TH International’s Expansion in China
TH International’s Ups and Downs in the Chinese Market

Written By Michael Gary Scott

TH International

Record Store Openings

TH International, the master franchisee for Tim Hortons and Popeyes in China, celebrated a milestone with the opening of its 10th Popeyes store in the Mainland market. The company reported its strongest-ever growth for new store openings in the last year’s fourth quarter, adding 156 new stores, which was more than the total for the previous three quarters combined.

Short of Expansion Goals

Despite the impressive growth, TH International fell noticeably short of hitting its target of 1,000 stores by the end of last year. In a mid-year announcement, the company had expressed its aim to reach the 1,000-store milestone but ultimately fell shy of the mark. The company will delve into the implications of this shortfall when it announces its fourth-quarter results later this year.

Investor Response

The latest announcement failed to significantly impact investor sentiment. The stock experienced minimal movement on the day of the announcement and has since decreased by approximately 3%. This lackluster response may be related to the economic headwinds affecting the company’s core Tim Hortons chain.

Challenges in China’s Economy

The slowdown in China’s economy has posed challenges for TH International’s aggressive expansion plans. The post-pandemic rebound anticipated by many has not materialized, leading to a pullback in consumer spending across various sectors, including lower-cost products like restaurant food.

Investor Skepticism

TH International has struggled to capture the interest of investors, experiencing a steady decline in its share value since its backdoor listing in 2022. The company’s price-to-sales (P/S) ratio of 1.22 trails behind its industry peers, as big institutional investors have yet to embrace the company’s story of success in the Chinese market.

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Path to Profitability

Despite the challenges, TH International is making progress towards profitability. Its adjusted store EBITDA and net loss have shown improvement, signaling a positive trajectory. The company aims to continue its expansion, especially with the Popeyes brand, despite the current investor caution.

Waiting for a Turnaround

Ultimately, larger investors are adopting a wait-and-see approach with TH International. They are looking for evidence of sustainable profitability and success with Popeyes in the Chinese market before fully embracing the company’s growth story.