FAST NEWS: Jiumaojiu Consolidates Business by Selling Unprofitable brand

The latest: Restaurant operator Jiumaojiu International Holdings Ltd. (9922.HK) announced Friday it has disposed of its 80.85% stake in Guangzhou Double Eggs Catering Co., Ltd., which manages the “Double Eggs” restaurant brand, for a consideration of 509,400 yuan ($75,800). Upon completion of the transaction, Guangzhou Double Eggs will no longer be an indirect non-wholly owned subsidiary of the company.

Looking up: The sale of “Double Eggs” restaurant brand will allow the company to focus on businesses with more growth potential, such as the “Tai Er” and “Jiu Mao Jiu” brand.

Take Note: The performance of “Double Eggs” has been unsatisfactory. As of the end of last year, the brand had six self-operated stores and 17 franchised stores, a decrease of 6 and 15 stores respectively, and its turnover only accounted for less than 0.7% of the company’s total revenue.

Digging Deeper: Founded in 2005, Jiumaojiu transformed from a traditional restaurant business into a chain operator in 2010, operating stores under the “Jiu Mao Jiu” brand. In 2015, it established the “Tai Er” brand targeting young diners by focusing on trendy “sauerkraut fish” served in a fashionable dining environment. Since then the chain has become the company’s main revenue source. Despite the continued impact of the Covid-19 pandemic on China’s dining industry, the number of “Tai Er” restaurants increased by 117 year-over-year to 350 at the end of last year, and revenue surged by 67.3% to 3.29 billion yuan, accounting for nearly 80% of the company’s overall revenue. That’s why the company’s business-consolidation measures to focus its resources on more-profitable brands make sense.

Market Reaction: The share price of Jiumaojiu opened up and then fell on Monday, closing 0.6% softer to HK$17.8 at the midday break. It now trades at the lower end of its 52-week range.

Translation by Jony Ho

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