BEIJING (Reuters) – Shares in Chinese hot pot chain Haidilao International surged on Monday after the company announced it would suspend or shut down 300 stores by the end of the year, slamming the brakes on a rapid expansion it undertook during the COVID-19 pandemic.
China’s largest hot pot chain said late on Friday it would shut down restaurants with relatively low customer traffic and unsatisfying results and would launch a new plan focused on improving its operations of existing stores.
Its shares jumped more than 11% on Monday to hit their highest since Oct. 28.
Reuters reported last month that Haidilao planned to slow its growth after its expansion and softening consumer appetite in China left it with falling table turnover rates and profits.
Haidilao, which became so popular in recent years that it appeased customers in hours-long queues for its soups by providing free manicures, snacks and shoe shines, was initially undeterred by the pandemic. The company embarked on an expansion drive in early 2020 that doubled its outlets since then to almost 1,600 currently.
Citi analysts said they expected Haidilao to incur one-off provisions or write-downs for its store assets or leases in the second-half but that the closures would reduce its start-up losses and boost performance at nearby stores.
“We expect this restructuring plan to boost its table turn of existing stores in (2022),” they said.
(Reporting by Sophie Yu and Brenda Goh; Editing by Jacqueline Wong)