Super Hi International Holding Ltd

HKEX:9658

Q4-2024 Earnings Call

[Operator]

Dear investors and analysts, hello. Thank you for joining the 2024 fourth quarter and full year performance call of Super Hi International today. The company management participating in this call are Executive Director and CEO, Ms. Yang Lijuan; and Finance Director and Board Secretary, Ms. Qu Cong.

Today's conference call may include forward-looking statements about strategy, business plans and performance outlook. Management's views are current as of today. For details, refer to the latest safe harbor statement in the evening's press release. The call will be conducted in Chinese with simultaneous English translation provided by an external agency. In case of discrepancies, refer to the Chinese content. Presentation materials are available on the company's Investor Relations page.

Next, we're going to invite Ms. Yang Lijuan, Executive Director and CEO of Super Hi International, to present the company's performance for the fourth quarter of 2024.

[Lijuan Yang, executive]

Great. Thank you. Hello, investors and analysts. I am Yang Lijuan, Executive Director and CEO of Super Hi International. I would like to introduce the company's performance in the fourth quarter and the full year of 2024.

We insisted on implementing the 3 tables management and improving the 4 color cards capabilities. Combined with the factors of the year-end holidays, we achieved good results in the fourth quarter. Revenue was USD 209 million, an increase of 10.4% year-over-year. The average table turnover rate of Haidilao hot pot restaurants was 3.9 rounds, and same-store sales growth was 4.2%. The company's operating profit margin was 8.4%, an increase of 2 percentage points year-over-year.

In 2024, we opened 10 new stores. The table turnover rate increased to 3.8 rounds, up 0.3 year-on-year. Total revenue grew by 13.4% with same-store sales of Haidilao hot pot restaurants rising by 7.1%. Our operating efficiency improved profit, leading to a restaurant-level operating profit margin of 10.1%, up 1.1 percentage points year-over-year and a 23.7% increase in company operating profit. Despite overseas challenges, our company still demonstrated strong resilience.

Next, I'll share our ongoing efforts in business improvement. First, we engaged both employees and customers. In the fourth quarter, we rigorously implemented the 3 tables management tool and the 4 color cards performance review tool, emphasizing accuracy and excellence. We identified shortcomings in leadership regarding employee growth, welfare, compensation and care. Therefore, besides the aligned interest incentive scheme, we also improved our systems and tools to enhance cohesion among diverse employees and foster material and spiritual connections. This really helped employees understand the corporate value of changing destiny with your own hands and make effective plans for their career growth.

In addition to that, we enhanced customer engagement by creating various dining experiences like birthday celebrations, family get-togethers and meals with friends. Introducing exclusive account managers strengthened employee customer connections, allowing teams to efficiently attract the customers and provide diverse services. And this method has incentivized a lot of our employees to provide better services with high quality.

Thanks to our progress in engaging employees and customers, we can now implement our dual management store and multi-management store policies. Currently, we have nearly 20 outstanding managers who have successfully taken on double or multiple management roles for different stores. These managers not only oversee a greater number of stores with their exceptional management skills, but they also play a key role in developing a talent training pipeline.

Number two, by concentrating on enhancing customer experience, we persisted in optimizing our product services and cost effectiveness to establish a distinctive identity for Haidilao. In 2024, we launched over 1,000 new products globally. Highlights include Laopai beef in Singapore, fresh-cut [ Dalong ] beef in the U.K. and fish and shrimp in the U.S., all well received by customers. Using market insight, we developed a system that assess click rate, coverage and gross profit margin, optimizing our offerings and improving our supply chain.

In 2024, we improved our research, development and quality control of the product. We incorporated raw material traceability into production standards, enhanced supplier grading and tightened ingredient quality checks. Each supply chain segment can intercept unqualified products, promoting accountability and ensuring higher-quality dishes for our customers.

Regarding services, we focused on expanding our services and building emotional connections with customers. For example, in some Malaysian and Canadian stores, we hired DJs for late-night hours, improved lighting and atmosphere and introduced snacks and drinks for late-night cravings. We also piloted a nightclub-style decor in selected stores to create a diverse environment. In Q4, 2 celebrity collaboration events in South Korea were organized, which drew local fans' attention, increasing customer traffic and sales.

Alongside enhancing the dine-in experience, we are also placing greater emphasis on taking -- on takeaway options. We've introduced a range of quick-serve foods like spicy hot pots, rice bowls and pasta across various countries' takeaway platforms. In 2024, our takeaway revenue saw a 15.3% year-over-year increase, effectively meeting customer needs and bolstering our revenue-generating capabilities.

When it comes to cost effectiveness, to maintain a high standard, country heads actually classify stores by local consumption, performance and demographics. They allocated budgets to reward customers through better shopping environment, product quality, discounts and surprises, aiming to build long-term loyalty efficiently. Through these initiatives, our stores across various countries and cities were able to better align with local conditions concerning products, experiences, environment and cost effectiveness. We remain devoted to providing an exceptional Haidilao experience in every location.

Number three, we encourage our company to improve learning for better management skills and techniques to address store challenges. In Q4, we enhanced member experience through digital solutions, analyzing consumer data to boost engagement and visit rates. At the same time, we effectively waken up those dormant members. Haidilao's overseas membership exceeded 6 million by the end of 2024. Our new digital dashboard that we launched in October last year provided visit reminders and foster connections with customers on special occasions such as on birthdays and anniversaries, increasing brand awareness.

When it comes to store management, in order to enhance the overall level and quality, we've engaged a reputable management consulting firm. They utilized one store as a pilot project to teach our grassroot employees how to interpret and utilize management and operational reports. This approach empowers everyone to take on an operator's role, fostering a more streamlined management structure.

When it comes to our supply chain management, we enhanced our central kitchens and boosted production capacity to expand export channels and strengthen suppliers' negotiations. Our focus was on Southeast Asia and will be on Southeast Asia using our overseas stores to create supply benefits.

Number four, when it comes to store opening, looking back in 2024, we opened 10 Haidilao restaurants across 7 countries: Canada, South Korea, Malaysia, the Philippines, Indonesia, Thailand and Cambodia. Concurrently, we optimized our store network layout and strategically timed our adjustments. We closed 3 stores in Indonesia and Singapore in 2024 due to expired leases and also our proactive adjustments. As of the end of 2024, we achieved a net increase of 7 Haidilao stores, bringing our total store count to 122 operational locations. Globally speaking, we consistently implemented a bottom-up strategy with country managers leading the way in opening new stores. To date, we have signed contracts for over 10 new stores, and more than 10 stores have progressed to the promotional phase.

Number five, in 2024, we launched the red Pomegranate initiative, a significant strategy to foster innovation. We've created an incentive system for our internal employees with strong management skills and innovative mindset. Additionally, we've assembled a dedicated support team to assist with market research, product development and management operations. We've also explored various business models, including barbecue and hot pot with prepared ingredients and a range of fast food options.

For example, barbecue is a widely adopted business model around the world. Our focus was on selecting locations near high-quality existing stores. This strategy aims to ensure a better customer traffic and allowed us to implement a dual-channel approach for multiple brands, which enhance efficiency. Currently, we've signed contracts to prepare for the opening of 2 barbecue restaurants in Southeast Asia.

Additionally, most stores are assessing and exploring opportunities to introduce barbecue or other secondary brands in the area. All of the red Pomegranate projects required national managers to identify high-quality sites and tracks from the grassroot level. Headquarters will review these based on factors such as project quality and operating conditions.

Our future objective is to become a prominent global integrated restaurant group. To reach this goal, we'll concentrate on improving 5 critical areas: customer experience, restaurant network, operational efficiency, new business ventures and the capabilities of our headquarters.

That was my introduction of the business performance. Now I'll hand it over to Qu Cong to discuss the financials.

[Cong Qu, executive]

Thank you, Ms. Yang. I'll update you on the financials. Our total revenue for 2024 was USD 778.3 million, a 13.4% increase year-over-year. Our restaurants operating revenue reached USD 747.3 million, 96% of total revenue, up 13% from 2023. Takeaway revenue rose 15.3% to USD 11.3 million, and other business revenue grew by 27.9% to USD 197,000 due to the popularity of our hot pot seasoning and branded foods. Our restaurant turnover rate increased to 3.8 rounds per day, up 0.3 rounds per day from 2023, boosting revenue and efficiency.

In 2024, raw material costs made up 33.1% of our total revenue. Optimizing and integrating the supply chain increased the gross profit margin by 1.1 percentage points. The ratio of employee cost to revenue was 33.3%, up about 0.4 percentage points compared to the previous year. Following the statutory salary increases during Q1 and Q2, we continue exploring incentive mechanisms, enabling us to achieve salary growth for frontline employees while controlling the overall increase in employee costs, thereby successfully enhancing labor efficiency.

Rent and utility expenses was 2.6% and 3.6% of revenue. Depreciation and amortization decreased by 1 percentage point due to increased revenue compared to the last year. Other operating expenses were 9.9% of revenue, consistent with last year. The measures mentioned increased our restaurants operating profit margin by 1.1 percentage points to 10.1% from last year.

Despite a challenging environment in 2024, unrealized foreign exchange losses of USD 19.7 million caused our net profit to be USD 3.86 million less than last year with a profit margin of 2.8%. Adjusting for nonoperating factors like foreign exchange, our operating profit margin in 2024 was 6.8%, beating the target that we set last year.

Now that was the overview of the full year performance. I would like to focus now on the Q4. The company achieved total revenue of USD 209 million, a 10.4% year-on-year increase. The growth was due to more stores, increased customer traffic and table turnover rate and a higher average customer spending. The Haidilao Restaurants operating income was USD 199 million, making up 95.7% of the company's total revenue with a 10% increase year-over-year. Takeaway revenue reached USD 3.5 million, up 12.9% year-over-year, while other business revenue was USD 5.4 million, rising 22.7% year-over-year. This growth was largely due to the increase in popularity.

Now let's look at the quarter's income statement. In Q4, raw material costs USD 67.684 million with a gross profit margin of 67.6%, up by 2.4 percentage points year-over-year due to improved global supply chain management, better cost control, optimized production and reduced waste. Employee cost was USD 67 million, accounting for 32.2% of revenue, which is a slight decrease of 0.2 percentage points year-over-year. Rental expenses was USD 5.6 million, accounted for 2.7% of total revenue, primarily due to an increase in revenue. Water and electricity expenses totaled USD 7.1 million or 3.4% of total revenue, down 0.1 percentage point.

Depreciation and amortization were USD 21.5 million, 10.3% of revenue, up 0.3 percentage points year-over-year, mainly due to increase in newly signed stores and corresponding depreciation expenses. Travel and other operating expenses totaled USD 222.11 million, accounting for 10.6% of revenue, consistent year-over-year.

The company's operating profit in Q4 was approximately USD 17.5 million, an increase of USD 5.3 million or 44.5% year-over-year. The operating profit margin in Q4 was 8.4%, an increase of 2 percentage points from 6.4% year-over-year. The increase was primarily due to revenue growth driven by increased table turnover rate and average customer spending and improved operational efficiency.

Q4, the company's after-tax loss was USD 11.6 million, largely due to exchange rate fluctuations, resulting in exchange losses of approximately USD 26 million, which is a historic high. In Q4, our operating cash flow was USD 31 million, USD 600,000 higher than the same period last year and stable compared to the previous quarter. By the end of last year, we had $255 million in cash and cash equivalents, a 66.7% increase from the end of 2023, largely due to improved operations and unused Nasdaq listing funds since our IPOs in the U.S.

In Q4, we served about 8 million customers, up 9.6% from 2023. The average table turnover rate was 3.9 rounds per day, unchanged from last year. Average customer spending increased by $0.30 to $25 due to menu adjustment and marketing activities offering more choices. The average daily revenue per restaurant rose by $1,000 to $18,700.

Performance in most regions has improved compared to last year with East Asia experiencing notable gains in table turnover rate. East Asia showed outstanding performance this quarter. The turnover rate was 4.8, up 0.7 rounds from last year, and restaurant revenue increased by 16.4%. The turnover rate rose steadily, showing double-digit growth, and it's mainly driven by the average spending and higher efficiency of operation.

North America's Q4 table turnover rate was 4.2 rounds, down 0.1 rounds from last year. The average spending per guest dropped by $2.60 due to ongoing pricing reviews and adjustment. Other regions, the table turnover rate in other regions in Q4 was 4.2 rounds. The average spending per guest decreased by $1.6 year-over-year, primarily due to an increase in the number of people per table in Australia.

Southeast Asia restaurant revenue increased by 7.7% this quarter with 5.4 million customers signing. However, due to the underperformance of new stores in Cambodia and the Philippines due to the macro environment, the overall turnover rate decreased slightly by 0.1 rounds to 3.7 rounds year-over-year. In Southeast Asia, the average spending per customer rose to $19.50, up by $0.40 from last year due to improved marketing attracting a more diverse customer base.

In Q4, 105 same-store restaurants had an average turnover rate of 4 rounds per day, matching last year's performance. And the same-store revenue growth was 4.2%. Regional performance mirrored the overall trend.

That's all of our prepared remarks. Now we are ready for your questions.

[Operator]

[Operator Instructions] The first question comes from Hildy Ling from Morgan Stanley.

[Hildy Ling, analyst]

I am Hildy Ling from Morgan Stanley. I have 3 questions. All of these questions are operational and strategy related. The first one is about your pricing capability and also average spending per guest actually from North America to Europe. Is there any pressure of consumption that you saw or witnessed in the last year? Any pricing pressure? What is our forecast of pricing and also average customer spending for 2025?

And my second question is also about table turnover rate. What is your projection for 2025's table turnover rate? If there is room for improvement there, how are we planning to achieve that increase?

My third question is about localization strategy on 2 levels. The first one is about our employees. Right now, how localized are our employee makeup? And is it more improved than last year, on the year before last? Another question is that when we look at the guest breakdown or makeup, how -- what is the percentage of nonlocal Chinese guests?

[Unknown Executive]

Thank you, Ms. Ling, for your question. Your first question is about our pricing, whether or not we feel pressure of pricing and also our pricing strategy. I think Ms. Yang will take the question.

[Lijuan Yang, executive]

All right. Thank you for the question. Right now, when we face inflation pressure, given the restaurant competition, it is very important for us to consider reasonable pricing. First of all, we do not plan to increase our pricing easily. Mainly, we want to offer reasonable pricing and cost effectiveness. That means that we need to make a better menu and also have better supply chain management so that we can guarantee a very good gross profit margin.

And also, we have differentiated pricing depending on the hours and also the customer group. So we give flexibility and autonomy of the region or country leaders for them to do pricing depending on the neighborhood of their stores, and they have their own budgets to do pricing or marketing promotion. They could either do a price promotion or add a portion of the meal or maybe provide better surprises, provide better dining experience and environment and atmosphere. So that was our pricing strategy. Thank you again for your question.

[Cong Qu, executive]

Thank you, Ms. Yang, for your answer. And regarding the second question of yours concerning table turnover rate and specifically what measures we're going to take to achieve our target, so we are confident that we can improve our table turnover rate as we optimize our management. We also require every senior management employee or managers to set goals and also put in efforts to achieve that goal.

We focus on building loyalty and connection between ourselves and our customers through organizing events on special occasions. We also expect to lengthen the operational hours to add, for example, late-night snacks hours, late-night hours for our overseas stores as well. We also will introduce nightclub decor for late-night hours for selected stores as well. We also invite professional DJs to also build atmosphere for late-night dining experience.

We believe that these will be really well received by our overseas customers. Once we implement these measures, we believe that table turnover rate can be further improved, and it will take some time for us to monitor the growth. So that's my answer for the second question of yours.

Your third question is about our employees and also the localization situation of our employees and customers. Now when it comes to localization, first of all, we need to focus on doing it the right way. So we start from the menu and products. We need to localize the menu in order to offer something that caters to local customers' palate. And also, as was mentioned by Ms. Yang, from last year to this year, one of the most important measures that we did was to focus on our employees' growth and also the unity of our employees from the material side and also spiritual side as well.

Once we build a very good corporate culture and have good connections with our employees, we believe that the experience that we can offer to the customer will be better. Right now, from a long term, about 20% to 30% of our employees and also management level are local employees. And when it comes to the breakdown of our customers, overall, it remains very stable as before.

On a micro level, though, for example, in the U.S., we actually have local managers who are able to successfully attract a lot of local customers. When we did our visit in Europe, we realized that actually local customers enjoy our Asian-style dining, which also boosted our confidence.

[Operator]

The next question comes from [ Ranqin Yu ] with Goldman Sachs.

[Unknown Analyst]

My name is [ Ranqin Yu ] from Goldman Sachs. I have 2 questions. The first one is about our store opening plan for 2025. We believe that we adopted a bottom-up approach. Do we have any opportunities that we're expecting to see when it comes to new market in 2025? Also, when we cultivate new brands, what are the potential brands that we plan to cultivate?

[Cong Qu, executive]

Thank you for both of your questions. I'll take the first one. Now for 2025 store opening, right now, we have already opened 3 hot pot and also 1 store in a skiing shop or skiing resort in Japan. So the stores that we signed are in the Philippines and Malaysia and Australia. And right now, we actually have signed contracts for new stores -- new hot pot stores with 10 stores. And also, we have already progressed to talking about signing contracts and the terms of contracts.

And on top of hot pot restaurants, we also have signed 2 stores for barbecue restaurants as well. With the support of our red Pomegranate project and also dual channel strategy, we have now proactively explored opportunities to open new stores and seek new opportunities for sub-brands. We do not set hard targets. But as was mentioned, we have a lot on the pipeline, and we expect to -- by end of 2025, we will open more stores than the previous year. And the second question, I think Ms. Yang will take it.

[Lijuan Yang, executive]

Great. Thank you for the question. Now regarding our red Pomegranate strategy, right now, we have -- be sure we have identified barbecue as one good business format for us to build our secondary brands overseas. Overseas, we will focus on selecting stores nearing our existing high-quality stores so that we can have high efficiency. Right now, in Southeast Asia, we have already signed contracts and prepared for 2 barbecue restaurants. And most of other restaurants are also seeking opportunities to build barbecue restaurants in surrounding neighborhood. Apart from our halal hot pot and also noodle shops, we also are exploring opportunities to actually explore sub-brands that are Chinese style and have opportunities in the overseas market. Thank you.

[Operator]

The next question comes from Lai Shengwei with CICC.

[Shengwei Lai, analyst]

I am Lai Shengwei from CICC. I have 3 questions. The first one is that since second half of last year, we have made a lot of adjustment. And for example, we have a new management system. You also adjusted the incentives for managers as well. How is it working out? The second question is about the projection of our gross profit margin and staff expenses. The last question is that for new brands. Do we have any sort of budget for investing in new brands such as barbecue? Is there a mature unit economic model that can share with us?

[Unknown Executive]

Thank you. The first question of yours is about the management adjustment and the effectiveness. Ms. Yang?

[Lijuan Yang, executive]

Thank you, Mr. Lai, for your question. Now about management adjustment, we focus on employees. We focus also on customers as well. We mainly focus on having our employees having a better career growth path. With this new strategy, we now can enable the autonomy and ownership, entrepreneurship of our employees. So far, we have already seen a very exciting and encouraging outcome. For example, with this method, our customers can feel better services, and they also have better return rates and loyalty as well.

And I think this kind of management adjustment comes from the heart. And we encourage our employees to do things from their heart. I mean what we offer as a mechanism is just a tool. Whether or not it will be taken on falls -- lies down to every single country's key manager, regional manager to see whether they believe it's suitable for their own stores. And we can monitor store performance using our own metrics to see whether or not these new tools are working out.

[Cong Qu, executive]

All right. The second question of yours is about our GP margin and also staff expenses. For GP margin, there's room for improvement. And our product department right now is prioritizing optimizing the GP margin by readjusting the menu of different countries and regions and also to do kitchen processing management to see if we can do better in the future regarding gross profit margin in different countries. But at the same time, we do not sacrifice the customer experience and quality of our products. I think the way to do it is to control costs and have better customization capability.

Now when it comes to staff expenses, we -- our priority is to guarantee the quality of our services and products. And so we do have high targets for the quality of people that we use and the headcount that we use. We also are fully compliant with local regulations and laws. And so staff cost optimization is not our #1 priority. But with our dual channel strategy, we believe that we can improve the labor efficiency further.

The third question of yours is about the investment on new brands and the budget. Now for new brands development, again, it's a bottom-up approach. We have organized an innovation committee who will monitor with tools the budget for new brands and new verticals that we plan to enter. But the decision is being made by our senior management and also our entrepreneurs from different countries. And so for project-level investment, sometimes it can vary from maybe USD 100,000 to million-level projects. But for every single store, we will do very careful calculation before we set the budget.

Now the last question, as you mentioned, barbecue unit economic models. Right now, we don't have a lot of barbecue shops in the overseas market. We only signed contracts in Southeast Asia, in Malaysia. And right now, they are still in renovating stage. We haven't really opened them yet.

[Operator]

The next question comes from Jun Zeng with Huatai Securities.

[Jun Zeng, analyst]

I have 2 questions. The first one is that we saw your operational quality and performance and also table turnover rate improved in 2024 year-over-year. And so for 2025, your priority -- where is your priority going to be -- fall on? Is it for improving table turnover rate or expanding new markets? And also, table turnover rate improvement can play an effective role in your future development. So my question is that, how do you think it's going to benefit you in the long term? My second question is about the supply chain management. And what's your projection and how to control the cost CapEx?

[Unknown Executive]

About your first question, we focus on whether or not we focus on same-store growth or new market expansion. We're going to do both. Obviously, same-store growth is very important. We're not going to sacrifice our same-store growth over expansion because it's going to affect our store visit rate and customer number as well. So that will remain very important to us.

And for new market expansion, I think there are different ways to do it. The first one is to enter empty space. Another one is to develop, for example, secondary brands surrounding our existing stores. And so it all comes down to every senior managers of the local market to see how they plan ahead. I think same-store growth is as important as new store opening or new market expansion. So we're going to do both.

The second question of yours is the supply chain construction for the overseas market and also CapEx and GP margin expectation. Now our overseas supply chain planning requires that the central kitchen in the future needs to do independent operation and also offer advantage when it comes to single product offering. And so they need to be sufficiently self-sufficient.

Right now, I think our central kitchen management has improved. Since September last year, we've done a lot of optimization in Southeast Asia. So the central kitchen's capacity has improved dramatically. And also, the delivery accuracy rate is better. The quality is better as well. And also, we saw a lot of improvement in the external sales by the central kitchen as well. The next step in Southeast Asia will be to do refine management of the supply chain and see if we can replicate the successful stories and experience in, for example, North America and in other markets.

When it comes to CapEx, right now, we're very cautious. We're not going to put in significant investment for central kitchen. It depends on every store, right? For some stores, sometimes you just need a small back kitchen. And for some areas and cities, if you have high density of stores, then we will consider maybe investing in central kitchen.

[Operator]

The next question comes from [ Wang Yeju ] with Citic Securities.

[Unknown Analyst]

I have 2 main questions. The first one is that in North America, what is the overall layout of your store? And also, since you got listed last year in America, would you consider maybe opening more stores in North America and speed up the process? The second question is also the short-term planning.

[Unknown Executive]

So thank you for your question. The first one is about North America market. In North America, we definitely sense that the market has great potential and vitality and diversity. It has the appetite for Chinese hot pot and also other Asian restaurants and also Western fast food as well. So we encourage our North America team to really explore and proactively seek opportunities.

Right now in the pipeline, we actually have a lot of projects for North America. Hot pot restaurants right now have at least 5 of them that are in actual promotional stage, progressing stage. We also are looking into possibility of fast food and other kind of verticals. But typically in North America, payback period is longer than Asia's, and the CapEx requirement threshold is higher. But -- and so we are very cautious about expanding the market in North America, but we are very optimistic.

The second question of yours is about incentive scheme, if I got your question correctly. Again, matching the red Pomegranate strategy, we do -- we are looking into optimizing our incentive schemes, but we don't have the details yet. Maybe we can let you know after the internal decision.

[Operator]

The next question comes from [ Jong Yezhang ] with [ Yezhang Securities ].

[Unknown Analyst]

I am [ Jong Yezhang ]. I have 3 questions. So among all of the brands coming from China, we are one of the few ones that actually have achieved quality and performance. And so exactly why are we more successful? What are our competitive advantage? And my second question is about our payback period for -- payback period for our newly opened stores. And the third question is that we realized that a few stores in Southeast Asia right now is pausing operation. Why is that?

[Unknown Executive]

Great. Thank you for your question. The first one is about Chinese dining brands going global and our competitive advantage. I mean from our experience and observation, there is actually a lot of success stories that -- from which we can learn. So we are proactively learning from other brands and our peers. We got inspired a lot. If we have to identify what we have done right, I think it's, first of all, our attitude. We respect the overseas market. We also stay very modest. We respect local customers. And we are very grounded when it comes to our way of doing business, which also means that we are really diligent, and we are very cautious in making decision to select local resources so that we can minimize error and risk when we go into the overseas market.

The second question is about our payback period. Last year, our newly opened stores' payback period in Asia -- in Southeast Asia is typically within 3 years, which is not bad. In North America, it's about 4 years of payback period, which is also very typical for the restaurant industry. And this payback period has definitely improved. But in 2 markets, Cambodia and the Philippines, we encountered some challenges from the local market, which is unexpected. So the payback period sort of underperformed than our expectation, and we are proactively improving our management and strategy to change that situation.

Another question is the stores that we paused operation and shut down in Southeast Asia. Now again, this is consistent with our overall strategy globally because we will -- when we examine the performance of store and notice underperformance, we have to stop the loss in a timely manner. Sometimes it's because of the expired leases. Sometimes it's because, for example, we have to admit that when we select the location, we did not make the best decision. And so we have to suffer the consequence, and we make the decision of doing the adjustment accordingly.

[Operator]

The next question comes from [ Yan Minxing ] with [ Zingye Securities ].

[Unknown Analyst]

I have 3 questions. The first one is that we saw in 2024 in Japan, we had improved performance. What was the driver? Is it because of company strategy? Or why was it? The second question is that for 2025, looking at the first quarter performance, how was table turnover rate so far? And what is the trend that we observed?

The third question is the barbecue sub-brand as a business model. So what is the overseas store opening model for barbecue stores? Is it going to be the same as the domestic market? Because domestically speaking, barbecue restaurants are smaller in scale than hot pot restaurants. And so when you try to replicate that in the overseas market, what are the commonalities and what are the differences? And also, if we plan to do a barbecue in overseas market, what is your expected ceiling of development?

[Unknown Executive]

All right. Thank you, Ms. [ Yan ], for your 3 questions. The first one is the driver for Japanese market improvement. I think it comes down to the management strategy. We do some very grounded changes based on the 4 color cards for, for example, environment, services, products and food safety. All of these details are clearly felt by our customers and also the whole experience, and customer satisfaction rates were improved. So as a result of this improvement, we clearly improved the overall store performance.

Another key driver was the pricing strategy. We removed some ill-designed pricing. And because of the local market adaptation, we are able to also offer concessions on certain products on the menu. And as a result, customers felt our sincerity, and the return rate of customers was better and better. And so after 1 year's adjustment, now it has entered a very stable development kind of trajectory.

The second question of yours is the Q1 performance so far. Now we haven't finished the first quarter yet. I think by about May, we are going to make announcements regarding the first quarter performance. Right now, it's a little bit early for us to disclose any figures. So I -- my apologies.

The third question of yours is our barbecue restaurants and how is it different or similar to the domestic ones. It's very hard to say right now because our overseas barbecue restaurants are still in a very early stage. We just signed contracts, and we are just doing some construction and renovation. And one of them will be opened in Malaysia and the other in Indonesia. We are still curious to see whether the local customers will like them just as much as they like our hot pot restaurants.

Now obviously, we have done a lot of market research. We have selected very good locations, and our managers for these new stores are experienced high-quality managers. So we have full confidence. But right now, it's very hard to say how are they similar or different to domestic ones. It depends.

The last question of yours is about barbecue's market, TAM market -- I mean potential market scale. Again, right now, it's still very early stage. And I think that with the experience of running and operating high-quality hot pot stores, we believe that in neighborhood areas, we will have great potential of running barbecue stores. So we're not too concerned.

[Operator]

The next question comes from Wang Yijie with Haitong Securities.

[Yijie Wang, analyst]

My name is Wang Yijie with Haitong Securities. I have 2 questions. The first one is that for 2024, we saw that your company improved very good gross profit margin to 10.1%, 1 percentage point improvement. And then also for other aspects of the performance, we also have done a lot of improvement. So what are the growth drivers behind that? And what is your projection for 2025?

Another question of mine is that in North America, there are some restaurants, as you mentioned, that have made significant strides led by local management team. So for 2024, did you see similar measures that can improve your efficiency and performance of single store with similar strategy?

[Unknown Executive]

Now about the profitability of restaurants for 2025, again, right now, it's Q1, and it's very hard to project right now because since last year, we've done segmentation of different stores. And so for those stores that enjoy a very good table turnover rate and profitability, they can actually reward their customers with benefits. And we believe that those are very necessary.

And right now, we don't have any guidance for 2025 yet. And we also are preparing a lot of new restaurants. And also, we believe that it's going to affect our overall profitability because we are going to open a lot of new stores and sub-brands. But right now, we don't have a lot of visibility into the guidance for this year.

You also mentioned about our operational improvement last year. First of all, it's very hard to pinpoint one single factor or driver. I think from the front line of restaurant level, we have to acknowledge the hard work of our frontline managers and employees, and the headquarter also play an important role. I think it's a combined effort, concerted efforts from both sides.

Another part of your question is North America. One -- I mean, a couple of stores in North America have improved their performance through innovative measures. Now again, every single store of ours are differentiated, and they manage their own customers and own stores based on their own conditions and environment. And so we believe that there are a lot of successful cases, but it's really dependent on local conditions. And for example, in Indonesia, they have their way of doing things. In America, they have their own styles as well. So whatever works for their store, it's the best measure. That's all. Thank you.

[Operator]

Now due to the time constraint, we are going to conclude the call here. Thank you so much for your participation. See you next time. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]