More Restaurant Industry Woes In China: Haidilao Sees Up To $710 Mln Loss

Following Yum China and Starbucks, another big restaurant chain in China is reporting business trouble.

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

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

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

“In particular, in the second half of 2021, our restaurant operations were significantly affected by regional outbreaks and public health control measures around the world, resulting in a decline in the operating results of Haidilao restaurants in the second half of 2021 as compared to the same period in 2020. In 2021, the overseas restaurants suffered from heavier loss.”

Revenue is expected for the year to grow 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, collapsing from more than HK$80 per share in early 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 multiple waves of Delta variant outbreaks persisted throughout the fourth quarter of 2021 in mainland China, hurting business. Spun off from Yum! and run 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 story here.)

Starbucks meanwhile also earlier this month said China comparable store sales decreased 14% in the three months to Jan. 2 from a year earlier, driven by a 9% decline in average ticket and a 6% decline in transactions.

Haidilao co-founders Zhong Yong, Shi Yonghong, Shu Ping and Li Haiyan rank among the world’s billionaires from their Haidilao stakes.

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