S&P revises Haidilao view to negative

S&P said it revised Haidilao International Holding Ltd.’s outlook to negative from stable but affirmed its BBB ratings on the company and its senior unsecured notes.

“Haidilao's rapid expansion will lead to slower table turnover. It's taking longer for new restaurants to become profitable, and this trend is in conjunction with a significant increase in new stores. The company opened 363 new eateries in the second half of 2020 and 299 in the first half of 2021, compared with 302 in full-year 2019. This pace of expansion is higher than our expectation. We also believe the company is falling short of its strategy to relieve pressure on popular locations, where the table turnover rate is 5.0x per day but long waiting times have hurt customer experience,” S&P said in a press release.

The agency said the outlook is based on the risk the company’s effort to improve new facilities could fall short, hamstringing efforts to lower its debt leverage to less than the base case of 1.5x in 2022.

“Failure to slow its pace of new openings in 2022 could derail the company's deleveraging effort as well,” S&P added.

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