Haidilao sees up to $710 million in losses

After Yum China and Starbucks, another major restaurant chain in China is reporting business difficulties.

Haidilao International Holdings, the Chinese hotpot chain whose market cap of $14 billion ranks among the world’s most valuable restaurant companies, said today it could lose up to more than $710 million , or 4.5 billion yuan, for the calendar year 2021.

The loss will largely come from one-time write-offs and losses related to the closure and suspension of operations at more than 300 stores, the company said in a statement. (Click on here for more details.)

Haidilao, which has four billionaire co-founders, noted “the impacts on the operation of Haidilao’s restaurants due to the constantly changing and recurring global pandemic, the rapid expansion of the restaurant network in 2020 and 2021, as well as the problems internal management”.

“In particular, during the second half of 2021, our restaurant operations were significantly affected by regional epidemics and public health control measures around the world, resulting in lower operating results for Haidilao restaurants in the second half. 2021 compared to the same period in 2020. In 2021, overseas restaurants suffered heavier losses.

Revenue is expected to rise more than 40% from 2020 to 40 billion yuan.

Haidilao went public in Hong Kong in 2018 at HK$17.80 per share; it closed at HK$20.20 on Monday, rising from over HK$80 per share at the start of 2021. As of mid-2021, it had 1,597 restaurants, all but 106 located in mainland China.

Yum China, the operator of KFC and Pizza Hut restaurants, said earlier this month that multiple waves of Delta variant outbreaks persisted throughout the fourth quarter of 2021 in mainland China, hurting business. From Yum! and operated as an independent company since 2016, Yum China is the largest restaurant chain in China with more than 11,000 restaurants across the country as of December. (See the story here.)

Meanwhile, Starbucks also said earlier this month that same-store sales in China were down 14% in the three months to Jan. 2 from a year earlier, due to a decline. 9% of the average ticket and a 6% drop in transactions.

Haidilao co-founders Zhong Yong, Shi Yonghong, Shu Ping and Li Haiyan are among the world’s billionaires thanks to their holdings in Haidilao.

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Cecil N. Messick