HDL.US 9658.HK
June Yang, who is credited with steering Haidilao into profit after the pandemic, has moved to the CEO post at the hotpot chain’s international arm, Super Hi, two months after its U.S. IPO.

June Yang, who is credited with steering Haidilao into profit after the pandemic, has moved to the CEO post at the hotpot chain’s international arm, Super Hi, two months after its U.S. IPO

Key Takeaways:

  • Singapore-based Super Hi landed $4.46 million in the red in the first quarter, hurt by foreign exchange losses, after a net profit of $5.62 million in the same period a year earlier
  • The restaurant chain is targeting new international markets, using proceeds from its New York listing

 

By Fai Pui

Fresh from a U.S. IPO, the international arm of the Haidilao restaurant chain has a new boss to accelerate its global expansion, as competition heats up in the spicy hotpot business.

She may have a new job title, but she is a familiar face at Haidilao. June Yang, who famously started out as a waitress before working her way to the boardroom, has swapped her role as Haidilao CEO for the top job at the brand’s ambitious affiliate, Super Hi International Holding Ltd. (9658.HK; HDL.US).

The leadership shuffle comes after Super Hi, which made its Nasdaq debut in May, slipped into the red in the first quarter, squeezed by foreign exchange losses and higher operating costs.

Singapore-based Super Hi was hived off from Haidilao International Holding Ltd. (6862.HK) two years ago with a separate Hong Kong listing as Zhang Yong, the restaurant chain’s founder and chairman, pursued a dream of putting one-pot Sichuan dishes on the menu for diners around the world.

Super Hi’s subsequent Nasdaq IPO raised more than $50 million to fund a push beyond the chain’s main offshore base in Southeast Asia and its foothold in the United States and Europe. The stock initially surged 50% on its first day of trade, but the gains moderated to 14% by the close. Since then, Super Hi has dropped below its IPO price of $19.56 per share.

The chain’s international reach grew to 119 restaurants in the first quarter, with the opening of four new overseas outlets. But earnings released on June 18 showed Super Hi had dipped $4.46 million into the red in the first quarter, reversing a $5.62 million profit in the same period a year earlier. The company blamed the result on a $11.2 million hit mostly from currency losses linked to the strong dollar.

However, the company’s operating income for the first quarter rose 15.7% to about $180 million. Explaining the figures, the company painted a rosy picture of recovering international markets and growing traction for its brand of tasty hotpots. The company’s overall table turnover rate and same-store table turnover rate both rose to 3.9 times per day, compared with 3.3 times in the year-earlier period.

Although it posted a net loss, Super Hi logged a 9.7% rise in operating profit to $12.4 million. However, investors were concerned about a fall in profit margin, to 6.6% from 7% last year, caused by higher raw material and staff costs, lower government subsidies, and listing expenses. As the chain expanded, the cost of raw materials and consumables jumped 16.5% to $62.8 million, while staff costs surged 19.8% to $63.6 million.

Haidilao became famous for more than just its hotpot dishes in a steaming broth. It captured the public imagination with a range of quirky services, such as manicures, hair washes and dances by staff to hit songs. But a headlong dash to open new outlets backfired on the company when the Covid pandemic persisted, forcing a wave of restaurant closures and layoffs at the end of 2020.

When the pandemic was subsiding in the second half of 2022, the company began to reopen its restaurants. By the end of that year, when Yang had succeeded founder Zhang as CEO, Haidilao had turned its business around, posting an annual profit of 1.37 billion yuan, rebounding from a loss of 4.16 billion yuan ($570 million) in 2021. However, rivals have turned up the heat in China’s hotpot market, introducing similar dishes such as chaoshan beef and coconut chicken. As China’s economy struggled to recover from the pandemic, consumers also reined in their spending, sometimes opting for cheaper alternatives to the high-end Haidilao. The company looked overseas for growth opportunities.

New growth driver

With the focus shifting overseas, an unexpected set of leadership changes was announced on June 21, a few days after the first-quarter earnings from Super Hi.

Yang, who was credited with steering Haidilao into profit after the pandemic, stepped down as the company’s executive director and CEO to take the equivalent posts at Super Hi, replacing outgoing CEO Li Yu. As of July 1, she will be replaced in her old job at Haidilao by Gou Yiqun, previously deputy general manager and head of investment business.

Yang’s resume tells a compelling story. She joined Haidilao in 1995 as a waitress before taking the reins of a restaurant and later becoming a district and regional manager. She was promoted to chief operating officer in 2018 and was named executive director and deputy CEO in August 2021 to implement the new company strategies. Her rise through the ranks reached a peak in March 2022 when she replaced Zhang as CEO, although the founding chairman retained strategic power over Haidilao and its spin-off companies.

At Haidilao, Yang worked with Zhang to spearhead the brand’s entry into Singapore and the United States in 2012 and 2013, laying the foundation for its international profile. In its statement, Super Hi said Yang was tasked with further expanding the brand’s international customer base and penetrating new markets.

It looks as if Yang is expected to replicate the strategic success at Haidilao, whose net profit surged last year.

After the New York listing, Super Hi can draw on a cash pile of $200 million for its expansion efforts, says independent analyst Ivan Chow. He predicts the company will step up the pace of restaurant openings this year and next, enjoying some cost advantages as an international brand. However, the overseas market is also feeling the heat of competition, with rival offerings from the likes of hotpot brands Happy Lamp, Liuyishou and Xiabuxiabu (0520.HK).

Moreover, fiery Sichuan spices may be an acquired taste for some overseas diners, and demand for hotpot slackens during the summer heat. Chow expects long-term success will depend on how well the company can tweak its menus to suit local tastes across its international network.

Back in China, Haidilao has been adapting to the more challenging economic conditions by exploring budget options and launching a franchise model priced at 10 million yuan. Shifting to a franchise system can reduce the risks associated with self-owned restaurants and help to cut logistics and warehousing costs, Chow said, but the company will still have to work hard on marketing to attract customers in the fiercely contested market.

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