WHILE technology and private education giants stole the headlines last week when it comes to stocks in Hong Kong, the biggest loser in the market was a popular hotpot chain.

Shares of Haidilao International Holding Ltd. plunged more than 30 percent in five sessions, turning them into this year’s worst performer on the Hang Seng Index. The rout came as the firm issued a first-half profit warning July 25, citing higher expenses due to new restaurant openings and negative impact from the pandemic.

Last week’s losses have exacerbated a selloff in Haidilao, best known for its string of Chinese spicy soup restaurants. The stock is now down more than 60 percent from a February peak, a sharp reversal following an almost 250 percent surge in the last two calendar years.

That reflects not just the challenges faced by the global restaurant industry because of changing consumer habits amid the pandemic, but also the company’s struggle to replicate its past success despite significant new store additions, and a broader weakness in Hong Kong equities.

Haidilao opened over 300 outlets in the first half, but new store performance has been weaker than expected, while same-store table turnover recovery may have stagnated at 60-70 percent of 2019 levels.

“Their business in top tier cities has been very good, but when they started to penetrate into lower tier cities, it becomes much more challenging because the spending power could be lower,” said Angela Hanlee, an analyst at Bloomberg Intelligence. “Lower tier cities are also not as densely populated so the population coverage of each restaurant is going down too.”

The Beijing-based restaurant operator that serves up boiling soup broth with meat, seafood, vegetables and noodles, went public in 2018 amid much fanfare, as many were captivated by the rag to riches story of the founders. (SD-Agencies)