Core Viewpoint - The Huangsha Aquatic Products Trading Market in Guangzhou is set to relocate to a new facility, the Huangsha Aquatic Center, which will officially open on September 8, 2025, marking a significant transition for the largest aquatic market in South China [1][3]. Group 1: Market Transition - The old market, established in 1994, continues to operate normally with merchants unaware of specific relocation dates, although the announcement has been made [2][3]. - Merchants in the old market express mixed feelings about the move, with some uncertain about the impact on their business and customer base [2][3]. - The relocation is part of a broader urban planning initiative aimed at reducing the environmental and traffic impact of the old market [3]. Group 2: New Market Features - The new market, located at 188 Sha Luo Long Wan Street, has been under development for five years and is nearing completion, with most facilities ready for operation [4][5]. - The new facility will cover approximately 110,000 square meters and aims to integrate trading, logistics, exhibition, e-commerce, and cultural tourism [5][6]. - Innovative features include a centralized cooling, oxygen supply, and seawater system, along with a digital management platform to enhance operational efficiency [5][6]. Group 3: Business Operations - The new market has achieved over 97% occupancy for wholesale operations, covering a full range of aquatic products, and is set to innovate in logistics and dining experiences [6]. - The market aims to become a new landmark for marine culture and tourism in Guangzhou, promoting the city's culinary identity [6].

Financial Data and Key Metrics Changes - Net revenue increased by 4.1% year over year to $314.9 million, and gross profit increased by 5.1% to $55.1 million [5][12] - Adjusted EBITDA rose by 31.1% year over year to $13.8 million, while net income surged by 117% to $500,000 [5][14] - Gross profit margin increased by 13 basis points to 17.5% [13] Business Line Data and Key Metrics Changes - The increase in net revenue was primarily driven by volume increases and improved pricing in the meat and seafood categories [12] - Distribution, selling, and administrative expenses increased by $1.2 million to $51 million, but as a percentage of net revenue, these expenses decreased from 16.5% to 16.2% [13] Market Data and Key Metrics Changes - The company observed lower exit velocity and foot traffic towards the end of Q2 and into Q3, impacting consumer spending [6][21] - The company noted that 99% of its customers are independently run restaurants, with a mix of takeout, dine-in, and buffet types [21] Company Strategy and Development Direction - The company is committed to capital investment and growing capacity, with a focus on digital transformation and infrastructure improvements [6][16] - M&A remains a core pillar of the growth strategy, with a focus on expanding geographic footprint and capturing operational synergies [10][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth strategy despite short-term uncertainties, emphasizing the importance of strategic investments [6][16] - The company anticipates a lower single-digit growth rate for 2025, around 2% to 2.5%, in line with industry averages [29] Other Important Information - The company successfully deployed a new ERP application across its network, which is expected to enhance efficiency and control [7][8] - The strategic facility enhancements are expected to create organic growth opportunities through expanded cross-selling capabilities [9] Q&A Session Summary Question: How is the Asian Specialty market faring in the current environment? - Management noted that foot traffic has been impacted by recent immigration policy changes, particularly affecting buffet restaurants [20][21] Question: How to prioritize strategic investment projects? - The company is focusing on organic growth through capacity investments and is also evaluating M&A opportunities, with most projects expected to be funded through cash flow [22][25] Question: What are the growth expectations for 2025? - Management expects a growth rate of around 2% to 2.5% for 2025, with significant organic growth opportunities identified over the next three to five years [29][30] Question: What are the tariff impacts on customers? - Management indicated that while tariffs are a concern, foot traffic and consumer spending are more significant factors affecting business volume [36][39] Question: What is the expected margin benefit from the ERP implementation? - Management stated that while it is difficult to quantify exact margin expansion, the goal is to achieve a 5% EBITDA margin over the next three to five years [47]

Financial Data and Key Metrics Changes - The company achieved record highs in revenue, operating profit, and operating profit margin for Q2 2025, with operating profit growing 14% to $304 million [10][31] - Same store sales growth turned positive at 1%, with system sales growth reaching 4%, showing a sequential improvement of two percentage points [9][28] - Restaurant margin improved by 60 basis points, and operating profit margin increased by 100 basis points year over year [10][31] Business Line Data and Key Metrics Changes - KFC achieved 5% system sales growth and a healthy restaurant margin, operating over 12,000 stores in more than 2,400 cities [10][11] - Pizza Hut sustained 2% same store sales growth, with a 17% increase in same store transactions, and improved margins through operational efficiency [11][24] - K Coffee Cafe contributed to incremental sales, with average cups sold increasing and a total of 1,300 locations nationwide [22][12] Market Data and Key Metrics Changes - Delivery sales accounted for around 45% of total sales mix, up from 38% in the previous year, driven by promotions and own channels [16][18] - The company opened 336 net new stores in Q2, with a total of 12,238 KFC stores and 3,864 Pizza Hut stores [21][26] - The franchise store mix for new openings was 41% for KFC and 26% for Pizza Hut, ahead of schedule [37] Company Strategy and Development Direction - The company is focused on operational efficiency and innovation, with initiatives like K Coffee Cafe and the Pizza Hut Wow model aimed at expanding market reach [47][68] - The company plans to achieve 1,600 to 1,800 net new store openings in 2025, with a solid pipeline for growth [37][36] - The company is committed to returning $3 billion to shareholders from 2025 through 2026, maintaining a healthy cash position of $2.8 billion [35][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year targets for 2025 despite complex market conditions, with a focus on maintaining margins and protecting price integrity [36][47] - The company anticipates steady same store sales levels year over year in the second half, while facing challenges from delivery platform competition [38][56] - Management highlighted the importance of balancing sales growth with margin protection, learning from past experiences in competitive environments [120][121] Other Important Information - The company is raising its 2025 target for K Coffee Cafe locations from 1,500 to 1,700 due to strong performance [22] - The company is committed to digitization initiatives, including AI, to drive growth and efficiency [44][45] - The average annual capital return is around 8% to 9% of market cap, with flexibility regarding the split of capital returns between years [35] Q&A Session Summary Question: Insights on delivery business growth and margin impact - Management acknowledged intense competition in the delivery space but emphasized a balanced approach to drive top-line growth while protecting margins [53][55] Question: New format store opening targets and profitability - Management confirmed over 20 Wow stores opened, with encouraging sales and margin levels, but did not provide specific opening targets for the new model [66][71] Question: Potential ultimate goals for Pizza Hut's margins - Management indicated that mid to long-term improvements in Pizza Hut's margins are expected, with potential to reach levels closer to KFC [80][82] Question: Impact of delivery platform subsidies on margins - Management noted that larger brands like Yum China enjoy favorable subsidy arrangements, minimizing the impact on margins [87][89] Question: Changes in average check trends at KFC - Management explained that the average check at KFC was positively impacted by a higher delivery mix, but a downward trend is expected in the second half due to smaller orders [95][96] Question: CapEx guidance and future trends - Management lowered CapEx guidance due to reduced CapEx per store, indicating a stable trend for future years [100][105] Question: Franchise store opening decisions - Management clarified that franchise stores are incremental and strategically opened in lower-tier cities and high-traffic locations [110][111] Question: Competitive environment and margin preservation - Management reiterated the importance of maintaining price integrity and not sacrificing margins for sales growth amid competitive pressures [120][121]

Inflation and Deflation Trends - Industry experts predict a new inflation cycle in China due to M2 scale reaching 326.06 trillion yuan, which is double the GDP, but currently, deflation is observed with April CPI rising only 0.3% [1] - From June 2025, five major price drops are anticipated in China [3] Real Estate Market - Since 2022, housing prices have been on a downward trend, with cities like Tianjin and Shijiazhuang experiencing declines, and major cities like Shanghai seeing significant adjustments, with prices dropping from 95,000 yuan per square meter to 65,000 yuan, a decrease of over 30% [5] - By the second half of 2025, housing price differentiation is expected, with second and third-tier cities slowing their decline while first-tier cities like Shanghai and Shenzhen may experience further drops [5] Seafood Prices - Seafood prices are becoming more affordable, with prices for king crabs dropping below 200 yuan each and salmon prices decreasing by 40%, while shrimp prices fell from 38 yuan per jin to 28 yuan per jin [7] - The decline in seafood prices is attributed to consumer hesitance following Japan's nuclear wastewater discharge, leading to reduced demand despite no contamination in domestic seafood [7] Automotive Market - A price reduction trend is observed in the domestic automotive market, with mid-range cars dropping by 15,000 to 20,000 yuan and luxury imports seeing reductions up to 100,000 yuan [9] - Factors contributing to the decline include an influx of new energy vehicles, increased competition from tech companies like Huawei and Xiaomi, and reduced consumer purchasing power [9] Home Appliance Prices - Home appliance prices are expected to adjust downwards by 10% to 15% for items like refrigerators, TVs, and air conditioners by 2025 [12] - The rapid technological advancement in appliances and decreased consumer spending due to lower incomes are driving the need for discounts and promotions to clear inventory [12] Pork Prices - Pork prices are decreasing, with supermarket prices dropping from 26-28 yuan per jin to 18-20 yuan per jin, and further declines are expected [13] - The price drop is due to overproduction from previous years' high prices attracting investment in pig farming and a shift in consumer preference towards healthier meat options [13]

Financial Data and Key Metrics Changes - Net revenue increased by 0.9% year over year to $298.4 million from $295.7 million in the prior year quarter [12] - Adjusted EBITDA increased by 12.3% year over year to $9.8 million from $8.7 million [15] - Gross profit increased by 1.1% to $51 million compared to $50.4 million in the same period in 2024 [12] - Operating income improved to $1.2 million from an operating loss of $0.1 million in the prior year quarter [14] - Net loss increased to $1.5 million from a net loss of $0.6 million in the prior year quarter, primarily due to unfavorable changes in interest rate swaps [14] Business Line Data and Key Metrics Changes - The increase in net revenue was primarily driven by volume increases and improved pricing in commodity, meat, poultry, and seafood categories [12] - Gross profit margin remained consistent at 17.1% compared to the same period in 2024 [13] - Distribution, selling, and administrative expenses decreased by $0.7 million to $49.7 million due to cost optimization efforts [13] Market Data and Key Metrics Changes - The industry continues to face macro headwinds, particularly due to new tariff policies and supply chain disruptions [6] - The company is actively diversifying its supplier base and exploring alternative sourcing strategies to mitigate these challenges [6] Company Strategy and Development Direction - The company is focused on executing comprehensive transformation initiatives, with 2025 being a year of strategic investment [16] - Investments in digital transformation and infrastructure are aimed at driving organic growth and complementing expansion with targeted M&A initiatives [16] - The company aims to optimize its distribution network and enhance its operational capabilities through strategic facility enhancements [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance and long-term plans despite short-term uncertainties [5][16] - The successful implementation of a new ERP application is expected to improve efficiency and decision-making across operations [7] - The company remains optimistic about M&A opportunities in 2025 and beyond, focusing on expanding its geographic footprint and enhancing product capabilities [10] Other Important Information - The company launched a new e-commerce platform designed specifically for food service customers, enhancing its distribution capabilities [8] - The strategic facility enhancement initiatives are on track, with renovations at the Charlotte distribution center expected to be completed by the end of Q2 2025 [9] Q&A Session Summary - No specific questions or answers were provided in the content regarding the Q&A session.