In recent years, CHLITINA-KY has faced a gradual slowdown in domestic demand in China, weakening new franchise interest. As of the end of August, the number of chain stores decreased by nearly 300 from the end of last year, totaling 4,067 stores. In response to this trend, the company shifted its management focus from “expansion” to “quality improvement”, prioritizing increased revenue per store. The results were evident in the second quarter, with revenue and operating profit both rising significantly quarter-over-quarter despite the challenging environment. With the peak season for core product sales approaching in the second half of the year, coupled with the launch of new flagship products, the company maintains an optimistic operational outlook.
As of August, CHLITINA-KY operated approximately 4,067 chain stores (including 5 directly-operated stores), down from 4,342 stores at the end of 2024, and down from a peak of 4,720 stores in 2021. The management team noted that each year, roughly 300–400 stores naturally exit the franchise system. This year, the decline was primarily due to weaker new franchise interest or inability to meet the group’s high standardization requirements. About 60–70% of departing franchisees remain in the beauty industry but choose not to follow the group’s standards.
To address this structural decline, CHLITINA-KY pivoted from expansion to quality improvement, aiming to enhance monthly store orders and operational efficiency, ensuring profitability for each store even under challenging conditions. Measures include full implementation of the “Digital-Physical-Omnichannel” (電物通) system, with headquarters diagnosing store-level issues and providing targeted support. Headquarters also manages content and promotions on local lifestyle platforms such as Dianping and Meituan, provides “operational support” services, strengthens professional training for beauticians and store owners, and introduces certified efficacy new product lines to boost repurchase rates and average transaction value.
Despite a decrease in franchise numbers, Q2 revenue grew nearly 20% quarter-over-quarter, with a consolidated gross margin of 81%. The core beauty franchise business maintained a high gross margin of approximately 84%, and operating profit rose 54% quarter-over-quarter, demonstrating the effectiveness of the strategic shift. In H2, the company will continue to leverage its digital systems and unified operational teams to provide store-level guidance, ensuring enhanced store capabilities and maintaining baseline profitability.
Although China’s domestic market is recovering steadily but slowly, its scale remains substantial, and demand for essential consumer products persists. CHLITINA-KY expects a strong performance in H2, entering the traditional peak season for core products starting in September, supported by new launches such as the “Royal Exosome Skincare Series” (御顏粹泌系列) featuring deer amniotic stem cell exosomes. The company remains optimistic about its operational performance.
Resource: 麗豐-KY「擴店」轉「提質」策略成效顯，下半年迎旺季展望樂觀
