Following the release of its first interim earnings report since going public, XIAO NOODLES has announced another round of price cuts. Starting August 17, the company will reduce prices on select products across its nationwide store network to varying degrees. Simultaneously, it unveiled the "Red Bowl Charity" initiative, committing a fixed portion of profits to social responsibility programs. This move extends the company's price reduction strategy that has been in place since the beginning of the year.
During the first half of 2026, the average order value at XIAO NOODLES same-store locations dropped to RMB 27.7 from RMB 31.3 in the year-ago period, a decline exceeding 10%. Meanwhile, average daily orders per same-store rose to 401 from 372. The company views the order volume increase as validation of its pricing strategy. While lower prices have attracted more orders, they have not yet fully restored revenue at existing locations. In the first half of 2026, overall same-store sales still contracted by 4.3% year-over-year.
Nevertheless, rapid store expansion continued to drive robust growth in both overall revenue and profit. In the first six months, XIAO NOODLES generated revenue of RMB 939 million, up 33.6% year-over-year. Adjusted net profit reached RMB 73.06 million, a 40% increase, with the adjusted net margin improving to 7.8% from 7.4%. Compared to existing store performance, expansion remains the most direct growth driver for XIAO NOODLES during the period.
As of the end of June, XIAO NOODLES operated 550 stores, a 31.9% increase from 417 stores in the same period last year. This total includes 17 company-owned locations in Hong Kong and 2 in Singapore. Mainland company-owned stores remain concentrated in first-tier and new first-tier cities, reaching 390 locations by the end of June, with 42 stores in second-tier and lower-tier cities.
Delivery services emerged as another significant growth avenue. In the first half, delivery revenue reached RMB 242 million, accounting for 25.8% of total revenue, up from 18.3% in the same period last year. Despite the price cuts, XIAO NOODLES overall profit margin did not decline notably, largely due to cost structure changes driven by the mix of new stores. Whereas stores were previously concentrated in central business districts, the company is now gradually expanding into peripheral urban areas.
In the first half, rental expenses rose 25.6% year-over-year to RMB 159 million, but rent as a percentage of revenue fell to 16.9% from 18.0%. The company cited this shift directly as a reason for improved profitability in its interim report: peripheral locations carry lower rent, and as store scale expands, headquarters costs can be further diluted. However, other costs did not decline in tandem. Raw materials and consumables as a share of revenue increased to 31.8% from 31.4%, while employee costs rose to 23.6% from 22.6%. The larger delivery volume also brought higher platform fees.
Looking ahead, the operating logic behind XIAO NOODLES current pricing strategy is becoming clear: trade a lower average ticket for more orders, then sustain overall revenue and profit growth through continuous store openings, expansion into lower-rent areas, and headquarter cost dilution. The company intends to further scale this model. XIAO NOODLES expects to open 150 to 180 new restaurants in full-year 2026. As of August 10, it had already opened 84 stores this year, with an additional 93 restaurants in pre-opening preparation stages.
The key question going forward is whether continued order growth and new store expansion can ultimately push same-store sales back into positive territory as average ticket prices trend even lower.