Aug 14, 2026 earnings call — Western Europe investment and global expansion
Announced a controlling investment in a Western Europe distributor; second quarter net revenues were RMB 1.01 billion.
Revenue $0.1B (est $0.2B) · EPS $0.03 (est $0.09)
Key quotes
"In July 2026, we made a controlling investment in one of Western Europe's leading distributors of next-generation smoke-free products and FMCG goods."
"In mature environments, traditional wholesaling model are no longer sufficient to sustain high-quality margin growth."
"We have commercialized our modern oral nicotine pouch line and are steadily ramping up manufacturing capacity and the channel distribution."
Analyst Q&A 4
capital allocation and M&A criteria
Q (Christine Peng · UBS): What is the capital allocation strategy given abundant cash? What are the M&A valuation and contribution criteria?
A: They said their capital allocation is financially disciplined and focuses on three priorities: organic growth (R&D, supply chain localization, manufacturing hubs), selective accretive M&A, and direct shareholder returns like buybacks and dividends. For M&A they have no fixed valuation cap but require strict financial and operational standards, ROI-gated payback, structural non-dilution, and EPS accretion. They also support investments operationally to unlock value and favor larger deals that meaningfully move the business.
"Our capital allocation strategy is financially disciplined and designed to drive sustainable long-term total shareholder returns." — Sam Tsang
overseas growth and margin outlook H2
Q (Lydia Ling · Citi): What is the expectation for overseas growth in H2 (organic plus acquisitions)? What is the margin outlook and effect of acquisitions?
A: They will take a quality-focused approach to international growth, prioritizing retail sell-through and healthy channel inventory rather than pushing volume. The financial consolidation of their newly acquired Western Europe distribution platform starting in the third quarter will raise reported international revenue in H2 and drive medium- to long-term synergies. Gross margin expansion in Q2 was temporary due to product and revenue mix; margins should settle to a healthy range, though the European distribution business has a lower percentage gross margin while expanding operating and net profit scale.
"In addition to our organic baseline, the financial consolidation of our newly acquired Western Europe distribution platform starting in the third quarter will deliver a step change increase in reported international revenue growth for the second half." — Sam Tsang
U.S. strategy and China regulation impact
Q (Yun Guo · Citic): What is the forward strategy for the U.S. market given peers selling flavored e-cigarettes? What is the impact of stricter enforcement on illegal e-cigarettes in China?
A: For the U.S., they are monitoring regulatory developments and peers; non-listed affiliates have submitted PMTA applications that are in advanced stages, but they will not commit large-scale capital until the regulatory pathway is credible and are instead focusing resources on Europe, Asia, and oral nicotine pouches. For Mainland China, they view tightening regulation and the crackdown on illegal products as overwhelmingly positive long-term because it removes illicit actors and redirects demand to legal brands. Near-term, approval timelines are more conservative, so they assume a prudent baseline and expect Mainland China sales broadly flat for the full year.
"Regarding your question on the Mainland China markets, we view the tightening domestic regulatory environment and crack down on illegal non-compliant products as an overwhelming positive long-term development for the industry and for our company as well." — Sam Tsang
Europe competition and oral pouch plan
Q (Yuying Zou · CICC): How do you see competition in Europe with Philip Morris' growth? What is the strategy for oral nicotine pouches?
A: They said multi-category execution (vaping, modern oral, heat-not-burn) is now mandatory, but RLX believes it has advantages as a pure non-cigarette company with strong supply chain, product innovation, and deep specialty retail relationships, plus investments to strengthen route-to-market and shelf control. For oral pouches, they are building specialized production lines in a Southeast Asia manufacturing hub; once construction and ramp-up finish, they will plug pouch supply into their strengthened European distribution to reach retail and B2B channels, and expect pouches to become a meaningful revenue and profit contributor.
"So regarding our plans of the nicotine pouches, we think that modern oral nicotine pouches represents a principal growth driver in our business expansion." — Sam Tsang