Key Takeaways from Expansion
- TH International has recorded its strongest-ever growth for new store openings in the last year’s fourth quarter, with a total of 919 stores, including 10 Popeyes locations.
- The company opened about 156 stores in the fourth quarter, surpassing the total number of store openings for the previous three quarters combined.
By Doug Young
Chinese fast food operator TH International Ltd. (NASDAQ: THCH) has reached an important milestone with its robust expansion in China, marking the opening of its 10th Popeyes store in the Mainland market. The company’s latest data release highlights its highest growth for new store openings in the last year’s fourth quarter, indicating both progress and challenges in the competitive Chinese market.
As the master franchisee for Tim Hortons and Popeyes in China, TH International currently operates 919 stores, a significant achievement driven by its record-setting opening of 156 stores in the fourth quarter. This surpasses the total number of store openings in the previous three quarters combined and underscores the company’s commitment to expansion amid fierce competition.
However, the latest figure falls short of the company’s goal to have 1,000 stores in operation by the end of last year, as announced midway through the year. While TH International did not provide further comments on this shortfall, details are expected to be addressed when the company announces its official fourth-quarter results later this year.
Despite the significant progress in store openings, investor reaction to the announcement has been muted, suggesting a degree of caution about the company’s growth prospects. The stock experienced minimal change on the day of the announcement, indicating a measured response from the investment community.
TH International is part of a cohort of Western fast-food operators with aggressive expansion plans in China. The company’s joint venture partners include venture capital firm Cartesian Capital, internet giant Tencent, local retailer Wumart, and Restaurant Brands International (NYSE: QSR), the owner of the Tim Hortons and Popeyes brands. Its ambitious targets align with a broader trend of multinational chains targeting China’s growing middle class.
Despite its substantial store growth, TH International has yet to fully persuade investors of its long-term success in China. Since its backdoor listing using a special purpose acquisition company (SPAC) in 2022, the company’s stock has steadily declined, prompting questions about its ability to secure a foothold in the competitive market.
With a price-to-sales (P/S) ratio of 1.22, TH International lags behind its industry peers in valuation metrics. The company’s ongoing losses and the absence of significant institutional investor interest have contributed to its lower valuation, signaling a need for improved financial performance to attract long-term investor support.
The company’s recent financial results reflect the challenges of achieving profitability in a competitive market, with its revenue growth slowing to 42.7% year-on-year in the third quarter. The gradual transition to franchise partnerships has influenced revenue dynamics, impacting the company’s overall financial performance.
While the company’s net loss has narrowed, its path to profitability remains a focal point for investors seeking assurance amid China’s economic slowdown. The market’s subdued response to TH International’s stock performance underscores the need for sustainable growth and profitability in the company’s future endeavors.
TH International’s journey to capture the Chinese market echoes the experiences of other multinational brands, including KFC, McDonald’s, and Starbucks, each of which navigated challenges before achieving lasting success. As the company continues its expansion and adaptation to the evolving market landscape, investor sentiment is likely to hinge on its ability to demonstrate resilience and profitability in the competitive Chinese market.
As the company refines its expansion strategies and navigates macroeconomic headwinds in China, TH International seeks to establish a compelling narrative for investors, underpinned by sustainable growth, operational efficiency, and profitability. The company’s future direction will be pivotal in shaping investor sentiment and its ultimate success in China’s dynamic consumer market.
This article is from an external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.