MINISO Group Holding Ltd (MNSO) 2025 Q2 法說會逐字稿

If you are using Zoom meeting app, you will be able to see the slide now. You can also review it later on our IR website. Coming next, let's welcome Jack Ye to begin his remarks.

Hello, everyone. Thanks for waiting, and I also would like to welcome all of you. Hello, everyone, and welcome to join us for MINISO Group 2025 June quarter and the interim result presentation.

In Q2, our revenue, adjusted operating profit, and adjusted EPS all exceeds expectation. The growth rate across all business segments, including overseas and domestic, reached or surpassed our upper limit of the guidance. Meanwhile, we also made significant progress in two strategic directions, that is our IP strategy and the large store strategy.

Coming next, I will share with you our quarterly performance, highlights, and our future strategic planning. In Q2, the overall GMV grew by 21%. Revenue grew by 23.1%. We achieved the first positive same store sales growth in four consecutive quarters. This performance not only exceeds our IO expectation, but also be accelerated compared with Q1.

MINISO and TOP TOY, our two brands, also show accelerated growth momentum in revenue in Q2. MINISO brand grew by 20%, while TOP TOY achieved a robust revenue growth by 87%.

In terms of the profitability, our gross margin was 44.3%. The GP margin improvement was mainly driven by the increased contribution from overseas revenue and the TOP TOY GP margin optimization.

The adjusted operating profit of this quarter was RMB850 million, up by 8.5%. While adjusted operating margin of 17.2% improved compared with Q1, we expect operating margin will continue to improve by peak season sales in H2 of this year.

Coming next, I'm going to break down on MINISO Mainland China, MINISO overseas, and TOP TOYS to work it through our business as a whole. First of all, for MINISO Mainland China, the business continues to maintain high quality growth. Revenue grew by 13.6%. In comparation, China's total retail sales of the consumer goods grew by 5.4% during the same period.

The online retail sales of the physical goods grew by 6.3%. This shows that MINISO Mainland's China business growth rate not only outpace the overseas retail industry, but also exceeds online channel growth, demonstrating our tremendous advantage of the offline store.

Particularly speaking, domestic comparable same store sales has been recovering steadily since the beginning of this year, turning positive in Q2. Entering into Q3, same store growth momentum has been further accelerated. Going forward, consistently maintaining same store sales performance that beats our peers will become our long term focus.

Within this quarter, we achieved a net addition of 30 MINISO stores in China, including seven MINISO LANDs. Last quarter, there might be some excessive concerns about the short-term impact of the channel upgrades. But from our perspective, this is the necessary move for long-term rapid growth.

After one quarter of the adjustment, store has quickly returned to positive growth. The number of the retail partners has reached a new heights. More importantly, MINISO Mainland China achieved a double-digit revenue growth despite moderate store additions, fully demonstrating channel upgrades can actually be the key high quality growth driver of our business.

Overseas market achieved RMB1.9 billion revenue in Q2, grow by 28.6%. Among them, US revenue growth was more than 80%, which was benefited from the same-store improvement and also high-quality new store opened in this year.

Due to the product metric optimization, US same-store sales achieved a mid-single-digit positive growth in Q2. The 37 net new stores added to US market also demonstrate good performance, the average store efficiency and sales per square meter significantly higher than the existing stores. They are very solid foundation for our accelerated growth.

TOP TOY achieved 87% YoY growth in Q2, with a net addition of 30 stores during Q2, reaching 293 in total. 283 are in China and 10 are in overseas markets. Benefited from effective product differentiating strategy and product power improvement, same-store sales grew in a low single-digit in Q2, with GP margin improved significantly.

TOP TOY is also a leader in pop toy market, which is significant and distinctive in the market. Going forward, we will continue to expand our recognizable brand network, whle continue to improve our private brands and proprietary IP business.

Coming next, I will share with you two strategic initiatives behind our robust performance, including large-store and proprietary IP. As the end of June, MINISO has deployed 11 MINISO LAND stores nationwide, covering Shanghai, Beijing, Guangzhou, and Chengdu.

11 MINISO LAND stores achieved an average monthly efficiency of several million. Shanghai Nanjing East Road, global number one store, achieved a sale of RMB100 million within nine months of opening, breaking new records.

The sixth store opened in Nanjing Deji in June represents another breakthrough for TOP TOY to enter into luxury malls, open new opportunities for high-end luxury shopping malls, and also continue to build themed scenarios for differentiated IPs.

With curated products combined with immersive spatial experience MINISO LAND has achieved two breakthroughs in both attachment rate and ASP plus higher consumer conversion rate. So the MINISO LAND not only set new performance records, but also achieved high sales per square meter with regular stores, then contributing above-average single-store GP margin.

MINISO LAND store also achieved excellent profitability but also served as a key base for our hit product and the modular zones. For MINISO IP LAND, it actually helped to launch new products and limited editions, which can actually form a flywheel of the large store, creating heat traffic, propagandization, and also regular store scaling up, delivering traffic and sales to store categories across all locations.

MINISO LAND serves as a spearhead of the continued innovation and breakthrough, where flagship store is a corner store of our larger store strategy. As of H1, we have already opened 200 flagship stores with a GFA of more than 400 square kilometers. Around half of them has been opened in 2024.

MINISO's largest store achieved sales as well as store efficiency above the average. We can see even for the past two quarters, we don't see the big change for absolute number of the stores. But actually, our channel structure has already been upgraded.

We are not purely seeking for the quantity growth. We continue to optimize our channel mix and continue to seek for incremental growth opportunities.

Regarding the overseas markets, particularly, I'd like to mention US, our largest direct operated country. The operation performance and brand momentum continue to improve with large store strategy. US store opened in 2025 achieved a store efficiency 1.5 times higher than the existing stores.

Sales per square meter also be 30% higher. The rent to sale ratio is also better than existing stores. The core advantage leverage is the diversified product portfolios, including the collectibles, figures, to the beauty products, to the stationeries and gifts, and the trendy toys for the whole family loves.

Large store can satisfy the interests and the needs of the whole group age of the family, becoming a one-stop shopping destination for trendy lifestyle products for the entire American family. But why can we be successful in operating the largest store strategy?

I believe it's because of our excellent supply chain and product capacity. We attach great importance to a proprietary product development. 90% of our revenue are coming from the proprietary product.

With a product development and design team of more than 1,000 people, we accumulated a very strong 1,500 high quality global suppliers. Only by so doing, we will be able to support a multi-category, fast, refreshing, and high turnover trendy department store, large store model.

Going forward, as we continue to optimize and refine large store strategy, and with the ever-expanding global supply chain, we're going to continue to have a balanced and stable development. No matter in mainland China or overseas market, large store strategy serve as our key platform for deepen our IP strategy.

Channels and contents are empowering each other. By creating new special experience, we greatly enrich IP. Meet and greets, install pop-ups, limited product launch, or have the long lasting memory for fans significantly increase our integrated marketing and operational capacity for IP.

Conversely, IP events and simple marketing can also take more traffic to the tracking activities. For example, when MINISO Landmark store opened in July, we partnered with One Piece in Australia first launch, driving first-day store performance exceeding 500,000, achieved a new single store record for Australian market.

MINISO has also become a collaboration leader in global licensed IP. In the near future, we will also leverage the product and operational capacity who actually work on the proprietary IPs to unleash greater value.

For MINISO worldwide, we identify the potential IPs to build our MINISO pop toy audience IP landscape through the dual-track model with audit IP and top licensed IPs, we will construct the IP ecosystem. Now we have already contracted pop toy.

For example, for Yuyuan which has been launched in June, once being launched, it's been sold out on many program. And we become hot in one store. You instant success marks a solid and successful stamp for MINISO in proprietary IP.

The Yuu event held in July of this year, attracted massive fan support. The mechanism will continue to be promoted, hosting, signing event and for the contracted artist at the world's top MINISO LAND stores, building deep appeal for the top year artist. YuYu IP product were also mid overseas consumer with this year, steadily advancing our strategy of bringing 100 Chinese IPs overseas.

Yochem's operational strategy fully demonstrate that in building proprietary IP MINISO poses unique resources enrollments for adequate coverage, omnichannel penetration, global deployment and end-to-end operation.

Looking worldwide, only MINISO poses the great flexibilities and the scalabilities in products, the most control and innovation in channels and the most extensive and high-quality global store network. In operation, MINISO were leverage end-to-end advantage from signing artists to the design development, auto marketing to production to sales of the product, we deeply empower artists at every stage, jointly operating and maximizing the IP value potential.

Those are MINISO's highly differentiated resources and also the key for us to achieve leapfrog development and overtaking the competitors in proprietary IPs. Our investment in proprietary IP is not for short-term commercial deployment, but a choice for long-term strategic development.

I proposed the interest-driven consumption in 2020. IP's most important vehicle for interest-driven consumptions. The initial success of this IP, not only branded product sales and the brand exposure but also allow us global channel partners to fully perceive the potentials of the IP consumption and the brand value of MINISO. I surely believe as IP and the larger store strategy continue to deepen as a synergy, we will create more marketing explosive moments and the sales miracles.

Now China IP market achieved a significant development, but we're just at the start. The numerous development potentials are still ahead. Looking at the global development history from Disney to Warner to United States to Bandai and Sara and Nintendo in Japan, China, we're seeing more several platform-type IP companies.

This is essential pathways to the great Nation's rise and inevitable outcome of the cultural confidence. In this market, full of opportunities MINISO with our unique advantage of full category coverage, omnichannel penetration, global deployment and end-to-end operation, we will secure our leading position in China's top-tier IP market.

MINISO's future is to fully develop, solidly understand and deeply cultivate IP, achieving influence not only in China but also worldwide. By deepening collaboration with World top IP to ensure operational sustainability and stable growth.

We also build a differentiated, explosive and scalable, sustainable growth driver through proprietary IP, those are also the key to our confidence for the future growth. MINISO's new strategic vision is to become the world-leading IP design retail group.

In terms of the channel network, we are already the world's largest IP product retailer. The full year 2025, we expect to generate more than RMB38 billion in GMV and more than RMB21 billion in revenue. We have already leading in market channel supply chain, product design and marketing. Next, we will need to strengthen our proprietary IP capacity. I believe our vision will be finally realized.

In H1 of 2025, we have returned RMB1.07 billion to shareholders through share buybacks and dividends, representing 84% of the H1 adjusted net profit. Going forward, we will remain committed of distributing 50% of the annual adjusted net profit as dividend and also continue with dynamic share buybacks to provide predictable returns to the shareholders.

That's all for me. Next, I will have Eason to introduce you, H2 and interim financials, please.

Thank you. Thanks, Jack. Welcome, everyone, to the meeting. Next, please allow me to walk you through the financials. First of all, let's take a look at the revenue.

In Q2, total revenue reached RMB4.97 billion, up by 23%, exceeding the upper limit of our guidance, added 21% privately. Breaking down by brand. MINISO brand Q2 revenue was RMB4.56 billion, grew by 20%, among which, MINISO Mainland China revenue was RMB2.62 billion, up by 40%, accelerated compared with last quarter, exceeding the low double-digit growth as we provided as guidance before.

MINISO overseas revenue was RMB1.94 billion, up by 29%, in line with our expectation. TOP TOY brand Q2 revenue was RMB400 million, grew by 87%, continued high-speed growth momentum, exceeding our previous guidance of 70% to 80% growth.

Looking at H1 of 2025, the total revenue of the group reached RMB9.39 billion, up by 21%. As we urge into H2, we're confident that revenue growth would be further accelerated. Progressing towards the guidance we provided to the market by the beginning of this year.

From the regional breakdown, China Mainland revenue accounted for 62% of the total and 65% in last year. Overseas revenue accounted for 38% and 35% last year with an increase of 3%.

Well, regarding the same-store performance, building on Q1 2025 significant narrow down same-store decline in Q2. The same-store performance improved significantly. Because last year, we do have Chihuahua explosive sales as a high baseline, but even so, we still reached a positive same-store quarterly growth in Q2.

In H1 of 2025, same-store sales declined in a low digit number, low single-digit number, representing tremendous improvement compared with H2 2024 which benefited our channel upgrades, product mix operation, new product launch and operational improvement.

Getting to Q3 and MINISO Mainland China same-store performance further accelerated compared with Q2. The year-to-date monthly MINISO same-store growth has already came positive.

Looking into H2, and we're going to assure you there will be a positive growth here. MINISO is being able to achieve positive same-store sales in China, such a competitive market, which again proves our strong resilience of the business model and our organizational strong execution capacity, and the lending capacity.

We have systematically compiled some of the same-store growth experience and started to export them to overseas market in Q2.

Combining local market condition to help the overseas market to fully understand the strategies and experience for same-store improvement strategy in China. And then you can also see that for Overseas MINISO same-store performance has already improved from a mid- to high single-digit decline in the previous quarter to a low single-digit decline in Q2.

European market same-store and the North America market same-store achieved a single -- mid-single-digit growth, which also strengthened our confidence for the overseas business growth.

In terms of the store growth, in Q2, we have already achieved a net addition of 30 stores, which is more optimistic than our expectation. Internally, we see brand updates channel first. Our channel upgrade could be traced back to 2023, Q3, when we first opened our first large store in Beijing Road in Guangzhou.

Starting from then, we discussed our a large store strategy to help to improve the product assortment, improve efficiency and store models. The landmarking event was opening of the MINISO LAND in Shanghai Neste road in Q3 of 2024. And now we're actually reaching the peak after the MINISO space at 1930 Plaza in Q2 of this year.

To date, we are pleased to share that large store now accounted for 5% of our total domestic China -- Mainland China MINISO store count, contributing to a mid-double-digit growth percentage growth. And for example, for 30 stores, we added net in Q2 were all MINISO LAND and flagship stores.

More importantly, we now have initially formed a channel metrics covering seven of the stores. We were not going to rely on small store to conquer the market. We're going to have to do MINISO LAND, flagship stores, regular stores, pop-up stores to create incremental opportunities.

For full year 2025, MINISO Mainland China store will continue to see healthy growth. We believe the net addition will be 100 to 150. The structure would be flagship stores and MINISO LAND.

We also have some regular stores, but who are still go to the lower-tier markets. Where for MINISO as a single brand in China market, we're going to achieve expectedly more than RMB60 billion sales for this year already position us as a large consumer brand.

However, in 2025, we hope we can achieve mid and double-digit scale growth for the full year without significantly increase in net store count. Behind this is our comparable same-store sales trading healthy positive growth and our new store being very high quality.

In overseas market, there are 94 new additions in Q2. The store continue to expand. As of H1, overseas store count grew by 189 and for the full year, we plan to add over 500 stores as new adds for the full year. However, we are going to be quite more cautious. We expected around 40% of the overseas new stores would be directly operated.

But we revised this number to be 35% now. In other words, we'll have a more reasonable CapEx and the team will have more energies to focus on the operational optimization of the existing stores going all out for the H2 performance peak.

Let's also talk about GP margin. Q2 increased 0.4 percentage compared with last year, reaching 44.2%. H1 of 2025 GP margin was 44.3%, up by 0.6 percentage compared with 2024.

In addition to the GP margin improvement for the increased contribution from overseas revenue, as mentioned earlier, the effective implementation of our IP strategy also enabled our overseas business of GP margin improvement. TOP TOY brands product structure optimization also enhanced Top-Toy brands GP margin.

Looking to the future, GP margin may fluctuate due to category structure changes between quarters and business seasonalities but still, the rising contribution from the overseas revenue and increasing IP sales contribution was still seem to be upward. We're going to be quite cautious in handling GP margins.

As you may know, with our brand upgrading IP strategy and, our GP margin has increased from 27% to 44% now. As been reminded to many of you in the previous earnings calls, we're going to pay much attention of financing product volume and price. Going forward, we will be more familiar to our consistent value for money position on non-IP product lines.

Starting from the beginning of this year, we have already made GP margin adjustment to some of the categories, both in China and overseas market, achieving better sales performance, improving our GP margin.

Well, as we're stabilizing the GP margin, we will make such an adjustment in the near future. Regarding expenses in Q2, total expenses increased by 38%. Selling expense grew by 43%, administrative expense grew by 90%. Salary expense accounted to 30%, 3 percentage higher than the same period of last year.

The Wawa growth is related to our investment in directly operated stores. For example, like the labor cost, lease-related costs, depreciation and amortization grew 56.3%, seeing significant deacceleration from the previous quarter, 71.4%.

This benefited from our refined operation and strict expense management. In Q2, directly operated store revenue grew by 78.7%, still higher than the Y-o-Y growth rate of the direct operated store-related expenses.

Administrative expenses growth was slightly slower than the revenue growth, which was mainly attributable to the increased employee cost, which may be related to our business deployment.

As I mentioned, our existing investment for directly operated stores is to have more sales opportunity to ensure our success of the future business, especially in strategic overseas market like the US. We believe our upfront investment in directly operated stores would be released the sale potential during H2 of this year. And the profit optimization will continue to be made.

And for our YH investment going to have impact on our financial statement starting from this quarter. And we're going to take the equity method for settlement. And the YH is going to impact our net profit by RMB190 million, which will be excluded from the non-IFRS financial indicators.

Majority of that are going to come from our 29.4% of the shareholding. In addition, there will be some optimizations and the amortization is going to be around RMB5 billion every quarter.

Regarding profitability, our adjusted operating margin was 17.2%, up by 0.6 percentage points from Q1, down by 2.3% on a Y-o-Y basis. The decline was narrowed compared with Q1. The trend quite be positive. Let me just break down the reason by business segment and why I'm so confident for the margin improvement.

Let's take a look at MINISO brand first. Our Mainland China franchise business has been quite stable in margin. And in China, we also have the warehouse store and e-commerce store, the margin was lower than the franchise business model, but the impact is controllable.

The decline in overseas operating margin was due to structural changes in revenue, we have more contribution from directly operated stores. We expect the margin to improve after entry into H2 of this year. We believe the profitability of our overseas directly operated store can be improved further.

We will improve operational margin by enhanced efficiency, refined operation and maintain high growth. Let's also talk about the TOP TOY. A significant GP margin improvement was seen in this quarter. We made some upfront investment. For example, like product R&D, overseas expansion and IP, which is actually a healthy operational investment.

In mid and long term, a 20% operating margin would be considered a comfortable target. But as we grow, we need to allow new business, sufficient time and space to grow.

The Q2 adjusted net profit was RMB690 million. Adjusted net margin was 30.9%. But adjusted EBITDA grew by 4.7%, but adjusted EBITDA margin was 23.1%. In terms of the working capital, channel inventory turnover remains steady and efficient. As of June 30, our inventory turnover days was 93 days, used to be 102 days for previous quarter.

Breaking down by brand in the region. MINISO overseas and the TOP TOY remained stable quarter-by-quarter. And the Mainland China MINISO see significant shortening of the inventory turnover days.

On the procurement side, we actually structured SKU management, strengthened category standardization, implement dynamic inventory monitoring. On the inventory management side, we established full-chain product life circle labeling system having the seasonal marketing to implement differentiated promotional strategies, which can also lay a solid foundation in improving our cash flow and also reducing working capital efficiency.

As H1 of this year, our cash reserves stood at RMB7.47 billion, remain robust. Our net cash flow from operating activities was RMB1.01 billion, including RMB260 million in Q1, RMB750 million in Q2. Our business cash flow showed very significant improvement on MOM and Q-on-Q trends, benefiting from our working capital efficiency improvement.

Our capital allocation strategy going to still be balanced. Today, we announced the 2025 interim dividends for about RMB640 million, accounted for 50% of our adjusted net profit, which will be paid after September. We believe under the existing market conditions, our share price is significantly lower than its intrinsic value.

We repurchased share of more than RMB340 million in H1 of this year, representing 1% of outstanding shares, which means the repurchase amount in H1 of this year already exceeds the total repurchasement of the entire last year. The highest purchase amount in any half year today or the repurchase share would be canceled.

In H1 of this year, returns to the shareholders through share repurchase and dividends has already been RMB1.07 billion, accounted for 84% of adjusted net profit. That number used to be 55% last year. The Board has also agreed to plan to utilize authorization granted by the Annual General Meeting held in June of this year to repurchase up to 10% of the total outstanding shares.

We will continue the repurchasement in the open market through Hong Kong repurchase plan and 25-1 the repurchase plan in the near future. We believe repurchasement in the best interest of the company and the shareholders and also show our confidence for our future business development.

As we urge into Q3, we remain optimistic about the continued acceleration. The revenue growth would be 25% to 28%, significantly higher than H1. Same-store sales are going to have a low single-digit growth. Adjusted operating profit will have a double-digit growth. Our adjusted operating margin continued to improve, and the decline expected to continue to narrow.

Looking to 2025, our full year revenue growth will be no more than 25% -- no less than 25% with quarterly growth accelerated, while at the same time, we expect in 2025, our adjusted operating net profit would be RMB3.65 billion to RMB3.85 billion. used to be RMB3.4 billion same period of last year, but adjusted operating margin will be improved on Q-on-Q.

Thank you. That concludes our presentation. We're happy to take your questions now.

The first question comes from Goldman Sachs.

Congratulations on the company for the performance exceed expectations. I have a question regarding the US business. In Q2, I see sales go beyond expectation and the fees control has been quite managed well. You also mentioned about the large store and product adjustment.

Is it possible for Jack, for you to share with us for your new team in US market, what are those things we do like to have such good growth? What would be the key strategies in H2 in the US market, especially for the profit margin, no matter for H2 or for the full year, what would be the profit for the operated -- directly operated stores in the US?

My second question is regarding the opening of new stores. What about the net store addition for US? And we really would like to hear more from you, Jack and Eason, regarding the US business?

For US business improvement, it may come from the following factors. First of all, we continue to improve the quality of the stores, only open larger stores and leveraging our multi-category advantage. Secondly, we're going to have a centralized store opening.

Around tw weeks ago, in Austin, Texas, we opened three stores together, which actually released the brand perception. So first of all, we opened large stores. And secondly, we were being concentrated in one region to open more stores rather than have fragmented store openings as what we did in past.

Thirdly, we're also working on the trendy toys. For example, for Sanrio's and Disney, and in the past, we also have the blade box and the figures which are also showing great momentum of the growth. And fourthly, we also have the localized team for MINISO. Our USA CEO is a localized figure with more than 20 years working experience in retail market, we started to become our US CEO, starting from last year.

So large store concentrated new store opening and the product power improvement and the localized team would be the four key pillar to help us to improve our US operationals.

Looking to H2 of this year, our key still continue to build our same-store improvement. We now have enough store account. We have to make sure the store performance or each store performance need to be improved. But still, we need to have the right product, especially for trendy toys. We opened a large stores, each store covers 600 to 800 square meters.

We use 100 square meters to become the trendy store dedicated aisle in order to continue to engage the young people to come to our stores and making sure our stores become more apparent in the local market.

Our second strategy is the holiday strategy, especially during the weekends and holidays. We make sure we have the right and comprehensive product and operations. Thirdly, we need to have the refined operation and also right scheduling of the logistics. We actually identify the localized team and very professional. They are good at refined operation.

So those are the three strategies we have in the US. We believe in the next six months, we're going to continue with those strategies. In H2, I have to mention to all of you, the trendy toys has been growing very fast in US. We have every confidence that in the near future, we're going to have a new sales target, especially coming from the (inaudible) product.

For US, the net addition we have for this year would be 80, much lower than what we have last year, but we hope we can continue to improve the quality and efficiency of the larger stores. Some of the new store efficiency is much higher than the existing stores. So that's the reason.

The upper limit of the new store has been further weighted were for new store opening strategies, we'd like to have a concentrated or the regional stores. For example, in Texas, we have the stores being opened at the same time then to help to polish our brand perception is also good for marketing.

And all of a sudden, it can make sure the brand has explosive exposure in one region. In one region, no matter which ones you go for, you see the MINISO large stores with good store performance. Regarding the US market, I will ask Eason, to walk you through the same-store performance.

Thanks for Michelle. As I have already showed with all of you last in Q1, we see a high baseline. In Q1 of last year, the same-store growth was 30%. In Q1 of this year, the higher pressured our Q1 performance of 2025.

But after getting to Q2 or especially Q3, we see same-store improvement has already been accelerated. In Q2, in US, the same-store performance has already been a positive number, is already a mid- to high single-digit growth.

In Q3, it's continued to be accelerated with a profit margin in H1 of this year. Profit margin of the same-store remained flat compared with last year. Starting from July of this year with our teams consolidated assets, operating profit of the store has already been significantly improved.

So we can foresee we have every confidence to continue to improve the profit rate of the US stores.

Anne Ling, Jefferies.

My first question that is regarding Mainland China business. Same-store performance in Mainland China has already been improved. I would like to know what would be the driver for the same-store performance improvement in Mainland China? Is it because of the volume? Or is it because of the ABS?

And my second question, I do notice MINISO also have some O2O. For example, in alba.com. I also see your stores. So for your same-store performance improvement, is it because it's benefited from the e-commerce platform promotional? Is it because you actually launched more activations on O2O channel? This is my first question.

My second question regarding the overseas business. Is it possible for the management team to help me to break down the sales contribution from each region? For example, US, Europe and Asia, what about the sales contribution to the total sales? Then what would be our future growth strategy? As the company has already mentioned about the US, we are also quite interested to know other parts of the overseas market.

My third question is regarding TOP TOYs. I really would like to know your overseas TOP TOYs growth. How many overseas stores do we have? What would be our strategy there? Because topic is also for trendy toys.

If the overseas market, MINISO and TOP TOYs, the two brands, how we're going to differentiate the two in the overseas market?

I'm Ethan. I will ask Jack to help to respond to the first question. The same store improvement for domestic China or men in China stores.

Okay. Please allow me to share with you, for Mainland China same-store performance improvement. I think we do have a very special initiative. We have an initiative called the Chief Growth Officer that has been responsible for the store performance growth.

We actually have the product center to take the lead, leveraging these special task force to well connect product, operations, digital center and also our stores and product have seamless operations to improve our operation.

And secondly, we also improved the product as product and commercial and operation has been well connected. Our execution efficiencies have further improved. Now we have a special task force in charge of that. It is already go beyond the departments. So the popular products could be shipped to the store as quickly as possible.

Secondly, we do have the popular heats dedicated to. For some of our stores, they are also optimized from small to larger by improving the GFA with more products on the shelf, and we will also be able to have popular heats.

My third point, we actually leverage the traffic advantage in festival seasons. We find out the traffic during the holiday has been particularly high, especially for family trips, the mom and the kids can all purchase what they like within MINISO. This is indeed the same we did.

So first of all, we have a well-connected mechanism for product and operation. And also we continue to optimize our product. That's the reason we will be able to improve our Mainland China same-store performance in H1 of this year.

I'm Eason. Please allow me to respond to the same-store improvement. Is it coming from ASP or traffic? In Q2 of this year, the Mainland China, the same-store growth was a single-digit number. First of all, ASPs be the key.

If you take a look at H2 or Q4 of last year, why same-store performance has been declining? The reason is because of the traffic. This is also many of the retailers being challenged now. The same-store performance has been pressured because of the traffic shortage last year. We do see the traffic shortage.

But for this year, we don't see that too much. So in H1 of this year, it seems many people believe the same-store performance improvement are coming from ASP. It seems that still the traffic has been declining. But actually, compared with H2 of last year, the traffic decline has already been narrowed or improved. So I surely believe our conversion rate has been gaining momentum for improvement.

Another point I have to talk about is the impact from O2O to same-store performance. In Mainland China, for our regular store, we have O2O for a few years. On part last year, O2O is not having incremental contribution to the same-store performance improvement. Still the key reasons because we have a robust offline performance. Regarding sales contribution from each region, let me just share with you our terminal GMV.

Overseas GMV. Asia country, excluding China, accounting to one third. Latin American countries, another one-third. Europe plus North America together accounted for another one-third where for other regions and countries be a single-digit contribution of the total GMV.

Your third question is regarding how TOP TOYs be differentiated from MINISO on positioning in overseas market. Jack, would you mind to answer the question?

Yes. I think TOP TOY is a professional trendy toy brand. Its pricing is targeting the primary market, where for MINISO, we are actually covering both lifestyle product, but also the trendy product. So TOP TOY is actually a professional store for trendy toys, where within MINISO it's only one store, but also have the trendy toy corners.

So for MINISO, we actually have a dedicated area for the trendy toys, where for TOP TOY, it has a full store for the trendy toys. For the MINISO, the price is more user-friendly. And also the strategy and positioning for top toy and MINISO differs a lot.

For overseas market, are you still going to have a net addition of RMB100 million? No, I was talking about the total number of TOP TOYs market. It's still going to be more than RMB100 million, where for TOP TOY, the account is going to be 70% to 80% growth for this year.

But for this year, we're going to seek for high-quality growth. The store number net growth would be 50 to 60, but still, the performance growth would be 7% to 8%.

Samuel Wang, UBS.

I'm Samuel from UBS. I have one question. My question is regarding the proprietary IP or collaborative IP with artists. I'd like to ask you for the artist IP or UUChang sales. What about the UUChung's sales to the overall contribution of the IP-related sales?

What would be your overall target? How is going to contribute to your total sales? For audit IP, you probably need to have a new business model as IP operation. So for that, is there any plan or strategies that the company can share with us? This is my first question regarding Artist IP.

My second question, if possible, and the management team to share with you. In the past, we are working with global large IP, but now we do artist IP. Why do we have such a shift? My second question is also targeting the overseas markets.

I have already clearly noticed in US market in Q2 same-store performance one positive, where for other overseas market, same-store performance are still be pressured. For overseas markets, what other markets go beyond expectation? What are those lower than expectation? Will those markets being pressured, what would be the forthcoming measures?

I'm Jack. Let me just share with you artist IP strategy. Yes, indeed, it's a strategic move. In the past, what MINISO do is only in the global IP licensing. But starting from now, or starting from six months ago, we have already started our new strategy.

Now I can officially announced the dual drive strategy. On one side, we have international IP. But at the same time, we're also going to develop our own proprietary IP. Yesterday, I see the release from a pop market, which makes me quite excited.

On one side, I see the consumer buying, the consumer actually buying the trendy toys and secondly, I see the capital market also buying the trendy toys. We can see trendy toys is in the infancy stage in China. The market is expanding now.

MINISO has a great growth momentum here. As we build our proprietary IP and UUChung our first proprietary IP in quite successful and is already short of supply now and the production cannot catch up with demand.

Proprietary IP would be our key strategy, why we can do IP right? In the past, we didn't notice how important it is, but now we started to understand the value of the proprietary IP. And MINISO has every opportunity to do proprietary IP right.

In the past, when we were working with global IPs, we indeed enjoy great advantage for product development, marketing and the channel, but we are indeed lack of the proprietary IP.

But as long as we started to take actions on proprietary IP, I believe the future would be full of promise. We now contracted nine artist IPs. Yuyuan is actually our first one, and I truly believe for this year, and going to actually make a very good sales. And next year, it's going to -- the sale is going to be RMB100 million UU. I can surely inform the market.

We have already understand the great methodology for the proprietary IP operations. Even for TOP TOYs and we actually acquired IP for, its rate was RMB100 million. Now for this year, it can reach RMB250 million and likely to be RMB600 million next year.

So no matter for TOP TOYs at MINISO, we are continued expanding our proprietary IP. For example, we contracted the artist IP like UU, and we also acquired IP. Those two IPs surprised us with expected outcome. We're going to engage more new IPs. When Chinese GDP, the capital is more than USD 10,000.

I think the rise of the great nation rests with the rest of the culture, especially IP. I think the IP culture in China is just at a start. It has a great prospective. It's going to generate the GMV of more than RMB300 million, RMB200 million in China and our 30 million overseas treatment, while at the same time, our proprietary IP also going to have further shipment to a resi market.

We never mentioned this before, but let me tell you, proprietary IP is something we explore and continue to grow. I can surely share with all of you. We have been quite successful in hiring the proprietary IP business model where what would be the advantage of MINISO in building proprietary IP.

Because for MINISO Group, it's more like having another growth driver or another way that can help us to be truly differentiated, having very nice growth and replicable experience. We're going to continue to engage all these IPs.

The cost is not high. It's not a high spending, where for some of the artists, we will be able to help them to run their business and grow their business as a whole.

Now in China, only us and another two to three competitors may be capable of doing so. For example, like MINISO and TOP TOY that are all under our umbrella, where for short-term performance contribution to profit, we rather would have to improve the quality of the IP and IP value. We have every confidence in proprietary IP. I hope you can keep our eye on MINISO for our proprietary IP strategy.

You feel quite passionate when we talk about proprietary IPs. This is indeed one of your most liked topics recently. You can see still show great mission and vision as a great entrepreneur. And we also would like to welcome you to join us for the Hong Kong offline roadshows. Jack will share with you more the proprietary IP and IP strategy.

Samuel, you also raised another question. What are those overseas markets go beyond expectation? What are those on lower than expectations? Let me talk about it in this way.

We have our business in more than 100 countries and regions worldwide. For some of the market, they may have the fracs, local retail, microeconomic impact or even some of our customers may have some hurdles locally.

Sometimes, the performs good, sometimes not. In H1 of this year in US, in Canada, or in Australia, we do notice a very nice growth, especially in Canada. You see we have localized team in the US. And in Canada, we also have a seasoned local retail expert to lead our localized team on our Canada leader in office, the sales result was looking quite well. The sales growth was three-digit number will even grow by more than 100%.

Where for Australia, in our prepared remarks, we have already mentioned our pop up papastores with the new large stores being opened in Australia. But what are those markets who may grow less our expectation. There are a few I can share with you.

The first one is Latin American market. The revenue was declining in H1 of this year, but actually the GMV on the retail was growing due to a few reasons. First of all, Latin American market, the local custom is someone we worked long term was with greater trust and who is adjusted inventories in H1 of this year, which has been completed now.

And secondly, for Mexico market, the local currency has been fluctuated a lot for the past 12 months, just using USD to purchase our product. So ForEx is one thing that impacted the Mexico business. But you can see that for Mexico or even for Latin American countries, the performance was quite steady for the past few years.

There are some small markets, not a big contributor of our business. The performance is go beyond our expectation. For example, Chinese Hong Kong, many of the traffic go directly to Mainland China market. The leasing fees for the retail industry has been quite high, but the Hong Kong business accounted for a very small part of our total business.

So over speaking, from each one of this year, from Q1 to Q2, the market was going up. In Q3, we see the trends being further accelerated.

Shi, Di, Huatai Securities.

I have two questions. First question, tariff impact, which has been started in Q2, and we also made some proactive adjustment for US business, where you actually -- for your supply chain plans for the fabric measures. Is there any updates whether the price adjustment to tariff impact to ourselves? We'd like to hear more details.

My second question for the Mainland China business. In higher-tier cities, you have the IP strategy where for lower-tier cities, you have the meaningful value strategy. What about its performance now? What would be the same-store performance in higher-tier and lower-tier cities? Any difference?

Let me help to respond to your second question first. Regarding the same-store performance in higher and lower cities. Overall speaking, in H1 of this year or starting from beginning to now, the same-store performance in higher-tier cities outperformed the lower-tier cities. You were talking about the tariff impact.

Starting from April this year, US tariff is always something that the market has been concerned about. Let me give you the result first. average didn't impact our margin for US business. In order to take care of the tariff, we made the following act.

First of all, starting from 2024, right before political situation changes in the US, we already have some strategic inventories in the US.

Secondly, we leverage our integrated supply chain management in US. We have already deployed the director sourcing in US. We do have many direct sourcing in the US. On one side, it can help to be the countermeasure of the tariff impact and also help us to have the localized product R&D and also sourcing to take care of the local consumer needs.

Thirdly, we also make our tax plan for the tariff. So here now, you can see that all these measures are working very well. our margin will not be impacted by tariff at.

[Qin Yiyang, Yangtze River Securities].

I have two questions. The first question, that is the self-operated business and also the distributor business in the overseas market. What would be the growth for both? And the second question, recently, we noticed the company has been taking many actions regarding IP.

So I'd like to ask you for MINISO LAND, what about the growth now and how it's going to drive the offices in Mainland China? And secondly, what would be the future IP development regarding the business cadence?

Sorry, due to the Internet connection, can you repeat your second question? Let me help to respond to the first question. For the overseas direct sales and the distributor business model, in Q2, overseas market growth was 29%. The direct sales is higher than district model growth.

And actually, we have a division of the BU, one being called direct sales and otherwise been called as agency business for the direct business. But later, we found out both business are working complementary, even in the direct sales business, we have the franchise stores or even in the distribution model, we have some self-directed stores.

So the division won't be able to truly tell the growth of our overseas business. So that's the reason internally. Actually, we sell, we keep less attention to such division. But generally speaking, the direct sales growth rate is higher than the distribution model.

The second question is regarding proprietary IP. What would be the cadence of the proprietary IP? Then what about MINISO LAND?

Proprietary IP is a key driver for us. In the past, we only have one thing to count. That is the global IP licensing. But now we take the parallel tasks. Proprietary IP and global IP are all quite important for the company.

We're going to continue to develop preparatory IP and continue to unleash its value potential and resources. The second question you will talk about is MINISO LAND. It's actually a success really surprised us go beyond our expectation.

For our Shanghai Eastern store within nine months results is already more than RMB100 million. And recently, we also have a few MINISO LAND stores proved to be quite successful recently. So what are those benefits for MINISO LAND bring to us?

We will be able to engage a large number of the transitory artists to contract with us, to work with us. I mean, the cooperation is also in-depth operation. For MINISO LAND, the fundamental logic is IP cooperation, and actually, for MINISO LAND IP-related contribution of more than 80% or even 90%. For example, for thirty shopping mall. We are the only one to provide the black box and trendy toys.

But why we can work with the shopping mall is because they believe we are the international brand. We have international IP. As we move into the luxury shopping malls, we're not only going to do international IP, but also the domestic territory audit can work with us for proprietary IP and continue to improve their exposure.

This can also help to further collect and also engage more IP artist resources. MINISO LAND and also the MINISO plans in the space. Those are the three product lines we're going to already engage in making the IP business right and comprehensive, where for those proprietary IP artists, we're going to create them a good and open platform for corporation.

I believe it will become a very solid foundation for us to develop our proprietary IP business. So for MINISO LAND, -- we're not on going to tap it in China, but also in uses markets.

Thank you very much. Thanks for all the participants. Here comes to the end of today's call. See you next quarter. Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.