Has the "price for volume" period ended? Tether International's profit margin recovers in Q1

The listed overseas business entity of Haidilao, Tehai International, has released its first quarterly financial report after a change in leadership.

In the first quarter, Tehai International achieved revenue of $226 million, a year-on-year increase of 14.2%; operating profit was $14 million, up 70.7% year-on-year; the operating profit margin rebounded to 6.2%, an increase of 2.1 percentage points compared to the same period in 2025.

However, improvements on the operating side have not been fully reflected in net profit.

During the period, net profit was $4.1 million, down about 65.9% from $11.9 million in the same period last year. The main reason was a $11.7 million increase in net exchange losses compared to the same period last year, mainly due to foreign exchange fluctuations, especially the depreciation of local currencies against the US dollar.

However, the profit pressure resulting from the “volume for price” strategy that Tehai International adopted earlier seems to be experiencing a stage of change.

In 2025, faced with pressure on customer traffic in the overseas dining market, Tehai International adopted a more proactive pricing strategy to maintain table turnover rates and the number of guest visits. At the same time, operating profit margin at the restaurant level declined, as actively offering discounts compressed profit margins.

In the first three quarters of 2025, per customer spending was $24.2, $24.3, and $24.6, respectively, rising to $25.4 in the fourth quarter.

Entering the first quarter of 2026, this trend continued, with Tehai International's average guest check reaching $25.3, up $1.1 year-on-year.

On the volume side, growth was also maintained. In the first quarter, the company's overall average table turnover rate reached 4.0 times/day, higher than 3.9 times/day in the same period last year; same-store sales reached $184 million, a year-on-year increase of 4%.

However, strictly speaking, the “volume for price” strategy has not completely ended.

Of the $1.1 year-on-year increase in guest check, about $0.8 came from exchange rate fluctuations, with endogenous price increases contributing about $0.3 after excluding this factor.

In other words, Tehai International has not clearly shifted to a strong price increase strategy, but is more cautiously correcting previous discount magnitudes.

Management continued this statement in the conference call: the company will continue to promote work related to “quality-price ratio,” including adjusting the menu structure and product combinations, conducting rationality checks on portion sizes and pricing, making it easier for consumers to perceive value.

This also better aligns with changes in the current overseas consumer environment.

Management stated that since the beginning of this year, the overseas consumer market has not deteriorated significantly, but customers have become more rational, and there are differences in performance between markets: North American customers are more concerned about value for money, Southeast Asian demand remains vibrant, Japanese and Korean customers are more sensitive to efficiency and social dissemination, and markets such as Australia, the UK, and the Middle East have their own consumer habits and pressure points.

By region, Southeast Asia remains Tehai International’s largest base. In the first quarter, the average table turnover rate in the Southeast Asian market rose from 3.7 times/day to 3.8 times/day; same-store sales grew by about 6.4% year-on-year.

East Asia performed even better, with the average turnover rate reaching 5.1 times/day, higher than the 5.0 times/day in the same period last year, and significantly ahead of the company’s overall level.

North America and other markets, however, are still under pressure. In North America, the average table turnover rate dropped from 4.0 times/day in the same period last year to 3.6 times/day, and the average daily revenue per restaurant fell from $22,200 to $21,000; in other markets, the average turnover rate also fell from 4.0 to 3.6 times/day.

Considering that labor, rent, and operating costs are higher in North America, Australia, the UK, the UAE and other markets, fluctuations in table turnover rates have a more pronounced impact on profit margins.

On the cost side, positive signals were also released.

In the first quarter, the cost of raw materials and consumables as a percentage of revenue dropped slightly from 34% to 33.9% year-on-year, and labor costs as a percentage fell from 35.3% to 34%. The decline in these two core cost ratios was a key reason for the rebound in operating profit margin from 4.1% to 6.2%.

For hot pot businesses, table turnover rate is directly related to efficiency per area, employee efficiency, food turnover, and fixed cost dilution. The operating leverage brought by revenue growth also helps the company dilute relatively rigid costs such as wages and rent.

But it is certain that Tehai International will not accelerate expansion in the short term.

At the beginning of April this year, the company clearly stated its annual plan and will maintain a “very cautious” attitude toward store expansion. In the first quarter, Tehai International only opened one new Haidilao restaurant in Southeast Asia, bringing the total number of stores worldwide to 127.