Tims China Reports First Quarterly Results After Listing, Q3 Revenue Up 67.9%

This is an English adaptation of a FoodBud historical article originally published on November 30, 2022.

On November 30, Tims China released its financial results for the third quarter of 2022. Total net revenue reached RMB 306 million, up 67.9% year on year and the company’s highest quarterly revenue to date.

At company-operated stores, net revenue was RMB 290 million, up 67% year on year. Same-store sales growth was 7.5 percentage points. Rent and labor cost ratios declined sharply: rent fell to 12.5% of revenue, and labor costs fell to 22.8% of revenue. Adjusted EBITDA at the company-operated store level remained positive and improved, with a margin of 6.7%, up 4.1 percentage points from 2.6% in the same period last year.

Store Network and Members

Tims China opened 46 new stores in the third quarter. As of September 30, 2022, it had 486 net stores, including 454 company-operated stores and 32 franchised stores, across 27 cities in China. In October, the company announced the opening of its 500th store nationwide.

The company maintained an average pace of roughly one new store every two days during the quarter. By the end of September, it had opened 96 new stores in 2022. Store expansion slowed somewhat in the first half because of pandemic-related disruption, but recovered in the third quarter.

Registered members reached 8.862 million in Q3, up 85.8% year on year.

Cost Structure

At company-operated stores, food and packaging costs stayed stable at 33.3% of revenue, slightly lower than in Q3 2021. The company attributed this to its localized supply chain and inventory-loss management.

Rent as a share of revenue fell from 24.7% in Q3 2021 to 12.5%, the largest cost-ratio improvement. The article attributes this to stronger brand negotiating power with landlords and some post-pandemic rent reductions.

Labor costs fell from 34.3% of revenue in Q3 2021 to 22.8%, supported by intelligent scheduling, more detailed store operations management, and labor structure optimization. The company expected further benefits as scheduling systems improved and stores increased their use of part-time labor.

Adjusted EBITDA at the company-operated store level was about RMB 20 million in Q3, more than tripling year on year. The adjusted company-operated store EBITDA margin was 6.7%, up 4.1 percentage points from the prior-year period.

At headquarters level, cost ratios also improved. On a non-GAAP basis, general and administrative expenses fell from 27.1% of revenue in Q3 2021 to 15.8%. The article notes that while the ratio remained relatively high, revenue growth and scale effects were expected to create further room for improvement.

Delivery and Store Formats

Tims China’s delivery orders in Q3 2022 increased 111.1% year on year. The company’s mini-program-based self-delivery service was still a small share of orders but was gradually increasing, with potential to reduce costs over time.

To serve different consumption occasions, Tims China operated three main store formats: flagship stores, standard stores, and Tims Go. It also expanded external partnerships and new service formats to cover more coffee-consumption scenarios.

On September 7, 2022, Tims China and Easy Joy Coffee launched two RTD ready-to-drink coffee products in China, sold through Sinopec Easy Joy convenience stores. Their co-developed Tims Express shop-in-shop format had opened multiple locations in Beijing, Shanghai, and Suzhou. Management positioned Tims Express as an important strategic format, with more similar locations planned in the coming years.

Tims China also announced a partnership with Freshippo. The two companies planned to launch co-branded coffee products for exclusive sale through Freshippo’s online channels and offline stores, extending Tims China’s retail reach.

Menu Expansion

Tims China continued to emphasize its “coffee + warm food” product positioning. Following the reported success of a RMB 19.9 breakfast combo, the company was developing lunch combos and planned to launch lunch products by year-end to address lunch demand and broaden customer choice.

Note: Forward-looking store-format, cost-improvement, and product-launch plans are historical statements from the November 30, 2022 article.