Inside Herfy's cost-driven recovery in the first half of 2026

The number in the headline tells only half the story, and it happens to be the less interesting half. Herfy Food Services, the Saudi fast-food and bakery company that was for years one of the Kingdom's most recognizable homegrown restaurant brands, reported revenue of about 515.6 million riyals for the first half of 2026. On its own that figure reads as a decline, down roughly 6.8 percent from the 553.1 million riyals it booked in the same period a year earlier, which sounds like a company still shrinking. But the far more important line is the one beneath it, because Herfy's losses are narrowing dramatically even as its sales slip, and that combination is the real signature of a turnaround taking hold. The trajectory becomes clear once the recent history is laid out. Herfy has been loss-making for a while, and the scale of those losses is what has been changing. In the first quarter of 2026, the company posted a net loss of just 3.91 million riyals, a striking 79 percent improvement on the 18.6 million riyal loss of the same quarter a year before, even though first-quarter revenue fell to 250.14 million riyals. That single quarter tells the whole story in miniature, revenue down modestly, losses down enormously. Extending to the half, revenue of 515.6 million riyals implies a second quarter of roughly 265 million, and given how sharply the first-quarter loss shrank, the half-year loss is on track to come in far below the 17.69 million riyal loss Herfy recorded in the first half of 2025. Zoom out further and the pattern holds across years. Full-year 2025 losses narrowed 33.5 percent to 77.47 million riyals from 116.52 million in 2024, while annual revenue held around the one billion riyal mark. Herfy is not yet profitable, but the direction of every one of these numbers points the same way. The mechanism behind the recovery is instructive, because it is a cost-and-efficiency story rather than a growth one. Herfy itself attributes the shrinking losses to a specific and repeated list of factors, a reduced cost of sales as a percentage of revenue, lower selling and marketing expenses, decreased finance costs, reduced impairment provisions, lower zakat expenses and higher other income. In plain terms, the company is squeezing more profit out of every riyal of sales it makes, spending less to generate those sales, and paying less to service its debt. The revenue decline, driven by lower sales volumes, is the uncomfortable trade-off, but management is clearly prioritizing margin repair and financial discipline over chasing top-line growth at any cost. That is often exactly the right sequence for a struggling business, fix the profitability of what you have before trying to grow again, because growing an unprofitable operation simply multiplies the losses. The regional and competitive context explains both why Herfy fell into trouble and why the recovery matters. Herfy operates a vertically integrated model that is more than just restaurants, running fast-food outlets, bakeries, sweets and chocolate shops, three bakery factories and a meat-processing plant, which gives it real assets but also a heavy cost base to carry. It has struggled in recent years against ferocious competition in the Saudi fast-food market, where international giants and a wave of newer local and regional concepts have crowded the space and pressured both traffic and pricing, and the company has also navigated shifting consumer preferences and past reputational challenges. The Saudi food-services sector overall is growing, powered by a young population, rising incomes and the tourism and entertainment expansion under Vision 2030, so the demand backdrop is favourable, which makes Herfy's falling revenue a company-specific competitive problem rather than a market one. In regional terms Herfy is a case study in an established incumbent fighting to defend its position against nimbler rivals across the Gulf's increasingly contested restaurant landscape. The honest caveats are real and should temper any optimism. Narrowing a loss is not the same as making a profit, and Herfy is still in the red, with revenue heading in the wrong direction, which means the turnaround is only half complete. Cost-cutting has natural limits, since a company cannot shrink its way to sustainable success indefinitely, and at some point the falling sales trend has to be reversed for the recovery to be durable. The real test ahead is whether Herfy can stabilize and then grow its revenue while holding on to the hard-won cost discipline that has driven the improvement so far. But for a company that was bleeding heavily not long ago, the first half of 2026 is genuine, measurable progress. The losses are a fraction of what they were, the financial housekeeping is clearly working, and Herfy has bought itself the time and stability to tackle the harder question of how to get customers coming back through its doors.