ATAT (Trans): Retail guidance raised to 40%, net margin still down

Below is Dolphin Research’s compiled transcript of $ Atour.US FY26Q2 earnings call.

I. Key takeaways

1. Shareholder returns: Since launch through end-Q2, buybacks totaled over $150 mn. Dividends continue under the existing policy, with no new return plans announced on this call.

2. Full-year revenue guide

a. Group: total net revenue is guided to grow 30% YoY for the year. b. Retail: on a strong 1H and solid sell-through of new launches, retail revenue growth guidance is raised to +40% YoY for the year.

3. Full-year margin guide and shifting drivers: Reiterated the initial view that full-year net margin will dip slightly YoY. a. Prior view: headcount expansion and tech R&D investment would lift G&A and R&D as a % of revenue. b. Current view: 1H revenue beat initial expectations, while opex growth broadly tracked revenue growth, so G&A and R&D ratios should stay relatively stable. c. New pressure: hotel supply chain and retail are set to outgrow initial estimates, shifting mix toward lower-GPM revenue; alongside ongoing shareholder returns, the effective tax rate is expected to rise vs. last year.

4. This quarter’s key financials

a. Total: net revenue RMB 3.419 bn (+41.4% YoY); Adj. net margin 16.0% (-130 bps YoY); Adj. EBITDA margin 23.5% (-120 bps YoY). b. Segment revenue: managed hotels RMB 1.725 bn (+32.8%, driven by network expansion and supply chain); leased-and-operated hotels RMB 132 mn (-11.8%, store count fell from 24 at Jun-25 to 19 at Jun-26); retail RMB 1.575 bn (+63.2%). c. Segment GP: hotel GP RMB 659 mn (+18.7% YoY) with GPM down as lower-margin supply chain grew faster within hotel revenue; retail GP RMB 809 mn (+57.4% YoY) with GPM down on product mix. d. Opex ratios: selling expense ratio 17.4% (vs. 15.9% a year ago), higher on brand spend and online channel build-out, in line with retail growth; G&A ex-SBC 3.5% (vs. 3.6%); tech & development 1.6% (vs. 1.7%).

5. Cash: as of Jun 30, 2026, cash and cash equivalents RMB 3.9 bn; net cash RMB 3.7 bn.

II. Details from the call

2.1 Management commentary

1. Industry view and strategy

a. China consumption kept diverging in 1H: both hotels and retail saw wider splits, with commoditized products and services under pressure. Brands delivering differentiated experiences and carrying strong brand equity proved more resilient.

b. Hotels are shifting from scale-driven expansion to quality growth, with competition moving from supply growth to product innovation, service capability, and operating efficiency. c. On retail, consumers seek quality and tighter alignment with lifestyle, with rising personalization needs. d. Executed the new 3-year strategy of 'Chinese experience, brand-led excellence' across hotels and retail, driving continued breakthroughs.

2. Hotel ops and network

a. Q2 RevPAR was RMB 345.4, at 100.7% of last year; ADR rose to 101.2% of last year; OCC was 99.7%. b. Mature stores (open >18 months) posted RevPAR of RMB 336.8, at 97% of last year; ADR and OCC were 98.3% and 99% of last year, respectively.

c. Maintained quality-first discipline with strict screening and opening standards. Opened 101 stores in Q2; 2,175 in operation at quarter-end with a pipeline of 811, a healthy level.

d. On channels, CRS was stable at 61.5% of room nights sold; corporate members contributed 20.4% of room nights.

3. Upper-midscale brands (Atour Hotels / Atour Origin)

a. Upper-midscale remains the core battleground with clear leadership established. Atour Hotels began as a lifestyle brand for upper-midscale business travelers and keeps iterating with evolving demand.

b. The latest Atour 3.6 balances experience delivery and ROI, retaining business travel strengths while adding a sense of ease. Q2 in-operation RevPAR topped RMB 370, validating market acceptance of the upgrade.

c. Atour Origin advances alongside Atour Hotels in upper-midscale: over 60 in-operation hotels and 90+ in pipeline. With more distinct experiences and stronger pricing power, Q2 RevPAR of in-operation hotels exceeded RMB 450.

d. Atour Origin channels the nature, serenity, warmth, and authenticity of Atour Village. From Apr, nationwide rollouts included a wilderness-themed arrival scent, afternoon tea rooms, deep-sleep night routines, and local-flavor breakfasts.

4. Midscale and premium brands (Atour Light / SAVHE)

a. Differentiation in midscale ultimately rests on tangible guest experience. Atour Light 3.3 has entered systematic cost-model optimization and scaled rollout, focusing resources on core touchpoints such as sleep and breakfast.

b. Atour Light 3.3 improves comfort while adopting a more disciplined investment model to lift franchisee efficiency. Q2 RevPAR at in-operation 3.3 hotels exceeded RMB 340.

c. More flagship projects were placed in higher-tier cities, drawing positive franchisee feedback. Quality-first remains the priority while steadily broadening city coverage, with student-only benefits and summer co-branded campaigns launched in Q2 to deepen engagement with younger guests.

d. Premium brand SAVHE centers on 'breathing,' crafting tranquil urban spaces and serving as Atour’s push upmarket. Q2 operating performance hit a record high, with in-operation RevPAR above RMB 1,000.

e. SAVHE continues to refine granular ops across brand standards, service systems, and talent development, forming a replicable playbook. Health-focused classes and F&B offerings were expanded in Q2.

5. Retail performance (Atour Planet)

a. Q2 retail revenue was RMB 1.575 bn (+63% YoY), with the mix transitioning from single hero SKUs toward a broader portfolio. b. Pillows: the Deep Sleep Memory Foam Pillow Pro series has sold over 12 mn units cumulatively, reinforcing category leadership.

c. Comforters: the Deep Sleep Thermo-Regulating Comforter Pro 3.0 Summer Season continued to sell strongly, driving rapid category growth, with GMV up over 80% YoY. d. Two strategic categories added last year—fitted sheets and loungewear—maintained strong momentum, increasing their revenue contribution.

6. Retail system capabilities and new products

a. Brand: Atour Planet has built the 'natural deep sleep' mindset over years, with rising consumer trust in its sleep products. b. Product R&D: iterates around real sleep needs, enabling both hero-product breakthroughs and new-category expansion.

c. Supply chain: reshaped the industry supply chain with new standards across manufacturing steps and end-to-end QC from raw materials to finished goods. Consistency and delivery reliability lead the industry.

d. Content and user ops: content centers on real sleep scenarios to make 'deep sleep' tangible, strengthening the brand’s emotional bond with users. e. New products align with last year’s Atour Planet deep-sleep standards: Deep Sleep Memory Foam Pillow Pro 4.0 addresses frequent turning with an upgraded dynamic support system for more balanced support across sleep postures; Deep Sleep Thermo-Regulating Comforter Pro 3.0 Four Seasons enhances temperature and moisture control via a balance system, adapting to seasonal and nighttime changes.

f. Long-term: keep iterating the portfolio around user needs, grow share in core categories, and convert product and tech capabilities into brand moat.

7. Membership, brand and organization

a. Registered individual members reached 120 mn by end-Q2. The member ecosystem underpins both hotels and retail, serving as the platform for long-term retention and user value management.

b. Built a more granular tiered user management system, tailoring outreach and benefits to core needs of different segments. c. Launched Atour’s 'Six Assurances' to set service standards and safeguards at key guest touchpoints, aiming to make 'peace of mind' a consistent, tangible experience and a new industry benchmark.

d. Employees: launched a public-welfare program for hotel room professionals nationwide to improve frontline working conditions, and created a 'Service Staff Appreciation Day' to recognize and thank them.

2.2 Q&A

Q: Overall industry supply growth has slowed since the start of the year. Will this affect your signing appetite? Any changes to full-year openings and closures guidance?

A: Hotel supply reflects multiple factors—macro conditions, supply-demand dynamics, and property availability—leading to cyclical swings. This is a natural adjustment as the industry matures. Rather than total supply, we prioritize high-quality supply that is truly competitive and meets consumer expectations.

In today’s market, franchisees focus on brands that can sustain growth and withstand cycles. Leaders with superior guest experience, strong brand equity, proven product models, and stable returns remain their top picks. Industry adjustment phases are when leaders consolidate advantages and gain share.

We do not chase scale for its own sake. Our core aim is to build sustainable brands with strong brand equity across price bands, then expand coverage as brand strength rises. Our brand matrix now spans wider price points and scenarios, fitting more property conditions and varied demand.

Project placement follows user needs and long-term brand value. Top-tier city CBDs remain a focus, while we also extend into strong lower-tier cities, areas around 5A scenic spots, and distinctive properties from urban renewal.

Signings were stable in 1H, and the pipeline grew steadily QoQ, setting up quality reserves for future openings. Thus, full-year opening targets remain unchanged. Since Q2, closures have slowed markedly QoQ, and the c.~80 closures guidance for the year is unchanged.

Q: RevPAR has been volatile since Q2. How do you view 2H RevPAR?

A: Long-term demand for quality lodging remains on an upward path across both business and leisure travel. That core logic has not changed.

Near term, typhoons and heavy rain in early Jul delayed some summer travel vs. prior years. But from late Jul as peak season kicked in, we have seen signs of stabilization and recovery.

Longer term, demand resilience is intact and the shift to high-quality development is clear. Companies with strong brand equity and solid customer bases should keep capturing structural opportunities, so we encourage looking beyond short-term datapoints to the industry’s positive internal adjustments and leaders’ through-cycle capabilities.

Q: How do you see current demand structure? Any new trends or opportunities across business vs. leisure?

A: In business travel, the customer base is diversifying. Previously, large KA enterprises were the main source, but local key corporates, universities, and research institutes are now adding demand.

While continuing to serve core corporate clients, we are refining the BT system to tap new business traveler sources. This broadens coverage and stabilizes the customer mix.

On leisure, more consumers now value the experience of lodging itself beyond functional needs. This aligns with Atour’s quality- and multi-brand strategy—our differentiated brands can match distinct customer needs and scenarios more precisely.

Inbound tourism is also a key long-term growth vector. As it recovers, we are advancing partnerships with overseas distribution channels and brand communications to capture future Intl demand.

Q: Retail momentum stayed strong in Q2. What are the core drivers? With high 1H growth, what is the full-year retail guide?

A: Atour Planet kept growing rapidly in 1H, but to us growth is an external outcome of building capabilities. What matters is the ongoing accumulation and improvement across brand, product, supply chain, and content.

We do not chase short-term trends or rely on discounting. We build around real sleep needs through product innovation and brand building, believing that truly value-creating, consistent-quality products will earn long-term user recognition.

On products, we have been forming a more complete sleep portfolio: pillows remain in the lead, comforters are growing fast, and new categories extending from sleep scenarios—fitted sheets and loungewear—are becoming important growth drivers.

For full-year retail revenue, based on strong 1H performance and sustained momentum after new launches, we raise guidance to +40% YoY.

Q: You previously flagged higher full-year opex ratios. Any change to full-year margin guidance?

A: We still expect full-year net margin to edge down YoY, but the drivers have shifted. At the start of the year, we expected headcount expansion and tech R&D to lift G&A and R&D ratios, pressuring net margin.

1H results showed a positive turn: revenue exceeded initial expectations, and while we kept investing in capabilities, opex growth broadly matched revenue growth. We now expect G&A and R&D ratios to remain relatively stable.

However, hotel supply chain and retail growth will exceed initial estimates, changing the revenue mix. Meanwhile, as shareholder return plans continue, the effective tax rate should rise vs. last year, also weighing on net margin.

Combining mix shifts and a higher tax rate, we expect a slight YoY decline in full-year net margin.

Q: Any new plans regarding shareholder returns?

A: We continue to execute shareholder returns per plan and pace. Since the buyback program began through end-Q2, total repurchases surpassed $150 mn, and we are steady on dividends under the existing policy.

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