Store Expansion Drives XIAO NOODLES' Performance Upward, Yet Average Transaction Value Drops by Over 10%

After releasing its first interim financial report since listing, XIAO NOODLES announced further price cuts.

Starting August 17, XIAO NOODLES stores nationwide will reduce prices on select products to varying degrees. Meanwhile, the company announced the launch of the "Red Bowl Public Welfare" initiative, allocating a fixed portion of profits to corporate social responsibility efforts.

This continues XIAO NOODLES' price reduction strategy implemented earlier this year.

In the first half of 2026, the average spending per order at same-store locations dropped from RMB 31.3 in the same period last year to RMB 27.7, a decline of over 10%. During the same period, the average daily number of orders per same store increased from 372 to 401.

The company views this order growth as evidence of the effectiveness of its price reduction strategy.

While lower prices have driven higher order volumes, they have not yet fully restored revenue at existing stores.

In the first half of 2026, overall same-store sales for XIAO NOODLES still declined by 4.3% year-on-year.

However, driven by rapid store expansion, the company's overall revenue and profit continued to grow at a robust pace.

In the first half of the year, XIAO NOODLES reported revenue of RMB 939 million, a year-on-year increase of 33.6%. Adjusted net profit reached RMB 73.06 million, up 40% year-on-year, while the adjusted net profit margin improved from 7.4% to 7.8%.

Compared to existing stores, store expansion remained the most direct source of growth for XIAO NOODLES in the first half of the year.

As of the end of June, XIAO NOODLES operated a total of 550 stores, representing a 31.9% increase from the 417 stores in the same period last year. This includes 17 directly operated stores in Hong Kong, China, and 2 directly operated stores in Singapore.

Directly operated stores in mainland China remain concentrated primarily in first-tier and new first-tier cities, reaching 390 locations by the end of June, with 42 stores in second-tier cities and below.

Food delivery has become another significant growth driver. In the first half of the year, XIAO NOODLES' food delivery revenue reached RMB 242 million, accounting for 25.8% of total revenue, compared to 18.3% in the same period last year.

Despite price reductions, XIAO NOODLES' overall profit margin did not decline significantly. A key reason lies in the cost structure changes brought about by new store locations.

Unlike previous strategies that focused more on downtown business districts, XIAO NOODLES is gradually expanding into peripheral urban areas.

In the first half of the year, the company's rental expenses increased by 25.6% year-on-year to RMB 159 million. However, rent as a percentage of revenue decreased from 18.0% to 16.9%.

In its interim report, the company cited this change as one of the reasons for improved profitability: lower rents in peripheral areas, combined with the dilution of headquarters costs as the store network expands.

However, other costs did not decrease correspondingly. In the first half of the year, raw materials and consumables as a percentage of revenue rose from 31.4% to 31.8%, while staff costs increased from 22.6% to 23.6%. The expansion of food delivery operations also led to higher platform fees.

Thus, the operational logic behind XIAO NOODLES' current round of price reductions is clear: exchanging lower average transaction values for higher order volumes, while maintaining overall revenue and profit growth through continuous store expansion, extending into lower-rent areas, and diluting headquarters costs.

The company plans to further scale this model. XIAO NOODLES expects to open 150 to 180 new restaurants in 2026. As of August 10, the company had already opened 84 new stores this year, with another 93 restaurants in pre-opening preparation stages.

Going forward, it will be worth observing whether further declines in average transaction value, coupled with order growth and new store expansion, can ultimately drive same-store sales back into positive territory.