Q4 2023 MINISO Group Holding Limited Earnings Call
It's called <unk> and it shouldn't therapy soften in 'twenty three.
At this time all participants are in a listen only mode. Please mark your name and institution put our record.
After the managements prepared remarks, we will conduct a question and answer section. Please note that if this on it's being recorded.
We have announced our quarterly and annual financial results earlier today.
Earning really is now available on our Investor Relations website at IR documents, so dot com.
Joining us today are our founder and CEO , Mr. Jackie yet and our CFO Mr. Ethan job.
Before we continue I would like to refer you to the Safe Harbor statements in our earnings press release, which also applies to this call since we will be making forward looking statements.
Please also know that we would discuss non <unk> financial measures today, which we have explained and reconciled to the most comparable measures reported under the international financial reporting standards in the company's earnings release and filings with the United States FCC in Hong Kong Stock Exchange. In addition, we have prepared a powerpoint presentation.
For today's call.
Which contains financial and operational information, but as Sportsnet and fiscal year.
If you are using zoom meetings, you should be seeing it right now.
You can also be visited on our IR website later.
I would like to hand, the conference over to Mr. Yang and Mr. John which calculates a mixture here. Please go ahead sir.
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Hello, everyone and welcome to our earnings Conference call overall performance once the general reached new heritage.
<unk> big breakthroughs and boost revenue and profit.
Total revenues excluded exceeded.
For a bit of milestone four plus times, increasing by 40% year over year to 325 billion GP margin rich, 698% an increase of six five percentage points year over year, adjusted non-profit surpassed 517 million increasing by 100.
Two 6% adjusted net margin also set a new high reaching 17, 6% an increase of eight percentage points year over year.
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I'll now walk you through business updates for our three major segments Minister, China overseas and top toy.
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Minimum China showed resilience, despite the challenging consumption environment.
So we're trying to achieve 40% year over year growth in this quarter, whereas according to the National Bureau of statistics, China domestic retail sales increased by only 10%.
Average transaction volume increased by 18%, while average transaction value increased by more than 5% year over year.
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Entering July not only once so the maintenance dosing, China achieved news service record, marking a strong start to the September quarter.
<unk> increased by over 25% you reviewed with Jimmy per store, increasing by 14%.
Average transaction volume and average transaction value increased by 10% and 3% respectively.
For the first seven months of 10 to 20 <unk> per store in China recovered to 10 to 21 level and around based upon the central pre COVID-19 level in the same period of 2019 in line with our expectations at the beginning of the year.
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Notably we opened a total of 310 to one new stores on net basis in China during the June quarter.
More than 90, new stores in tier one and tier two cities.
This is not going south and close a new record for store openings home municipal but also represents the highest quarterly new store openings in tier one and tier two cities since the pandemic.
Meanwhile, store closure rate in this quarter was only 1.0% below historical average.
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What <unk> seen in store opening and closing reflect is the high confidence of our retail partners as of June municipal brand had over 1000 meters. So retail partners with <unk>.
The only 50% of stores owned by top 50 franchisees.
Among the 40 have been cooperating with us for more than 60 years.
In the past the full fiscal years about 50% of new stores in China are owned by all top 50 ponders.
The average number of stores both by the increased steadily from 27 to 33.
We have been recruiting new partners as our school network penetration into lower tier cities. The total number of retail partners increased from 754 at the beginning of 10 to 22, one solvent and constitute as of now.
We are highly confident that we will achieve our target of opening 352 450 stores in China.
This is in 2023.
We are also optimistic that we'll be able to expand our network in different tier cities across China.
We now expect to have about 5000 stores in China by 10% to 27% compared to 3300 to five stores, we had at the end of 2022.
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Let's move on to overseas Firstly revenue was 1.11 billion.
A 42%.
Create strong high base of last year exceeding even our most optimistic expectations and setting new record June quarter.
Revenue from directly operated markets increased by 85% accounting for more than 45% of our overseas revenue.
From such 5% in the same period last year.
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Secondly, Jimmy in overseas markets increased by 41% per year.
69% gross being directly operated markets and 32% growth in distributed markets overall.
<unk>, Jimmy pursuing overseas market increased by over 25% year over year averages for counting for us by about 11%.
Major overseas markets maintained rapid growth momentum, including 106% growth in most of America, and a 46% growth in Latam.
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CERN over sister Emmi per store in the June quarter recovered to 92% over same period. In 2019. This is meaningfully higher than the 77% and 68% recovery rate we saw in the previous quarter in the same period of last year.
The distributor markets recovered to 95% pre COVID-19 levels, well, the DTC market recovery, 80%.
Our top five overseas markets generally per store in most of America was nearly twice the same period in 2019, Jimmy per store in Latin America, Europe , Middle East and North Africa, all recovered to about 90% through 2019 levels.
Asia markets recovered to about 65%, which was the highest we have seen since the pandemic and the recovery is still very fast.
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Quatre wise JV per store in Mexico is 10% higher than pre COVID-19 level in the first half will tend to 23, four thousands and you ask your useful lunched in Mexico and became a major driver of its local service.
GMA per store in the U S was twice the pre COVID-19 level.
The Grand opening of our first global flagship store at timescale.
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<unk> profit margin of overseas business is substantial with improving <unk> operating leverage in this quarter overseas markets contributed more than.
40% of total operating profit.
<unk> higher than the approach approximately 25% in the last quarter.
Margin expansion was especially apparent in the U S market alone with a rapid revenue growth send to refine students economics about 90% of our stores. There was already profitable in June significantly driving up the operating profit margin overseas directly operated markets.
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In the first half hour temperature industry 72, new stores will open in overseas markets on a net basis. The second half of calendar year tends to be a peak season for store opening in the Soc.
Recently store opening have accelerated.
In July we added 38 overseas stores.
We are still positive with targeted towards 352, 450 addition overseas market in 'twenty two 'twenty three.
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Since the beginning of this year I have spent the majority of my time in overseas markets.
During this period I had a lot of people thinking about moving to social value proposition and I like to take this opportunity today to share with you.
In the past 10 years since our inception, Minnesota, Loughridge, China's unmatched supply chains.
Used to position our products and three high since three lows.
In hot appealing high quality and high frequency and.
Our low cost low markdown and low process.
We relied on these cost leadership strategy for very rapid growth.
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<unk> can you hear me.
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'twenty to 'twenty three marks the first of your main source brand upgraded its value proposition has never been clear right in my mind.
Leasing new changes and nutrients both at home and abroad, we cannot survive by relying solely on cost advantages.
In addition to that we also need to differentiate our product offering this as much as we can to engage in global competition.
So I have renewed ministers brand positioning to global value retailer.
<unk> launched our products featuring IP design.
So how should we think about this positioning.
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The first message all onto delivers.
We attach great importance to the design of every single product.
We have developed a lot of training law stocked products that resonate with young consumers by focusing on creating more interest to treat and contents.
Just like Nike has been doing in promoting better designed new software.
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In Asia.
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Challenges MGM easyjet.
In addition to that we shouldn't become IP powerhouse, such as PC and make lifestyle products more fashion by featuring Ip's buying.
By leveraging consumer demand to guide product design, we can always develop products that are truly unique or are believed to offer more value than similar IP products.
In this way can we continuously do not designed fastest selling products that also resonates with consumers.
Now cooperating with a D IP licenses compared to 17, when we listed in the you asked three years ago.
Take the recent blockbuster Barbie serious as an example.
<unk> of related Skus, we had a dog with sold out within the first five days of lunch.
The collaboration generated immense boss on social media platforms, including shop home true well related topics received over 17 million comments as well as we pool well the topic accumulate nearly 300 million views as it became another phenomenal argued co brand that you've been.
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Third we will stick to value for money proposition.
Minister <unk> are happy philosophy, as we all for creative and high quality products to global consumers at affordable price. This is in line with our commitment to make it easy for consumers to enjoin happy and quality of life.
Never even China's efficient supply chain and design capabilities, we have accumulated during the past 10 years.
<unk> is able to offer a global consumers budget friendly products and build our customer friendly image. This medical Monte proposition enables us greed advantages in navigating through economic cycles.
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Have identified two product strategies for overseas markets globalization and IP strategy.
Completion of these two strategies successfully we need to consistently drive product and design innovations.
That means we need to offer emotional resonance with consumers by providing drew.
Drew leaching fun and useful products, among which we believes III categories will be key to our success.
These are big Beauties, Victoria's and B guide piece products.
And this theater Huff fumes IP related plush toys, and IP related buying boxes acted as our pillar categories and have generated explosive growth in overseas markets.
Opening up new avenues for all future grips.
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Luckily will play months Super store strategy, I believe superstores play a key role in growing mindshare, among consumers and strengthening our brand as they contribute contribute a larger sales.
For example, our recently opened flagship store Peking Road, Guangzhou refresh the Suezmax hurdle Singles' day in China are for us.
This is particularly impressive given ongoing weakness of consumption in China.
Particular, the opening performance the timescale flagship store was unbelievably strong and it has upgraded our understanding of our business, including for me and the whole management team and help us have better understanding of the market potential in the U S and a strengthened our confidence.
In further developing and making investments there.
The superstore concept is potentially a new path towards improving personal steel response.
Yeah, I mean, like I said, a couple of colleagues at Kantar.
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Yeah.
Now let me briefly.
Recent developments from top toy.
Hopefully revenue.
Just by 81% to be reviewed with an increase of four 6% you're using personal shows an increase of 10, 4% of average store count.
You can see how that kind of general thoughts around that.
But in general you.
You know couple of telling you that timing chicle, especially you wont see at what time and a shot at what time you see in some of the Tiger indulging him some of either those out time and time is what I mentioned.
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Hi, good money to especially chicken chicken.
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The changes in the channel where most of the region.
Although you didn't see a little glimmer of hope Jean Ghana equivalent of cervical cancer.
Doesn't that sound good human especially me.
I believe that high quality growth is just ahead of us in the June quarter top tourist product mix has been optimized.
Our exclusive products accounted for one stood up total sales, reaching the goal we set about two years ago.
Merchandise margin was about 46% five percentage points higher than the same period last year.
Accounting GP margin continued to increase to a comparable level mix of China, one year ago.
This is a reasonable comparison I suppose business employee and S analog business model well, we many attract punters between baskin stores, so when social reach a certain scale operational leverage kicking and drive profit.
Can you kind of saw that your hunting or shipment nutrient easily thought not just a bunch of them, Egypt and China and of course is tell us too much.
I'll now turn the call over to Houston for a review of our financial performance in June quarter and fiscal year 'twenty three.
Thank you Jack.
Thank you again for joining us today I'll walk you through our financial results for the June quarter.
No doubt all numbers are in.
B unless otherwise stated and I will also refer to some non <unk> measures, which exclude share based compensation expenses.
Revenue was 3.25 billion, representing an increase of 40% year over year revenue from China was 2.14 billion up 9% year over year. The increase was driven by a grid, so 42% and revenue from Minnesota.
<unk> and no gross of 81% and revenue from top toy.
The 42% year over year growth Mirasol flawed business was the result of a 9% growth in average store count and a 31% growth in personal service.
However, on a more comparable basis.
Doors sales increased by about 25%.
Excluding the impact of store closures last year.
Ed you want to send you your gross up top toy was the result of 24% growth in average store count and a 46% growth in personal service.
A more comparable basis cost of service increased by about 30%, excluding the impact of store closures last year.
Revenue from overseas markets.
One 1 billion.
42% due to the year driven by an increase of 11% in average store count and it grows about 10, 8% in average revenue per minutes of staring in overseas markets.
Revenue from distributed markets was about <unk>.
609 million, an increase of about 20% year over year revenue from directly operated markets with about 500 in the six minute increased about 85% year over year accounting for 45% of overseas revenue as compared to six 5%.
Plus units.
Both through fiscal year 'twenty to 'twenty, three revenue was $11 5 billion or 14% of base revenue from overseas market was about 3.82 billion up 45% every year.
Gross profit in the June quarter was $1 3 billion up 68% of your here gross margin was 69, 8% compared to sort of three 3% in the same period of last year.
The year over year increase was due to three reasons, one GP margin in China increased by about six percentage points. Thanks to.
Our continuous effort in brand upgrade to GP margin in overseas markets increased by another six percentage points, thanks to product optimization.
And higher revenue contribution from directly operated markets and three chicken margin top toward increased by 10 percentage points due to product optimization.
SG&A expense as a percentage of revenue was 19% down from 22 point to 7% in the same period of last year.
Selling and distribution expense was about 458 million increased by 33% year over year.
Driven by one increased IP licensing expenses number two increased personnel related expenses and number three increased marketing expenses, many interaction with our strategic brand upgrade up in Minnesota and China.
Going forward, we will continue to see marketing expense increase for a while but we are highly confident to make sure. The total SG&A expense maintained at a reasonable and controllable level of revenue.
<unk> expense grew a 161 million decreasing by 10% year over year.
Turning to profitability.
Trading profit was $619 million increasing by 154%.
<unk> operating margin in this quarter was 2% the first time ever for us to reach such a high level.
For fiscal year 'twenty to 'twenty three operating margin has reached nearly 20%.
Adjusted net profit in this quarter was.
571 billion, increasing by 156% year over year pull through fiscal you adjust not proceeds was about 1.85 billion.
155% year over year.
Adjusted net margin in this quarter was 17, 6% compared to nine 6% in the same period up 10 to 22.
For fiscal year <unk>.
Adjusted net margin was 16, 1% compared to seven 2% in last year.
As of July as of June 30, 'twenty to 'twenty three we had a strong cash position of seven point Street bidding compel to renminbi, five 8 billion one year ago.
Turning to capital allocation strategy, we have established a dividend policy of paying out no less than 50% of adjusted net profit in the future.
For fiscal year 'twenty to 'twenty three the board of directors approved a cash dividend in a month.
Yeah.
There are points for one to put you at a U S dollar.
About 50% of our adjusted EPS of zero point a while.
The aggregate amount of cash to be paid as approach makes me $128 five U S daughters made at U S doors, all 900 617.
B.
Minnesota aims to be a world class company, our capital allocation strategy in the future with balanced new growth opportunities and our commitment to bring stable return to shareholders.
So June quarter has witnessed too many breakthroughs in new hates in each major aspects of our operations.
Looking forward into the September quarter, we expect ourselves, we're continuing to grow strongly on a year over year basis, driven by better store level performance and still now work expansion.
Well our margin profile will continue to optimize on a year over year basis. Thank.
Thank you and this concludes our prepared remarks, we are now ready to take questions.
The first question today comes from the lines as Michelle Cheng from Goldman Sachs Line is open. Please go ahead.
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For D C and also that you should think of motto and how should we think about the market or the overseas business. Thank you.
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Michelle.
Thank you for your first question.
So we will continue to continue enlarge our cooperation with strong IP with global influence.
In line with our strategic direction of Brent upgrades and will help be helpful.
Spending on our service.
Specifically in overseas market, we will stick to our big IP product strategy and we will continue to fund the straw eyepiece in each important markets, we are seeing and that is that.
That will be a focus too.
For the target of IP. So we do not have specific numbers at this moment.
My My my personal estimate is that in the near future. It will be stabilized at about 20, 25% to 30%.
In the first half the IP contribution was up about 25%.
About one percentage points higher than the same period last year, but compared to you know 2019. It has been in a 10 percentage are higher.
And I'll say in U.
At least for a while the percentage contribution will be a 25% to 30%.
But in the future we will dynamically change the contribution from IP based on the market change.
And there is no significant difference between a core patient more between in China and overseas market with specific specifically bond debt piece in the U S or from Japanese.
As you know our global tubing, among our customers and we will cooperate with our IP licenses in terms of product authorization in terms of marketing in terms of shopping experience in the store experience and in all these aspects we will leverage.
Each IP to empower in terms.
For us in terms of you know branding power and product policy. Thank you.
Uh huh.
Yeah.
Okay.
Well, it's a leading it.
<unk> yesterday at the shelf was set off on it.
Yeah kind of lets say the European Commission get of course, what's really changing.
So sure that patient's body of tenants.
Ill, let anybody know Julien I'm getting a team in U D bypass opinion philosophically.
<unk> been in the past you don't want somebody cut.
How many of the Chisholm.
That's all they have done as part of the intelligent contact for example, <unk> tenant that shows a similar journey she came.
That turned out an email.
Hello.
So what kind of thought here she isn't there isn't a lot of TG. She should only changing there's always a chance also dependent.
Danielle machine cutting your feet too so that you know about it.
But there'll be no tender with tornadoes and yet what's yet.
On the table so hurdle.
Got it.
That kind of got out of total total put them put them together they don't basically.
I was in China, where you see about him.
<unk> done as you can.
Can you tell me I showed you the sort of Colombia and assembly cadaga call balance sheet.
I need a tendency with Sundance.
Predominant yes on audience. So on Monday in terms of the value that you see your thought here in Tulsa.
So he put them again.
In terms of your second question you are right that with the progress of our brands upgrades, we will stick to our in our big store strategy all flagship store strategy by the end of the by the end of June we are the average store size or administer China's stories about 100.
<unk> grown meter and this number has been stabilized during the past several years, but with the <unk>.
Improvements to our branding power and all products.
It has created aided some conduct some preconditions solve our in our big stores opening as I shared earlier only by open big stores can we you know increasing our mind share.
Among our customers.
These big stores contribute a larger soc and by opening big stores all flagship stores is also.
No common experience that we have learned from the big retailers to advance to retailers from European countries and the U S.
So in the first six months, we have opened.
Doesn't solve big stores that house demonstration effect for example.
The flagship stores.
Peking Road and the trends you road now in our store portfolio. We have about 100 about 100 flagship store or big sports largest sports our outreach. The initial capex is about two times so ordinary stores in the first six months. The postal service has been very grades.
These big schools, because there are no crystal shows is three times that of ordinary stores with a S. P. A seven 7% fired and the knot and the inventory turnover days with inventory turnover days off about 30 days.
It's about 20 days.
Less than the ordinary schools. So in general in terms of Oi and paybacks. These large stores will be in a far better than ordinary stores.
Hey, Michelle this is about your third questions about the Okemo.
<unk> margin.
Improvements I think first of all you have to know that these what percentage you know okay margin contribution.
It's the one before the allocation of how the quarter overheads.
Because there's always some overheads in headquarters that you win.
Alex.
Auto capable to H B U in the photo op margin of overseas business I would say no conflict between.
The 22% of the group level and above.
Only 6% so I mean, so China is between Dame.
I'd say our win ever the op margin of overseas business is above the average the group level is a profit contribution will be higher than its revenue contribution and if you look at the comparison between this quarter and last.
Quarter, I'll say the source from the improvement as many from the operating with outreach.
If you look at our expense structure.
In both directly operated markets and distributor markets in this quarter, we would see that the expense ratio.
The opex.
Sure.
No the decreased about you know.
Several percentage points compared to last quarter or so in general the op margin of overseas market. In this quarter has improved by about five percentage points on a quarter over quarter basis.
And the last point I would add as I say, it's not the first time that we have seen.
Okay margin contribution of overseas markets.
Surpassed 40%.
As we shared earlier before the pandemic when the overseas market contributed about 35 on nearly 40% revenue contribution than we already saw a nearly 40%.
Over 40% so margin contribution and I'll, just say because the directly operated markets of our overseas business is still picking up operational leverage so the overall.
Profit contribution from overseas market I would say you will you will not surprised to see it will fluctuate for a while.
Yeah.
Thank you.
Tom can you somehow control.
Okay.
Okay.
Thank you next question is from the lines of Anne Ling from Jefferies. Your line is open. Please go ahead.
Hey, Hello Nicola.
Okay Yeah.
Hum.
Oh, well I feel like a follow up question because it didn't make a yes. It does.
When they go on I, just thought they had didn't need that follow from that.
No well, what kind of woman that sends out to make a clean that C. O. So you're absolutely right.
Uh huh.
But you could probably handle on that I suppose.
It was a high state Nick Nick Nick a franchise that you get most of the night I told that he wants to tell them don't one woman died because sometimes there is a PD youll bear with somebody you support yeah downhole not take away that woman that they've got the idea that you've got just a whole woman. He can walk out with me al Dor they'll cut those out I think I thought you just all one sided because somebody wishes thoughts about god that he thought that was the target.
Yeah, exactly yeah, I'll take us through what people question, no and yogurt with peanut. There's just that way you sound like a woman my questions that I think are doing.
Well, maybe and I think of course that that guidance at all so that's helpful. From you know well that they think of Dundee and doesn't it got it that's all.
Yeah of course, I think Dean Morse it doesn't think alcohol outboard Nathan so unless I'm gay G. E sounds don't know you can well imagine that they could ask hey, you'll have Shanghai somebody else yourself don't make up on a young Kid with Toyota now to go Oh, My God, Oh, My God go well that debate when need be at least for me is I think like Oh My God.
I think that's a job he used to call them yet.
You should see it that way.
Because he talked about yourself about tier one that way like that nickel Mali.
Well, you'll eat Gabon to them, so well quite yet soggy shallow like Oh. My first question is on the superstore strategies, just a follow up question.
Like you know, whether we will be opening a self a superstar or how about how many of you still typically operated by the franchise and it feels like you know what is our target for the.
Uh huh.
Oh for the Spike in the superstore at our 300 to four.
No. It's still opening for this year for both China as well as for the overseas My Kid.
Oh, sorry.
My question is to come out from it is that it's actually for the.
Last with market.
Hi, Tom.
The south Contrapose churn that's it right.
No from the from Alec <unk>.
From the U S. You know as a percentage to that you also have the overseas sales.
Okay.
So that's on that at all.
How different is it so far.
No.
Oh, let's just say the China market I remember that in the past Oh.
Be gradually picking up.
Which will help drive to that sounds that's why I said profitability.
Yep.
Let me attempt to identify well Gee.
Gee they thought it cannot yeah, well I'm sure that took a lot well Neil.
Mega Tejas, maybe that's a way to answer it.
In July we cut our lineup I can't see it.
Sandy.
So I thought I'd say it jumps out kind of a close okay, well doesn't want you'll kind of it was yes. It was okay. It jumps okay. Yeah, I think that's a woman still mostly the Amiga essential nasal glucagon Vegas hotel. So that you don't have done yet total audience that Jenny team Petter Goto.
To what thought in that journey, one yeah, Judah good opportunities to put in a tunnel totally hear you.
So that they may look like out.
Didn't let it go forward.
You got to build them, so well look at it is on label.
When they are done yet.
You thought are you guys talking about making your vessels or let me say something about it.
So I'm, making it up on doping window again, almost not like that.
She has a thought so that was sort of I do the math when you have to live it until that all that when we have put on that.
To look at it.
The lateral length.
Yeah.
Okay. Thank you.
Yeah.
Oh.
For your first question about the.
The largest large store strategy I have to say, we would stick to this strategy.
In my you know design, we have a blueprint that in the near in the future. We do believe that each city. Each probe interested in China has a flagship store that represents many source brand image. So my best guess is where you should have by.
500 is such stores.
And there's.
There's no such thing that you know these stores should be directly operated all you know franchisee all crowded.
Well.
The first thing the first and foremost important things we should fund the optimal location and we will suggest every one of our main source overseas market to open.
Suitable flagships stores, because as I said, the big store strategy is critical for our future success, because it's Kim brings our it brings meaningful brand image and our stock performance to a new H and it also has a demonstration in fact.
Well its peer stores among the same savings to markets. So for example in the U S markets our flagship stores there.
You know we can deliver like one three to one 4 million service record and a four hour no Guangzhou bedroom road flagship stores.
We may we may have you know five minutes so as per months and all of these are now on new sales record for municipal universe.
And for a second question about the U S market, specifically I'll say.
The U S market for the past three quarters. It has two quarters ranked the first among its revenue contribution from overseas market and in June quarter. It's the second largest in terms of revenue contribution and the revenue contribution of our overseas market is high teens and its revenue contribution.
Our total services like mid single digits.
During the past several quarters and you are right that we have you know a lot of potential in terms of store accretions in terms of product optimizations in terms of unit economics.
And in the U S in the near term and as I shared in our prepared remarks.
The economics of the U S stores has been improved a lot for example, the opex ratio of U S stores for us during the past 12 months decreased by about 20 percentage points and that is one big thing that turned this business into <unk>.
A profitable one thank you.
Thank you.
Sure.
Yeah.
Okay.
Thank you next question is from the line of <unk> from Bank of America are in Lynch line is open. Please go ahead.
She gets even at your plant, yes on how you feel hot once you may know Lucy.
She just human that can go on being in stock.
She Anton with Acadia move natural churn yeah, no chico's.
So I wanted to start just with Apple juice founding Apollo monthly you can do without Samsung elite I should do.
Why not just show that landscape and she'll conduct I found it helpful. Yeah go.
Well and I don't see cut Antilock E T J I shouldn't get that off with them within the hip with Amazon.
Sure.
Tiago to shift towards the timelines, Josh Weinstein gender equal financial haul when I told him again, either you eat up I'll call. It G that you know when we get them out either yeah, Yeah, Louisiana team somebody's soundly ECF in late I'll caution that arent, yet that's about right. So cheap entrepreneurs franchise out just yet.
Oh, what's that finding.
So solid Daphne mentioned in the announcement that China is pocketing qualify southern stores in 2027, so what's the allocation of geography allocation off that was news to us and do we have any midtown path for the overseas market, which may have greater potential in the long term and secondly is on the China strong unit economics.
So call that so what does a detailed GP margin operating expense breaking down.
S payback PM. It thank you.
Yeah.
Okay.
D doesn't team.
Well I mean.
Chick Fil, a which had an essential element of that he was thinking about.
I'll, let him again.
The Nikkei shutdown, yes, as long as the comparator.
So no need to cut it so you call it cut in at Who's on our funnel.
Only went out what Denise may celebrity Campbell, GTT implicitly I'm, okay to Shanghai.
Let us figure out how to have that.
Okay. Thank you would receive purpose crushing them about the store opening and potential.
In China, our target is to have 5000 stores by year end of 'twenty two to seven we have strong track record and we have high confidence to achieve that goal and in terms of overseas potential I see.
From my perspective, we do not have any you know why are you concerned about.
The store opening overseas market for at least the next 10 years.
My personal observation in this year I have spent a lot of time in overseas market and Scotts.
In a lot of countries and oldest market, we can't Oh come one Minnesota athletes to one means of stores for each 100000 people in overseas markets.
And this report your second question about the payback of the domestic stores.
We strongly believe that the payback period for most of our franchisees has been has been shortened during the past several.
Several months.
There are several reasons. The first is our Bachelor of store performance during.
The first half of this year and the second reason is the optimization of the expense structures I E. The rent level has decreased.
Stuffing cost optimized and and there are other savings in the cost to so our estimate that.
Our franchisees are outreach bell margin profile has improved significantly compared to one year ago two year ago.
Especially in tier one cities in this year, we have all reserved that in tier one cities are minutes of stores.
The sales per store increased by 50% more than 6% on a year over year basis is higher than the 20% of the outreach you'll be a groups and for the new stores in tier one cities in this year, we all the debt they all average rents.
Rents are level has decreased by single digit compared to last us for us.
As Ms too just to share in the first half we have opened a batch of demonstrate to big stores. So the big stores. The average payback period is far far less than the ordinary stores. So I would say.
As my last point to your question is that the big stores will also help increase.
All of our franchises. Thank you.
Actually you are talking to you soon.
Thank you.
Thank you. The next question is from the line of signed me along from UBS. Your line is open. Please go ahead.
She said, yes, it's wrong to say he says yeah of course, the Gulf, but she now that you.
Got it yes, yes, well, which again are going to see if there's a T. S N to Holland cocoa there sure largest coordinate I think it's honestly Auschwitz Shanghai by about.
How should it go based on call. It comes out in the Trump tax not cover page or two Cali Sanjay just what's your it sounds Jacob kinetic whereby the Golden child, I pay a whole lot of attrition, which we don't have patient monitor Chan.
Chance this year to get to your food sound quality tissues T. S. Anyway, you can pick out junk Tom let's figure out some talk <expletive> Kashi, which you don't highlight if you took out the cost.
They use that not to go show district by to get to see you guys sell show them to go to get to Continental what can I say to yourself. So.
So we saw an announcement at R.
Our July sales is also very strong with a domestic growth above 25% over sick right, 50%. So what are the reasons and drivers behind that thank you.
For example.
Thank you Samuel this is he said yes.
Our domestic sales increased by more than 25% in July months as it is.
It's between 25% to 30%.
Driven by two drivers the first is the.
No.
The principal source of Minister China increased by.
Mid teens during the same periods and we have also in the defense of store number grows so a single store basis. The no mid teens Crystal sales increase was you know major from you know a low single digit or a S. P. A hike and a high single digit.
About 10%, so no traffic improvement and the overseas market.
Also mentioned in the earnings release that the <unk> increased by about 50% and I see the overseas you know directly operated markets. Your house you know see a.
Continued high high growth rates and are comparable.
To the June quarter.
And in overseas market. We also see you know the drivers also come from the traffic and the PSP height.
Thank you.
Thank you. The next question as something a little song from Industrial Securities Line is open. Please go ahead.
Oh, Yeah, Yeah, Johnson said Ethan.
And I think that you want to quit the whole like he'd been no.
It's all exactly Josh.
So I should see how something page there's.
As a woman that we like to keep.
Uh huh, she can make the MEO, you'll keep that she shall highlight that we didn't meet its you know what kind of somebody else's.
Hello, 20, endogenous enzymes, she found quite I can't yet share.
Equally all Eagle Bulks that she has done so.
Sometimes I talk with each other singular token Michelle Neal socially I'm, saying that Oh God God. She was $17, how do you cut them down there.
Pardon Black Knight, Yeah, Yeah. So it sounds like just Goldman diminish it for me.
Suddenly the condition not a something like you said ghansham I'll just catch it watching it and then can you put on that that you thought you send a photo.
Did you say you will I E N a.
Coordinator Y that could then Jody.
The whole way to do nothing.
I have two questions. The first question is about.
How to improve that supply chain and about the opposite supply speed and controlling that inventory Oh SKU and.
The second question is how can we forecast at S. P. A.
It increased by 3% this time at that.
How to weight forecasts about the overseas E. S. P on the next year and that's.
The mistake as be up next year. Thank you.
Well it had to do quite well.
Timber ridge at home.
Oh.
Yeah, they are putting it.
And they are doing that.
Okay, I'm gonna unethical.
Yeah.
But can you talk about people don't make long or whatever you sort of have door M.
He may not answer well I mean, it's I'll say.
Yeah, So again, a bunch of training a lot of room there.
China, Yeah, he can work with them.
Okay.
Thank you for question. So in terms Sylvia now overseas supply chain expansion plan, we have two points two out of here. The first is that you know.
We will stick to it.
Our you know our accumulated.
Resourcing trainer, so China will definitely it will be the major supplier.
Supply chain base, but we are still exploring new our new partners in southeast Asian countries, such as Vietnam.
So on the second we will increase the percentage of direct sourcing from local markets such as the U S. Market. For example, we have been.
Proactively increasing the percentage of IP related snacks in the U S market.
And for your second question about E. S. P in overseas market I've saved in China's around you know 35, a M b rise and now it's about 37.
In the June quarter.
For overseas market I see we have a rough number that outreach.
Outreach he ASP being overseas market is about two times.
A little bit higher.
<unk> of you know China's asps.
In countries in specific countries like in European countries and.
In the U S. I'd say this number is about three times or even higher than that of China.
That our China.
You know all rapid growth market, such as the U S and Canada and so on we still see OSP, increasing either their fastest speed.
Thank you.
Thank you once again for joining us today in our conference call now comes to an end.
Any further questions. Please contact when they sell IR team our contact information can be found on today's press release. It will see you in the next quarter have a nice day goodbye.