Q1 2024 MINISO Group Holding Ltd Earnings Call
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Speaker Change: San Diego about cliffs without chassis.
Speaker Change: When do you do you know what you want.
Speaker Change: Now I will walk you through the business update as part of our three major segments I mean, if somebody one China and its overseas.
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Speaker Change: Sure.
Speaker Change: Let's start with the minister of mainland, China, which continues to grow with a high quality.
Speaker Change: Jimmy increased 60% year over year compare with 5% increase of the domestic retail so all consuming according to National Bureau of statistics in particular same store asset coverage of over 98% up last year I think continued to outperform our peers in this context average transaction values remain stable.
Speaker Change: Transaction volumes recovered to 98%.
Speaker Change: And entering into June quarter things are soft trends, we've made off of it.
Speaker Change: Year to date same store sales for copper rates, reaching nearly 100% of the same period last year.
Speaker Change: Being an industry, leading same store software will be one of our priorities in this year.
Speaker Change: Lugo singer you, even thought about Tony I'm not sure what milestones you another nine deep Genesis time in country.
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Speaker Change: Someone's, having a concern about lets users sometimes.
We summarized two reasons for achieving outperformance same store golf first we stick to product innovation and solidify our I T things CIT product strength.
Speaker Change: Leveraging our observation of human consumption trends and our own advantage, we are gaining market shares and of course their T. J categories, such as black box that toy.
Speaker Change: Well, let me later product et cetera.
Speaker Change: In our Q1 self from such category accounted for over 40% in China, meaning year on yourself increase of more than 40% jargon, a 60% growth of total soften China Ah Monte Blind box Calgary thought up nearly 200% growth in of travel related products achieved nearly a 70% growth.
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Speaker Change: Yeah, So Jeff Siegel from their food.
Speaker Change: No.
Speaker Change: Second our offline to online models or ultra well developed rapidly in.
Speaker Change: In Q1 itself increased by over 80% year over year effectively compensating for the natural decline in foot traffic after the public holidays and driving the growth of our advanced ourselves.
Speaker Change: Appeared to in source all top selling SKU you within <unk> are predominantly concentrated to IP product and items that are flooding immediate cause human needs. This year, we have implemented several operational optimization measure such as extending the operation of ours, all both juul and improving service quality.
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Speaker Change: Syngenta lead you throw a dart on the answer to John Chumby in Jiangsu, China Chicken are pumping. So you want more convenience tissue puzzling thing thought in a sense you don't choose anywhere junior <unk> well suited to thoughts on her she does that belong to tell them, who you know you talked about putting a good one.
Speaker Change: Kona and when do you go.
Speaker Change: Got it.
Speaker Change: Yes, so much of the window by lead instance, Tim Coffey.
Speaker Change: And this quarter, we added 180 net new store in Milan, China, setting a new record for Q1 structurally there are several things we're noticing first over 50% up new stores were located in the break in second tier cities. We don't know why they shouldn't have economics, we have identified lots of commercial spending in China's top tier cities the Centcom pharmacy.
Speaker Change: Nikki for future sports fashion.
Speaker Change: Second the total numbers off our directly operated store had reached 29, nearly doubling 64 from a year ago. It was due to our ongoing operations nobody passenger into various channel metrics, including directly operated flagship stores and we'll continue to refine our channel strategy. This year and looking forward to sharing more details.
Speaker Change: And in the near future Lastly store network in China has seen high quality development, so a quarter.
Speaker Change: Quarterly rate remaining healthy at around one 4% for three consecutive quarters.
Speaker Change: Challenging how about your father.
Speaker Change: Moving on to minutes of overseas business updates.
Speaker Change: So yeah, Hi, How're you doing those tests has told you have told us so shall constitute a little why don't you cheap food, who want to sell you couldn't be done on a little looser chisel three and this was also the Columbia Sundar Violet yourself.
Speaker Change: Cook Cook couldn't be accordingly by robust user entry so digital Colabella Boswell comes on the scene Saddam John how about some of the Thunder was about sort of the question Tobey.
Speaker Change: Can you somehow.
Speaker Change: Firstly, obviously business grow once again exceeding our most optimistic expectations revenue was RMB, one 2 billion up 53% year over year in particular revenue from directly operated markets has seen some straggling year over year growth up 92% or 84% up a comparable basis, achieving a world.
Speaker Change: Over 80% for four consecutive quarters.
Speaker Change: <unk> operated markets accounted for 58% of our oversea wrapping these full year over year quarter over quarter increase in Robyn revenue shares.
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Speaker Change: China on the hospital well, Jeff how about Jim will lead you soon.
Speaker Change: The only so not I'm not sure Jimmy.
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Speaker Change: Secondly, Jim Gouin oversee increased by 46% year over year, we had 104% increase in exactly operate at market and a 29% increase in distributor markets.
Speaker Change: On a comparable basis the growth they were 78% and 35% respectively. Amongst key region North America increased by nearly 110% Europe increased by over 80% Latin America was 40% in Asia with 34% structurally Latin America and Asia.
Speaker Change: At a top two markets accounted for nearly three quarters of oversee at G. M B, while Iraq and North American markets are growing rapidly with over 20% G. M <unk> contribution.
Speaker Change: Clearly North America, when we relaunched its operations in late 2021, it accounted for only 10% of Oversea G M meat.
Speaker Change: And now at 13% already we expect that assured of Europe, and North America with continued to rise rapidly.
Speaker Change: Is that G animal weekly calls with them on a tour in ANZ.
Speaker Change: It could be a two year shoulder with some kind of allows you to.
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Speaker Change: That is I don't know that much about how about food, which would also be able to continue to adopt.
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Speaker Change: So no I won't talk about Lam, it's another vessel, yes, it will.
Speaker Change: It's one of them.
Speaker Change: Although this was a full quarter of or did you kind of Shanghai was Argos I'm trying to understand that don't go to them.
Speaker Change: Certainly one of the key driver of G. M E rapid growth, what's the same store same store sales, which fell by 21%, but then that directly operated markets thought that 32% in the softball, while the distributor markets growth by 80% across nearly all our oversea regions. We have achieved positive same store growth with north.
Speaker Change: America increase by around 32% Latin America by around 75% Asia by around 19% and era by around 13%. In addition, top 20 overseas countries and regions as a whole achieved 23% in same store softball.
Speaker Change: Who you have asked what I can tell you about Indian woman, yet clearly a tornado kill you cut out a shingle.
Speaker Change: Sonya how about cargo.
Speaker Change: Oh, I'm jumping to call out kind of slow.
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Speaker Change: Moving on up Islanders, Washington to do it you can you tell me what how did you talk about wireless system can chew that huh.
Speaker Change: Wishing you a grand total of them loosen forgive me collaborate from Rio Grande if I'm honest with you.
Speaker Change: In March quarter, we added 109, net new store in oversea market. Another new record for Q1 store opening I mean length of the lessons of last year.
Speaker Change: I'm sure there were extra stronger control over the pace of store openings. This year aiming to open more high quality stores before the peak season in Q4 separately, 60% up the new stores will contribute it by directly operate in markets with Indonesia, and the United States to get it contributing over 40% amongst key region Asia contribute over six.
Speaker Change: Per cent up new source, while North America, and Latin America contributed 17% and 10% respectively.
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Speaker Change: So Bobby.
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Bobby: If he does how many I mean this is all people.
Bobby: I know you said you had some good almost.
Bobby: While changing pushing due to assure so I'm gonna Gosh, you show, where the lead production pattern Dow Jones Toy show visa she met a pin pad.
Bobby: I mean, you said Hello Challenge you said, yeah, well, we're not going to go away.
Bobby: Well among chunk on them, if you don't want them when we changed the kind of all we are bullish on most of them also don't meet your it's I'll tell you. What are you what are you doing engine sure. Okay. Good.
Bobby: Michigan.
Bobby: In 2020 sport, we further deepened our implementation of IP strategy for <unk>.
Bobby: Oh, you celebrate Chinese new year with Chi Chi NTT company and in responding to our consumer Internet initially baked adult life event, all flow parade celebrating the Barbie 65th anniversary new collections to draw attention.
Bobby: Moreover, the.
Bobby: The lunch in Chicago at the end of March spiked it up in nominal consumer great 50, Bucks not partnership's Casper, that's only to buy our undisputed state as a leader in IP collaborations.
Bobby: This collaborations can be summarized with five.
Bobby: Consented itself Womens representatives product launch speech I understand and the efficiency epithet is coverage and the unprecendented.
Speaker Change: Yes, Archie type of thing.
Speaker Change: This collaboration is the milestone or our product team.
Speaker Change: Rich and having to have an ability in identifying trends IP R&D supply chain management and the products of the Bill and in April are back with product launch and high quality centers. It also set a very successful benchmark for future IP co branding and marketing I strongly believe that the brands that bring joined too.
Speaker Change: Humor and put consumer first will finally be favored by customers.
Speaker Change: I mean, it's all have created multiple phenomenal collaboration C bench, thanks to our strong IP kind of bearish and capabilities. We are pleased to see that more and more young consumer on social media platforms, such as Playboy and shallow I'm sure are tagging meaningful and require us to call up calibrated more IP.
Speaker Change: I want you to chime in a shoulder telling you thought all about I'm not sure.
Speaker Change: I'm wondering if you've done it you just don't see it won't be you do have a powerful with sunbelt family you buy yourself pulpwood side be it won't be a thoughtful chisels without listening you know why don't don't local shall I brought it up I don't know if you're talking about children's on it. So you will be on budget.
Speaker Change: And this quarter I think products accounted for 26% of total sales in mainland China accounted for about 25% increased slightly year over year.
Speaker Change: Oversee IV product shipment increased by over 100% and contributed over 40% of total shipment data.
Speaker Change: Latest lead moving forward to our target of 50% I kept off by 2028.
Speaker Change: Yeah, Let me take that you have a couple of hundred to Sundar.
Sundar: Well a little upon that topic what are you what are you doing.
Speaker Change: Well, it's all going to find out probably your turnover when you use I guess season, Neil evaluating them and Jim would you forget Bill gautreaux watching choosing the school. So that's all I have sat on it.
Sundar: Yes.
Speaker Change: I'm going to talk to them, we believe that turning point for the top toy business has arrived.
Speaker Change: Since the inception of choice that learning to a leading player I think pop toy industry.
Speaker Change: And you'll start off 1 billion and with 160 stores across nearly 70.
Speaker Change: C D surround mainland China.
Speaker Change: Okay.
Speaker Change: So do you to something with the couple of other questions.
Speaker Change: Controlling instead of Ciena cut immobile doing incident Wassa, sometimes are you back up when we get your thoughts on it Sam will probably happen again, it sort of jumped off.
Nobody wants to go.
Speaker Change: With the business moving on track, we have stronger comprehensive talk twice back that expansion and have therefore rice at store opening targets from this year from 50 to 100, which means that we will have 250 stores or so top toy store by the end of 'twenty 'twenty four.
Speaker Change: Once you do all your solar Columbia, you talked about that a little with the world.
Speaker Change: It's a natural move us. So you know it goes without Gabriele forgive me I don't know when they are fully on permits and Jocelyn.
Speaker Change: During this quarter revenue increased by 55% year over year, driven by a very high quality up 26% seems herself girl and a net addition of 44 stores year over year.
Speaker Change: So they'll come on of course, I don't know so do you know, which all 'cause. It suggests along do you know can you tell me I told you yesterday eligible so shouldn't you for a minute.
Speaker Change: So I mean chicken, we want monitoring Colombia to go bundled island him being a bump in Sudan, Kenya, Ghana Savant.
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Speaker Change: Andrew John Jim, but don't eat.
Speaker Change: With the rapid growth in skull topline set to unlock full profit potential gradually and have achieved positive profitability for two consecutive quarters on one hand through the optimization of product me if gross margin improved by around 8% point there over a year on the other hand as operational leverage to in fact and with Mark.
Speaker Change: Targeted investment in marketing.
Speaker Change: Menswear shows have been further reduced.
Does it all wash out I'm not sure what.
Speaker Change: They also have some you know you're going to do when you and find out we Wanna shouldn't you do.
Speaker Change: Yes, it's always so women you want generally yeah, well I'm going to show visual Julien. So don't you, Jim but don't Joel for golf shoes, So kudos for that.
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Speaker Change: And so Jim does go out on a chill muddle off on region false agenda for Jesus.
Speaker Change: Do you do with you Joe Dziedzic agenda well.
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Speaker Change: Please don't usually Joseph Tung.
Speaker Change: Do you believe you could join.
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Yeah. The 'twenty 'twenty four is the NIM starting points for five years development plants up in Minnesota.
Speaker Change: Meaning with the ending target in mind, and the philosophy I uphold us always to realize our long term goals, we need to pursue excellent detail orientation and continuously develop high quality work. Therefore this year I have spent a lot of time and card games in development as a corporate culture that a simple efficient and straightforward one that can provide.
Speaker Change: Complexities, I mean teens, Jack or T J okay.
Speaker Change: Do you want to embrace as professional pest and simple culture in Minnesota.
Speaker Change: That's enough and the necessary patient and persistent with remains committed to our long term approach, taking each stuff with care and diligence to accomplish our five year development plan.
Speaker Change: Sure Yeah, so what I don't want anything, which I mentioned, you said without that showed up in general.
Speaker Change: Hello, Don how would you work.
Speaker Change: I'll turn the call over to Ethan for receivables all of our financial performance.
Ethan: Thank you Jack and thanks, everyone for joining US today, let me walk you through offline insurance for this March quarter. Please note that all numbers are in renminbi unless otherwise noted are also referred to some <unk> measures, which exclude share based compensation expenses.
Ethan: Revenue saw a robust increase of 6% as followed by Jack we are particularly encouraged by our strong same store sales growth. Okay. So 69%.
Ethan: Achieved concurrently with the rapid expansion of our global store network in.
Ethan: And then in China. It means on a same store sales support.
Ethan: 8% of previous figured a high benchmark set up the release of pent up demand for calling the Covid lockdown.
Ethan: The overseas market.
<unk> reached 21% to passing the fixed season, SSG or 20% observed in the last year December quarter.
Ethan: Particular motive force to 2% same store sales crews in overseas directly operated markets and 18% gross in distributor markets. Additionally, top tours as Judy was remarkably at 26%.
Ethan: Regarding our channel mix.
Ethan: We have noted a significant surge in the contribution from overseas markets.
Ethan: Share has grown from 23% and see why it into 1% to 63% in the current quarter. This increase is particularly pronounced in the overseas directly operated markets, which have seen their contribution to total revenue more than doubled.
Ethan: Coming from 8% in Q I tend to want to 19% in this quarter.
Ethan: Slowly top flooring has been consistently gaining traction with its revenue share or clothing from 3% she walked into 1% to 6% in current quarter, indicating its revenues to unlock even more significant potential moving forward.
Ethan: We're optimistic about these shifts towards a more diversified revenue stream, which underscores the strength and resilience of our business model.
Ethan: Gross profit margin reached 43, 4%, making marking another historical high and representing a four one percentage points increase year over year. This improvement is attributable primarily to two factors.
Ethan: There was a higher revenue contribution from overseas markets, particularly directly operated shuchman's, which accounted for over four seven percentage points increase of condensed the GP margin.
Ethan: Can the optimization tacos chicken margin resulted from our strategic shifts shifts towards our product mix with greater profitability.
Ethan: SG&A expense amounted to a.
Speaker Change: Hey, hungry.
Two 6 million in total contributing 23% of our revenue and increased from about 20% a year ago. Despite.
Speaker Change: Despite this shoot the structure of the major expenses remain stable, indicating effective cost management image expansion.
Speaker Change: This increase was attributable to number one increased personnel related expenses logistics expenses and other expenses in relation to the growth of our business.
Number two increased expenses in relation to the directly operated stores, including payroll rental expenses.
<unk> expenses as well as marketing expenditures for new store openings of which a century investments for our new store openings and ongoing success of our directly operated business.
Speaker Change: Let me give you. An example by March quarter, we had 281 such stores in overseas market.
Speaker Change: 101 stores.
Speaker Change: It's 7% and in mainland China, we had.
Speaker Change: Four six such stores for our two brands opt into law schools or 84%.
As we rapidly expand our overseas directly operated markets there may be a temporary surge in.
Speaker Change: Related expenses and we might also fluctuations in this expense across different quarters in the year as we have been talking this for two quarters in our earnings conference call. However, we are confident that the high gross margin driven by the increased revenue contribution from our directly operated markets.
Speaker Change: More than offset the operating expenses and protect margins in this March quarter. For example revenue from all overseas directly operating market solar 598% and on.
Speaker Change: Page.
Speaker Change: Page, 4% on comparable business, which has outpaced the growth in expenses.
Speaker Change: The shift expansion of our overseas directly operate markets May also have a consequential impact on the distributions.
Speaker Change: Our operating profits.
Speaker Change: Let's look at the distribution of <unk> 23, so over 60% of our operating profits during that two year from overseas market were realized in the second half.
Speaker Change: In contrast to over 50%.
Speaker Change: Our operations in mainland China.
Speaker Change: Costco is 55% of our total op profit for the year were realized in the second half for this trend.
Speaker Change: It is expect to continue in C Y can do for with profits even more skewed towards the second half of the year.
Speaker Change: Turning to profitability operating profit was 743 million up 29% per year op profit margin was 10% up from 19, 5% in the same quarter last year adjusted net profit was 600.
Speaker Change: 17 million up 10, 2% year over year, adjusted net margin or 16, 6% up from 16, 4% in same quarter last year adjusted EBITDA was 965 million increasing by 17.
Speaker Change: Such a 7% year over year adjusted EBITDA margin was 25, 9% compared to two street not sensed in the same period of 22 discrete adjusted.
Speaker Change: Adjusted basic and diluted earnings per Eds workers, maybe one point.
96.
Speaker Change: Increasing by 29% of the rigid turn into cash position. So end of March quarter, we maintained a strong cash position of $7 3 billion.
Speaker Change: In April we distributed cash dividend.
Speaker Change: I mean, the 650 million more than 50% of adjusted net profits generated during the second half, we'll see wide tender to industry.
Speaker Change: We are committed to a dividend payout ratio of at least 50% and brain September or stable returns to our shareholders turning to working capital.
The channel inventory turnover remained efficient.
Speaker Change: March quarter, 24% of meaningful brands inventory located in overseas compared to 18% a year ago.
Speaker Change: Inventory turnover days were 83 days on brand level, including 72 days for Minnesota men in China in the 153 days from Minister oversees directly operating markets.
Speaker Change: And for the top 20 markets in overseas distribute distributed markets inventory turnover days was comparable to the level of PTC market.
Structurally inventory over 180 days accounted for about my sense on group level flat year over year.
Speaker Change: Turning to capital allocation net cash flow generated from our operation was 602 million Capex was about 110 to two minutes and free cash flow was.
Speaker Change: 500, or so to get them.
Speaker Change: Repurchased 71 million worth of stock in <unk>.
Speaker Change: Last quarter. If we included the dividend paid out in April we have returned around 710 to mid and back to our shareholders year to date.
Speaker Change: Our U S. IPO, we have returned three points by better Reminbi Trust shareholders.
And we will continue to commit to a capital allocation strategy that balances growth and return.
Speaker Change: Our performance in March quarter, once again demonstrates the strength and resilience of our business model and reflects our ability to execute on our IP and the globalization strategy.
Speaker Change: Confident that we will once again meet our full year target and deliver on our phone.
Speaker Change: On a value to our consumers worldwide. Thank you and this concludes our prepared remarks, operator as well.
Speaker Change: We are ready to take questions.
Speaker Change: Next we are moving forward to the Q&A section.
Speaker Change: The first question is coming from Mexico, Michelle Cheng from Goldman Sachs. Please go ahead.
Michelle Cheng: Yeah Dong hee.
Michelle Cheng: Now to the technical team golf Ashok <unk> now with the Daniela <unk> Peter when he said when Gwen J B a woman can you kind of on the got Oh Sanjay for you too.
Michelle Cheng: Oh, Okay I got it.
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Speaker Change: Thank you Joshua when we can come out of our factories.
Speaker Change: Oh, Columbia noted about the options that would have changed it Moshe.
Speaker Change: Nah I'm Danielle I was hoping she says I got the whole, yes, it wont be all might not understand yet.
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Speaker Change: And that's a graduation economics about cardio cabanas electricity on onshore nonprofessional, Guangdong, Joe Vornado being combination.
Speaker Change: Now how do you all go on pieces to Ottawa YJ quiet on the make up of potential Kathryn King and country, either the mainboard from P. P. M. So I can't imagine that kind of all the people of banking the pn shotgun Monday.
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Speaker Change: P C L King.
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Speaker Change: How might that come with banking casuals that kind of academy for hygiene in our opinion, a buyback might be final one Tisha, California Molly.
Speaker Change: PMT does it sounds like you did go on how you would go to the GP margin that you got to go walk up along with us.
Speaker Change: Now how come.
Speaker Change: And I was wondering if there would be and I give them a GP margin she had to come back to you.
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Speaker Change: Chocolate of Jpmorgan life, a life that Scott.
Speaker Change: Got you got you.
Speaker Change: Now what can I. Thank you all so.
Speaker Change: I have a quick question firstly on regarding the domestic same store sales trends and.
Speaker Change: And Michelle on the visa central sales couple of months.
Speaker Change: G L C D and the store optimization optimization is a key focus for this year. So is there any is there any progress that you saw him and Duane history with us and how this will impact the coffee and ticket size and second question is regarding the U S.
Speaker Change: Okay, you said, we thought ladies.
Speaker Change: So economics and the sales trend and we talk about exploring new locations on ECS. Okay.
Speaker Change: Without any thought HFC fellow myself the U S.
Speaker Change: And third of these Oh G P Mod genco in the flight management shared that GP margin in like a lifetime, but you look back on the China business excuse me Morningstar, and we have or Colorado.
Speaker Change: Thank you.
Speaker Change: What are your thoughts and thundered at once yes, well me Sean horizontal cut audience.
Speaker Change: Hello again.
Speaker Change: So I know you're not you don't bring in Louisiana.
Speaker Change: Hello, again, Regina doesn't really didn't Don Mckenna KN, we will move to the euro.
Speaker Change: So I don't know.
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Speaker Change: Oh, hi, there wasn't a thought and emotion Shaw.
Speaker Change: So that one didn't have thought unless you listen it's a push out of control.
Speaker Change: Thank you Michele for your question our flagship strategy.
Speaker Change: The basic idea is that we.
We really want to open as many flagship stores as we can do.
The vast commercial areas.
Speaker Change: So things are C warrants and two three we have opened a serious so very good flagship stores such as our bedroom routes for in Guangzhou <unk> store in Shanghai, and Bushnell Crisscrossing Beijing, we have accumulated a lot of operational and store expansion insurance during this.
Speaker Change: That's the opening and operations, but still I think it's early days, we're still optimizing the.
The unit.
Speaker Change: Yeah in the model so all blocks flagship strategy as I mentioned in prepared remarks.
Speaker Change: We can show more in our earnings conference for the near future.
Speaker Change: Well, you know when it's going well and well make what data center yourself on the truth of again.
Speaker Change: Oh, Dear Oh Union, so do that I mean, what do you want a woman it usually does.
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Speaker Change: Kelly.
Speaker Change: So those are you know BARDA can be summed up ourselves with our system Lumping me versus on a photo boil contamination.
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Speaker Change: So you had trouble Washington will do so.
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Speaker Change: So digital great time tenure, social casino, you buy yourself G and free TV.
Speaker Change: Yes, you don't mean, what's a little time, but you got it or not it's pretty well known.
Speaker Change: I'm from China mobile.
Speaker Change: So for a customer about the U S about this issue.
Speaker Change: And the store expansion plan. So we have seen the uptrend continues in this year and in the second quarter actually since the fourth quarter of two items one on the very excellent operation of our local team there. The U S business has been capped.
Speaker Change: Very high gross beta speed for a lot of quarters.
Speaker Change: According to our data.
Speaker Change: We have achieved like 130 CAGR for our sales in U S.
Speaker Change: Between <unk> and see where I can just treat.
Speaker Change: In this March quarter, the same store sales of United States still maintain a very high growth, so 30% to 40% and that is while all our resource of our confidence about the United States market no at this moment, we have around 100.
Speaker Change: T well 50, 150 stores in the United States and our annual target for store net opening eight to 100 stores. According to our experience and our internal data during the past two years in the United States.
Speaker Change: The December quarter, the exceed them will account for more than 50% in terms of revenue and net profit and with a very obvious just novelty and with the U S revenue share.
Speaker Change: Getting bigger and bigger this year it will definitely help cost to achieve.
Speaker Change: <unk> target.
Speaker Change: And therefore your question about the <unk>.
Speaker Change: S SG recovery rates and different tiers of cities in China.
Speaker Change: You'll see in this year, we have seen tier one and tier two cities are out for lower tier cities.
Speaker Change: At least four minutes so.
Speaker Change: So we are 98% recovery in the first quarter and in tier one tier two I would say, it's new it's new.
Near to 98% and in tier three and low velocity is it's like no.
Speaker Change: <unk> mid single digits, lower compared to last year.
Speaker Change: And for GP margin. Please go back to the workforce.
Speaker Change: Yes.
Speaker Change: Particularly margin if you look at this chart you will see that the meaningful mainland China. It has a negative contribution of one 7%, but this chart.
Speaker Change: This calculated bought based on weighted average.
Speaker Change: Because our Minnesota men in China's gross margin is lower than the group level average. So it is a negative drag of the of the overall GP margin.
Speaker Change: So this is the case, where last Q1 for Q1 in last year and this year.
Speaker Change: In this year, we have seen the GP margin in mainland China improved.
Speaker Change: On a year over year basis, so with its revenue contribution decreased only <unk> of your business the drag worse.
Speaker Change: Was lower compared with one year ago. Thank you Michelle for questions.
Speaker Change: He is all I can say you said.
Speaker Change: Thank you.
Speaker Change: Second question is coming from Bank of America Merrill Lynch, maybe Lucy Yu.
Lucy Yu: Go ahead.
Lucy Yu:
Lucy Yu: Just a quick decision on that before on what you've been able to sell and ship our chairman I was going to Atlanta. This will come out how much had been done yeah Palm Beach on about one geography eat I'm just trying to gauge how it will play a whole too Alex you don't need an.
Lucy Yu: <unk>.
Alex: Sure Tony.
Alex: She's on coastal we gained about a huge harley's on shazam.
Speaker Change: Lockwood Chicago leaned on some of the ETS, how about 20% also normalized juices Jacob.
Speaker Change: I see this administration to be.
Tony: Yeah, I'm not sure how much Jean I'll do you do you can't all your seasonal hot dog.
Tony: It's not outside you got OPM what are you watching me if I'm in a car.
Tony: <unk> was born out there you've got T cell malignancy what's.
Tony: I was wondering on them when she just want make sure that he cannot be telling you something about our gene.
Tony: Optimal op module that actually gets me honestly team.
Tony: Did someone once you're not usually a combo cicala, Japan questions yes.
Tony: Do my social how shall I take that off onto arching idea of tissue clamp on when she toshi I pizza have one adult equally potentially answer so without Nikkei's article I shall lay them I would guess you show them when I.
Tony: The total lease yet.
Tony: I do just wasn't good enough I E.
So for the overseas market things go South has been our expansion has been expanding at 21% the quarter without a major key drivers behind that and how should we think about the future seems most house for the overseas market.
Tony: Lee is all overseas direct to retail op margin, what's the like for like expansion in the first quarter and what is the optimal level for op margins in the longer run and thirdly is on the fresh store of Chicago I.
Tony: He already this year. So it has contributed a lot to our small cells as.
Tony: As well as helping us to test the popularity of some IP in China. So Oh can we comment that.
Tony: Are we going to do more about these kind of flash.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thanks, you call out what Sean.
Sean: Do you not me, though yes.
Sean: Central Asia Yeah.
Sean: I'm going to let him.
Sean: Thank you if you briefly Hello, Michelle Jones soda W. Two shall I figured I'd throw towards the Shaw Bruce.
Sean: Bruce outlined young population.
Speaker Change: Sure well, there and you should not go into that.
Speaker Change: Oh.
Speaker Change: Oh sure.
Speaker Change: Sure.
Speaker Change: Local going with agenda.
Speaker Change: Genius with Nintendo if we weren't doing it well.
Speaker Change: Hey wasn't kenyon at tens or hundreds of mobile.
Speaker Change: A question here.
Speaker Change: I'm doing a woman.
Speaker Change: Could you maybe just one more quick Felicia how each one of the.
Speaker Change: Can you give me give us some that Jim Hall.
John: John One quick one.
John: So you also John.
John: Tata <unk> engine of your daughter.
John: You'll hear somewhere.
John: If you choose to wait till.
John: Tell us share with you Felicia.
Felicia: Yeah Ali somewhat neutral a sledgehammer.
Felicia: Okay.
Felicia: Thank you for your question.
Felicia: Can you kind of went in and did the pop up store strategy.
Felicia: Mineral position as global odd collection store any single Ikea will not contribute significant revenue contribution.
Felicia: Yes.
Felicia: <unk> need to diversify their portfolio.
Felicia: Do the same thing when choosing IP, we want to introduce more and more new IP and world class IP and fully diversified IP portfolio and the second point that has been so as Barry.
Felicia: Barry we are where our all star is very cautious and we are done tours to deliver results.
She walked into full marks the first year of our five year development plan and we have high confidence.
Felicia: To achieve these growth targets.
Felicia: And for the pop up strategy, yes, there will be some small scale testing in big cities in cities well, though.
Felicia: A lot of young people young customers, such as Wuhan Chengdu shouldn't young.
Felicia: Tangshan and in North China, we are focused on these regional centers such as cheese.
Felicia: So we have about you know.
Felicia: Oh.
Poke op stores Uh huh.
At this stage and forecasts show about the same store sales groups of overseas market.
Speaker Change: I'll say.
No.
Speaker Change: Most of the significant share.
Speaker Change: Same store sales growth comes for all directly operated market, especially in markets like the United States and in Europe market are important distributor market. So, let's take U S market and U K markets.
Speaker Change: Two examples we have we are seeing the drive comes from both traffic and average sales price or average order value during the past several quarters and behind us with the we are seeing we think there is there are two reasons. The first is we are improving our.
Brand awareness in both of these two markets and a lot of new people to come to US a lot of new young customers not firmly commentary based.
Speaker Change: Meaningful store and become our <unk> members.
Speaker Change: So we have a lot of you know.
Speaker Change: The.
Speaker Change: Improvement on this side and the second is the product optimization.
Speaker Change: Mr. You just mentioned about 40% of.
Speaker Change: Our overseas shipment.
Speaker Change: IP products now increased by more than 100% during the March quarter the risk in this.
Speaker Change: <unk> improvement with this increase we have high confidence to attract more.
Speaker Change: Customers come to us and buy more things.
Speaker Change: And yes, we have seen same store sales growth.
Speaker Change: Chris.
Couple of quarters, and I would say in the.
Speaker Change: In this June quarter, we still see the trend maintenance.
Youre right at the end of the day to broke out normalized I think for this year for.
Speaker Change: For the remaining quarters. The major driver will still come from store network expansion and same store sales growth.
Speaker Change: The former will contribute more to our overall sales growth.
Speaker Change: And for the overseas.
Speaker Change: The DTC market.
Speaker Change: <unk> profile.
Speaker Change: If youre compel.
Speaker Change: The operating margin of on group level lost to your open margins, 20%. This is.
Speaker Change: Not 19, 5%. This is 20% so we have a very.
Speaker Change: It's more improvement on this side and if you look at China, China is fairly mature business. So you can assume that China's margin stabilized and if.
Speaker Change: If you look at overseas, it's improved its improved boasting.
Speaker Change: Directly off grid markets and in.
Speaker Change: Our distributor market. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Theres question, it's coming from J P. Morgan mixture Calvin Inc. Please go ahead.
Uh-huh Tisha tissue Glen you said first of all yes, TRP she's on mute.
Speaker Change: Sort of alluding to.
Speaker Change: <unk> made quarter to cause.
Speaker Change: Got that she thought that you jumped at polyol shall make a yogi analysis Sandia mushy lukasz inside 'cause say oncology early Matteo Nekoosa GP margin Buckalew assumed yoyo uchida chief onto us it's on schedule.
Speaker Change: And that's how couldn't that I saw a central Europe.
Speaker Change: Net margin step up into <unk>.
Speaker Change: So youll see.
Speaker Change: Took a C G codes will achieve <unk>.
Speaker Change: Chunk, feeling you've got <unk> <unk>.
<unk>.
Speaker Change: She got another took a layer issues, which I'll show you. Even if you don't make the same store sales growth is essentially dose. This is what youll.
Speaker Change: <unk> could.
Speaker Change: Could be Omar.
Speaker Change: C. A full point you could then not beating weighed upon that you wouldn't you say you mean, what you can ship I wish you could see in <unk> no material in the hubs, we like to think of shoes home show you.
Speaker Change: Super Super Dundee Intermune.
Speaker Change: So youll see a nice formula.
Speaker Change: Also on the <unk>.
Speaker Change: The hotel Quito.
Speaker Change: Now to <unk>, the IP not only year over year neotype out Josh.
Speaker Change: So youll see.
Speaker Change: Any color.
Speaker Change: <unk> shown that the amount that whole pool, Joe will mentioned, the Youngs Creek cheap.
Speaker Change: Hoodie to plant one strong quarter IP defense, yes.
Speaker Change: A quick moment, along some shelf number showing into English.
Speaker Change: IP <unk> P M.
Speaker Change: ASP, Tina <unk> spending Gunther <unk> GP margin to some center took.
Speaker Change: <unk> I guess, you're saying younger the whole <unk> studio initial would you just underwent tail because only slightly EMEA. Thanks.
Speaker Change: And see some up entrance H Union <unk> now seen a tissue can view anything she'd ip's of Houston that just took a stuck out for me on <unk>.
Speaker Change: A very quick translation.
Speaker Change: The U S.
Speaker Change: Help us walk through the key assumptions for the GP LP net property.
Potential margin expansion to drive that but the potential margin expansion.
Speaker Change: China why IP.
Speaker Change: Essentially 25, no change AEP flattish, but GP margin was up.
Speaker Change: And thirdly, a license fee.
Speaker Change: You bet.
Speaker Change: In the first quarter.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Can I have a question.
Speaker Change: Oh, we do not disclose too much detail O U S. Yes. This moment, because it's still early stage, but I assume your assumptions.
Speaker Change: Fair enough to simply to certain extend.
Speaker Change: And.
Speaker Change: Answer Looses question the driver of it.
Speaker Change: 30% to 40% Sims.
Speaker Change: Same store sales grows.
Speaker Change: Come from come from both traffic and traffic.
Speaker Change: Traffic and it will be.
Speaker Change: The U S is beginning.
Speaker Change: Begin to bidding debuted its a CRM system from this year. So hopefully we can share with you more.
Speaker Change: In the future and.
Speaker Change: And above the synergy all the you know.
Speaker Change: No different U S stores Youre right at this moment that we have 150 stores.
Speaker Change: You'll see.
Speaker Change: The biggest distressed states are California.
Speaker Change: Taxes.
Speaker Change: And Florida and next by.
Speaker Change: New England area and so on.
Speaker Change: Apparently apparently our in our store you know.
Speaker Change: Quite in a separated separated so we have in Peru, we have.
Speaker Change: A lot of improvement a lot of room to improve on this you know cost of savings in terms of logistic expenses. Our distribution expenses for example, the related expense in the United States. It accounts for.
Speaker Change: A low single digit or even mid single digit Trowbridge Soc compared to.
Speaker Change: More mature business of China is only less than 100%.
Speaker Change: One 1% in China, So we have a long improve.
Speaker Change: And.
Speaker Change: The GP margin of China, and Chris because of the product optimization as we say you know like bind bulks increased by.
Speaker Change: 100% travel related products and crisp.
Speaker Change: The 200% to as we mentioned these products has higher GP margin. So this is a product mix optimization and the IP license fee is all about a couple of Chicago. So you know this.
Speaker Change: This is one quarter it right. If you look at our full year or even longer term the IP license fee huge b a relative of our railroad cost. Thank you.
Speaker Change: Sure.
Speaker Change: This year.
Speaker Change: Hello.
Speaker Change: The first question is coming from UBS Mr. Samuel Please go ahead.
Samuel: Alright, that's it yes, it's on how you can talk to that a T O kashagan.
Samuel: Kalgoorlie, which again to show it to you guys felt Lindsay.
Our top toy to contract. So that's a two dollar talk to it you are a shareholder you're quite dania true patient not yet Sean Telecom 19, Antigua Caribbean, let you go.
Samuel: John Kelly, John tissue problems, you're kind of dollar an excipient Apache.
Samuel: Pandora and show them the top toy, yes, sure quite hps here, because you need to do to Canada.
Speaker Change: Sure if you.
They can call the city and a good driver.
Speaker Change: You all may lie the halden.
We entered into a chipotle.
Speaker Change: We're trying to cheer heart, reaching 200 around leeco Chiapas shares count.
Speaker Change: Fisher.
Speaker Change: Okay.
Speaker Change: Now what does that mean.
Speaker Change: Hey, Scott Hey, Nick My question is regarding top toy so when Easter year commented on top toy spaces.
Speaker Change: She mentioned.
There's no.
Speaker Change: You guys have changed.
Speaker Change: Timing for the for a top choice.
Speaker Change: The turnaround so and also he vice popped a store open knee a target. This year. So my question is regarding what what makes management could be that there's a turning point for this business and also what are the drivers for the same store sales growth in Q1 and going forward.
Speaker Change: Thank you.
Speaker Change: Thank you for question Samuel Yes, we have seen several changes.
So for us the change or has seeing a more rational competitive landscape in this top toy market three years ago four years ago three years certain hobbyist go home.
Speaker Change: In the lunch a top toy.
Speaker Change: It was it was in a highly competitive market a lot of new players new come was coming this sector.
Speaker Change: Three after three years a lot of small players has created competition I left a lot of white space not only the prime locations, but also you know.
Speaker Change: Better than our suppliers for battery supply chain.
Speaker Change: And so the second is the.
Speaker Change: Hum.
Speaker Change: Supply chain side.
Speaker Change: Top toy with 160 straws.
Speaker Change: <unk> a leader.
Speaker Change: Oh, it's sector. So it has higher Bakken and power with the suppliers I mean, you know.
Speaker Change: With the the toy brands with ODM manufacturers.
Speaker Change: Are you done with downloads.
Speaker Change: So.
Speaker Change: These are the two sides, where we have seen you know.
It's getting better and if our top toy we have mentioned it has been making money with two consecutive quarters.
Speaker Change: December quarter, I'd say it was just breakeven as a little profit this quarter. Since this quarter. We have seen top toy has making has been making a decent profit margin because all that's been mentioned eight percentage points improvement in GP.
Speaker Change: <unk>.
Speaker Change: And a comparable decrease in its thing is opex opex ratio so that means no.
Mid teens or.
Speaker Change: Low teens to mid teens improvement.
Speaker Change: Okey margin and we are also happy to see that its profit mix is profit structure are getting more and more housekeeping.
Speaker Change: And.
Not only is proprietary.
Speaker Change: <unk> products, but also third party products for example, buying books as a major is a major category, we've seen a top toy So third party bond books from third party.
Speaker Change: Our suppliers is GP margin also has been improving during the past several quarters, because it's higher bargaining power because its largest efforts larger scale and so on so thank you.
Speaker Change: Yeah.
Speaker Change: Thank you all again for joining US today now we shall conclude our call you in next quarter Goodbye.
Speaker Change: Okay.
Speaker Change: The recording has stopped.