to validate the company's turnaround strategy and potentially counter the current negative institutional sentiment.
• Consider the growing 25.1 million member loyalty program as a key asset, but recognize its value is contingent on the company's ability to successfully monetize this user base to restore revenue growth.