TH International Limited (NASDAQ: THCH), the exclusive operator of Tim Hortons coffee shops in China, reported unaudited financial results for the second quarter of 2026 on August 18, 2026. Total revenues fell 21.7% year-over-year to RMB273.4 million (USD40.3 million), while the net loss widened to RMB97.4 million (USD14.4 million) from RMB75.9 million in the same quarter of 2025.

Financial Performance

The revenue decline was primarily attributable to the closure of underperforming stores and a 17.8% drop in same-store sales growth for systemwide locations. System sales decreased 15.1% to RMB347.8 million (USD51.3 million). The decline in same-store sales was driven by a 16.3% drop in comparable transactions and a 1.5% decline in average comparable ticket size. Management cited significant reductions in subsidies from delivery aggregators, underspending in marketing, and discount controls as contributing factors.

Company-owned and operated store contribution, previously reported as adjusted store EBITDA, fell to RMB12.6 million (USD1.9 million) from RMB27.2 million, with the contribution margin contracting to 5.7% from 9.6%. Operating loss expanded to RMB58.1 million (USD8.6 million) compared to RMB47.8 million in Q2 2025. Adjusted corporate EBITDA turned negative at a loss of RMB21.0 million (USD3.1 million), down from a gain of RMB2.2 million in the prior year. The widening net loss was partly driven by a RMB34.9 million (USD5.1 million) loss from changes in fair value of convertible notes, compared to RMB23.4 million in Q2 2025.

*Derived from disclosed percentage changes.

Operational Updates

Tims China closed underperforming non-made-to-order (MTO) stores, resulting in a net closure of 13 such outlets, offset by the opening of 15 MTO stores for a net new store opening total of two. The number of company-owned and operated stores decreased from 566 to 544, while franchised stores increased from 449 to 484. Monthly average transacting customers fell to 2.85 million from 3.59 million in the same quarter of 2025.

Despite top-line pressure, customer engagement metrics showed strength. Registered loyalty club members reached 37.1 million as of June 30, 2026, representing a 41.7% year-over-year increase. Digital orders increased to 91.8% of total orders in Q2 2026, up from 90.4% in Q2 2025. The company launched 27 new products during the quarter, including 20 beverages and 7 food items, to strengthen its all-day dining proposition.

CEO Kwok Wah (John) Cheung, who joined in mid-June, emphasized a strategic focus on product innovation, operational excellence, and optimizing the store network. He stated the company is moving quickly to return the business to growth by focusing on core identity and guest experience.

Liquidity and Financing

As of June 30, 2026, cash and cash equivalents and restricted cash stood at RMB121.1 million (USD17.8 million), down from RMB129.7 million at December 31, 2025. The decrease was primarily due to cash disbursements on business operations, partially offset by additional bank borrowings.

In July 2026, the company successfully closed the initial tranche of USD15.8 million in additional senior secured convertible notes issued to Tim Hortons Restaurants International GmbH (THRI). This is part of a proposed USD55 million financing series. CFO Dong (Albert) Li noted that proceeds will drive innovation, marketing investments, and a balanced store network development strategy involving both company-owned and franchised stores.

What the Numbers Show

While operational restructuring through store closures reduced revenue, it also lowered food and packaging costs as a percentage of company-owned revenues from 30.1% to 28.3%. However, fixed cost pressures remained evident, with rental and property management fees rising as a percentage of revenues from 20.2% to 21.7%, and payroll costs increasing from 17.8% to 19.9%. This divergence suggests that while variable costs are being managed, fixed overheads are becoming a larger burden on a shrinking revenue base. Additionally, delivery costs as a percentage of revenue rose to 13.1% from 11.8%, reflecting an increase in delivery revenue share from 61.0% to 65.7%.

Strategic Outlook

Management plans to increase marketing spending in the second half of 2026, particularly starting from September for annual festivals, to drive customer traffic. The company aims to achieve corporate EBITDA break-even by optimizing cost structures and enhancing supply chain capabilities. CEO John Cheung outlined priorities including raising innovation standards, improving store economics, and expanding selectively in top-tier cities and high-traffic zones like transportation hubs and universities. The company also acknowledged competition from new entrants in the coffee market, emphasizing a strategy of delivering superior product value and experience.

TH International reported a deepening loss per share and a notable decline in sales in its latest quarterly results. The company posted losses of $(0.25) per share, compared to losses of $(0.17) per share in the same period last year, marking a 47.06% deterioration YoY. Sales also contracted, falling 17.29% YoY to $40.291 million from $48.715 million in the prior-year quarter.

Q2 financial performance

The following table summarises TH International's key financial metrics for the quarter against the prior-year comparable period.

Both the per-share loss and total sales figures reflect a weaker performance relative to the year-ago quarter. The loss per share widened from $(0.17) to $(0.25), while sales declined by more than $8 million on a YoY basis.