Hotpot chain group Xiabuxiabu said Monday it expects a net profit of no less than 2 million yuan in the first half of 2023.

The latest: Hotpot chain group Xiabuxiabu Catering Management (China) Holdings Co. Ltd. (0520.HK) said Monday it expects a net profit of no less than 2 million yuan ($280,000) in the first half of 2023, reversing a loss of 280 million yuan in the same period last year.

Looking up: Its revenue jumped 32% to 2.86 billion yuan, driven by increased traffic to its restaurants from the lifting of control measures on the Covid epidemic in China, as well as an increase in the number of restaurants by 86 on the past 12 months to 1,094 at the end of June this year.

Take Note: The company said that, as consumption hasn’t picked up as expected, and in the face of the unfavorable consumer environment, its mid-to-high-end positioning brand “Coucou” has adopted several proactive marketing campaigns and special offers to maintain its market share.

Digging Deeper: Many of Xiabuxiabu’s restaurants were told to shut down or restrict their business hours during the Covid epidemic that began in 2020, but the need to keep paying rents and salaries pushed it to a net loss of 757 million yuan over the past two years. The company said it adjusted its structure and strategy in a timely manner. By negotiating rent waivers or reductions with landlords, coupled with the official relaxation of anti-epidemic policies, its net loss of the second half of 2022 was significantly reduced. Regarding the “post-epidemic” business outlook, Xiabuxiabu will actively open new small-shop model restaurants. With lower costs and good results, it can push forward the expansion of its restaurant network southward and accelerate the digitalization process, to satisfy demand for rapid development of the business.

Market Reaction: Xiabuxiabu shares dropped Tuesday morning and were down 4.2% to $4.38 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by A. Au

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