“Science and Technology Innovation Board Daily”, August 29 (Reporter Xu Cihao). Recently, Nai Xue's tea released its 2024 interim results report as of June 30, 2024.

Financial reports show that in the first half of 2024, Nai Xue's tea revenue fell 1.9% from 2.594 billion yuan in the same period last year to 2.544 billion yuan, and adjusted net profit changed from a profit of 70.2 million yuan in the same period last year to a loss of 0.437 billion yuan.

The operating profit of direct-run stores fell 65.1% year-on-year to 0.165 billion yuan, and the operating profit margin of direct-managed stores was 7.8%, down 12.3 percentage points from the same period last year; net operating cash fell 73.3% to 0.103 billion yuan from 0.388 billion yuan in the same period last year, and net cash from operating activities fell 73.3% to 0.104 billion yuan per person from 0.388 billion yuan last year.

It is worth noting that although Nai Xue's tea has begun to change its business strategy, and since the second half of last year, it has opened franchise licenses and expanded stores to improve performance, the results have been average.

Zhao Lin, chairman of Nai Xue's Tea, said at the earnings conference today (28th) that although the number of directly-managed stores was raised last year and the conditions for joining were relaxed, after a period of operation, he realized that it was not possible to blindly sink, but rather to open one store and develop steadily.

The performance of the same stores in Beijing and Shanghai was poor

By business, the revenue of Nai Xue's direct tea stores declined during the reporting period. The share of total revenue fell from 90.8% in the same period last year to 82.7% in the first half of this year; revenue from other businesses such as franchising rose from 3.2% in the same period last year to 10.5% this year.

Specifically, revenue contributed by Nai Xue's direct tea stores decreased by 8.1% to 2.104 billion yuan from 2.354 billion yuan in the same period last year; revenue contributed by bottled beverages increased 0.8% to 0.172 billion yuan from 0.157 billion yuan in the same period last year; revenue from the franchise business, as well as revenue contributed by retail products such as tea gift boxes, holiday limited gift boxes, and souvenirs, increased 7.3% to 0.267 from 0.185 billion yuan in the same period last year billion yuan.

Since this year, the overall price band of new tea brands has continued to drop. According to the “2024 Research and Analysis Report on the Trend of New Tea Drinks Explosion in China”, 80% of consumers choose products under 15 yuan, and less than 4% buy single tea products worth 20 yuan or more. The continuous decline in Nai Xue's operating profit margin also reflects this.

Financial reports show that the operating profit margin of Nai Xue's direct-run stores in the first half of this year was 7.8%, compared to 20% in the same period last year; the average sales value of each order fell 15.12% to 27.5 yuan from 32.4 yuan in the same period last year; and the average number of orders per tea store fell 27% to 265 from 363 yuan in the same period last year.

In terms of same-store performance, overall, the Shanghai and Beijing markets performed relatively poorly.

Specifically, the number of same stores in Shanghai was 67. The average daily sales of a single store in the first half of this year was 7,800 yuan, with an operating profit margin of 2%. The average daily sales of a single store in the same period last year was 12,400 yuan, and the operating profit margin was 17.1%; the number of same stores in Beijing was 55, with an average daily sales of 8,100 yuan, operating margin of 1.5%. The average daily sales of a single store in the same period last year was 12,800 yuan. The operating profit margin was 12.8%

“The price war made Nayuki's tea days even more sad.” Chinese food industry analyst Zhu Danpeng said in an interview with the “Science and Technology Innovation Board Daily” reporter that commercial rents in Beijing and Shanghai are particularly expensive. In a situation where overall sales are poor, the overall gross margin of Nai Xue's tea big store model is low.

Rational development of franchise stores and direct-run stores

Nai Xue's tea stated in its semi-annual report that it will steadily advance incremental business, including franchising and overseas expansion.

In terms of franchising, financial reports show that as of June 30, 2024, Nai Xue's Tea has opened a total of 297 franchise stores.

Notably, Nai Xue's tea was opened for franchise on July 20, 2023. In almost a year, Nai Xue opened about 300 new stores.

Zhao Lin, chairman of Nai Xue's Tea, said at today's earnings conference that starting to join rationally this year, Nai Xue's tea party will make adjustments to the franchisee's maturity and level of self-management. Judging from now on, regardless of whether a franchisee joins Nai Xue's tea, the company will be very rational and careful, and then slowly develop franchise stores and direct-run stores.

On August 23, Nai Xue's overseas flagship tea store opened in Thailand. The three-day revenue was nearly 1 million baht, setting a record high for overseas stores.

Peng Xin, executive director and general manager of Nai Xue's Tea, said at today's earnings conference in response to investors' concerns about overseas market developments, that in the future, Nai Xue will continue to improve quality and brand impression, and develop overseas markets in a relatively steady manner.

Peng Xin explained that the recently opened Thai store is located in the largest shopping center in the region, with an area of 200 square meters. It uses a combination of tea and baking to build a brand. “Looking at it now, this store is very popular with local consumers.”