Recently, XIABUXIABU (0520.HK) disclosed its profit forecast for the first half of 2025, with the company expecting to achieve revenue of 1.9 billion RMB, representing a decrease of approximately 18.9% compared to the same period last year. The company is projected to record a net loss of approximately 80 million to 100 million RMB for the first half. Although the company's loss margin has narrowed compared to the same period last year, it still failed to achieve a turnaround in performance. From 2021 to the first half of this year, XIABUXIABU has accumulated losses exceeding 1.3 billion RMB.

XIABUXIABU's loss reduction in the first half was mainly attributed to cost optimization, while overall revenue growth remained weak. In 2016, XIABUXIABU attempted to transform from affordable fast dining to the mid-to-high-end market by launching the sub-brand "Coucoude" and increasing the average spending per customer for its main brand. The company's revenue peaked in 2021, but has since experienced continued volatility and decline. This is due to both external environmental pressures from changes in consumption patterns in the post-pandemic era and the lingering aftereffects of the company's underwhelming high-end transformation.

01. From "Growth Champion" to "Loss Black Hole"

2021 marked the beginning of XIABUXIABU's performance losses. That year, impacted by the pandemic, domestic restaurant companies faced operational pressure, and XIABUXIABU was no exception. The company closed 230 loss-making XIABUXIABU restaurants throughout the year. The large-scale store closure wave, combined with continued declining performance at some restaurants, ultimately resulted in the company's net profit loss of 293 million RMB in 2021.

That year, XIABUXIABU restaurants' revenue growth also showed signs of fatigue, increasing by less than 1% compared to the same period last year. In contrast, the company's mid-to-high-end hotpot brand "Coucoude" restaurants saw revenue surge approximately 39% year-on-year to 2.353 billion RMB. Thanks to Coucoude's strong contribution to overall revenue, XIABUXIABU achieved revenue of 6.188 billion RMB that year, setting a new revenue record since its 2014 IPO.

Unlike the main brand "XIABUXIABU" which focuses on value-for-money, Coucoude targets the new middle class, with restaurant locations primarily in first and second-tier cities. Additionally, due to Coucoude's strong revenue growth in 2021, the company decided to expand against market trends despite external environmental pressures. However, this decision also laid hidden dangers for the company's losses in subsequent years.

In 2022, the company opened 44 new Coucoude restaurants, exceeding the 41 new XIABUXIABU brand restaurants opened in the same period. Meanwhile, Coucoude restaurants' average consumption per person increased from 140.6 RMB to 150.9 RMB compared to the previous year. However, the brand's revenue declined approximately 6.29% year-on-year to 2.205 billion RMB. Net revenue in first-tier and second-tier cities, where Coucoude restaurants are primarily located, declined 17.79% and 3.25% year-on-year respectively. Additionally, Coucoude restaurants' table turnover rate showed significant decline, dropping from 2.5 to 1.9 compared to the previous year.

In 2023, Coucoude restaurant revenue briefly recovered, increasing 15.89% year-on-year to 2.618 billion RMB. However, the consumption downgrade environment impacted Coucoude's business, resulting in a net loss of 98.378 million RMB. In 2023, some of Coucoude restaurants' operational data showed obvious pressure, with same-store sales declining 9.7% year-on-year, including 11.7% and 11.9% declines in first-tier and second-tier cities respectively.

By 2024, affected by intensified restaurant market competition and continued weak consumption, Coucoude restaurants not only saw revenue plummet 26.55% year-on-year to 1.948 billion RMB, but losses reached 353 million RMB, ultimately causing XIABUXIABU's full-year loss to exceed 400 million RMB.

02. Both Brands Lose Momentum

In the first half of this year, XIABUXIABU achieved loss reduction through cost optimization. Store closures remain one of the important means of cost optimization. From 2021 to 2024, the company closed 229, 81, 99, and 138 XIABUXIABU restaurants respectively. Except for a net increase of 32 XIABUXIABU restaurants in 2023, the company saw net decreases of 220, 40, and 73 restaurants in other periods respectively.

This series of adjustments reflects the main brand "XIABUXIABU's" long-term struggle with store structure optimization. As new stores failed to effectively offset the impact of closures, restaurant scale continued to shrink, with revenue decline being particularly evident: the brand's revenue was 3.497 billion RMB at the end of 2021, shrinking to 2.627 billion RMB by the end of 2024, showing significant scale reduction in just three years.

The deeper issue lies in weakening brand appeal. XIABUXIABU once won the market with high value-for-money "single-person dining" hotpot, but this core advantage has gradually faded in recent years. On one hand, cost-driven price increases have loosened its value-for-money label; on the other hand, although the company's average consumption per person decreased from 62.5 RMB in 2021 to 54.8 RMB in 2024 in an attempt to win back customers, this failed to drive substantial improvement in table turnover rates—this indicator only increased slightly from 2.3 times per day in 2021 to 2.5 times per day in 2024. This reflects that the brand's attractiveness to consumers has not significantly strengthened, and simple price adjustments have not truly resolved the core issue of declining market recognition.

Meanwhile, Coucoude restaurants' expansion pace has significantly slowed, while store closure scale has rapidly increased. From 2022 to 2024, the company opened 44, 48, and 13 new Coucoude restaurants respectively, while closures showed significant growth: 3, 15, and 73 respectively, with Coucoude restaurants showing negative growth for the first time in 2024.

Notably, according to the company's previous plans, Coucoude restaurants were to open 74 and 26 new locations in mainland China in 2023 and 2024 respectively. However, actual expansion progress fell far short of expectations, reflecting that the brand's expansion strategy has significantly contracted.

Additionally, Coucoude restaurants have also been reducing average spending per customer in recent years, with average consumption per person declining from 140.6 RMB in 2021 to 123.5 RMB in 2024. However, its 2024 average consumption per person remains significantly higher than Haidilao's 97.5 RMB in the same year. From an operational efficiency perspective, as of the end of 2024, Coucoude restaurants' table turnover rate was only 1.6 times per day, not only significantly lower than Haidilao's 4.1 times per day, but also lagging behind Banu Hotpot's 3.2 times per day, which has higher average consumption (142 RMB).

Affected by weak overall performance in recent years, the company's stock price has fallen more than 90% since 2021, with a decline of over 20% this year alone.