Ladies and gentlemen, thank you for standing by, and welcome to MINISO Group Holding Limited's Earnings Conference Call for the Third Quarter of Fiscal Year 2021 that Ended March 31, 2021. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will conduct a question-and-answer session. Please note this event is being recorded. Now, I' d now like to hand the conference over to your host speaker today, Mr. Eason Zhang, Director of Investor Relations. Please go ahead, Eason.

Thank you, Jason. Hello, everyone, and thank you all for joining us on today's call. The Company has announced its quarterly financial results earlier today. An earnings release is now available on our Investor Relations website at ir.miniso.com. Today, you will hear from our Chairman and CEO, Mr. Guofu Ye, who will start the call with an overview of our business. He will be followed by our CFO, Mr. Steven Zhang, who will address our financial results in more detail before we take your questions. Before continue, I would like to refer you to the Safe Harbor Statement in our earnings press release which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-IFRS measure today, which we have explained and reconciled to the most comparable measure reported under the International Financial Reporting Standard in the Company's earnings release and filings with the SEC. During the Q&A session, please repeat your questions in Chinese if it is asked in English, management will answer in Chinese and I will translate them into English. With that, I will now turn the call over to Mr. Ye to give you a business update. Please go ahead, sir.

Hello everyone. For the March Quarter of 2021, MINISO recorded a revenue of RMB2.23 billion, up 37% year-over-year and in line with the Company's guidance. Our domestic businesses delivered a combined revenue of RMB1.79 billion, up 75% year-over-year and 12% compared to the same period of 2019. In today's conference call, I will share the major developments we have achieved for both MINISO and TOP TOY this quarter. For MINISO, our domestic operations continued to deliver an encouraging recovery this quarter. While occasional cases of COVID-19 in early January resulted in shut-downs for certain stores, we took a number of measures and launched a series of new products in the following months to achieve a healthy recovery. As a result, domestic operations of MINISO brand recorded a revenue of RMB1.72 billion, up 71% year-over-year and 12% compared to the same period of 2019. We added 44 new MINISO stores in China during the quarter, with more than 90% of new stores located in Tier-3 and below cities. During the past 12 months, we made significant progress in executing our strategy to penetrate into lower-tier cities, with 70% of new stores locate in Tier-3 and below cities. We notice that nearly all key operating metrics for MINISO stores such as average ticket size, conversion rate, and cross-selling rate are similar in lower-tier cities with Tier-1 and Tier 2 cities, while rental expenses are more attractive, providing a better ROI for our retail partners in the long term. As of March 31, less than 40% of our stores were located in lower-tier cites. As lower-tier cities accounted for more than 70% of China's consumer spending, nearly 60% of GDP, and contributed two-thirds of the country's economic growth. Going forward, we see a lot of opportunities in lower-tier cities and will continue to…

Thank you. I will start my remarks with a review of the March quarter financial results and then provide additional color regarding the June quarter. Please note that I will be referring to non-IFRS measures, which have excluded share-based compensation expenses. Revenue was RMB2,229 million, representing a year-over-year increase of 37% and a quarter-over-quarter decrease of 3%. The year-over-year increase in revenue was driven by the recovery of our domestic operations, which increased 75% to RMB1,788 million. Within our domestic operations, revenues of MINISO offline stores were RMB1,544 million, increased 69% year-over-year; revenues of eCommerce were RMB171 million, increased 86% year over year. In overseas markets, revenue declined by 28% year-over-year, as compared to a decline of 51% year-over-year in the previous quarter. The quarter-over-quarter decrease was mainly due to seasonality and the influence of pandemic. Our business is subject to seasonal fluctuation, typically with stronger performance in December quarter than in March quarter. However, we took several effective measures such as launching more popular products to boost sales and penetrating further into lower-tier cities in China in this quarter, the sequential decline of revenue was only 3%, compared with the sequential decline of 11% in March quarter 2019, which represented a normalized seasonality before pandemic. Gross profit was RMB627 million, increased 19% year-over-year and decreased slightly quarter-over-quarter. Gross margin was 28.1%, the highest in the past four quarters since the outbreak of pandemic, showing a positive sign of our continued business recovery. Gross margin was 32.4% a year ago and 28.0% a quarter ago. As we have explained in last quarter, the fluctuations in gross margin were due to changes in our revenue mix. The year-over-year decrease was due to a decrease in revenue contribution from our more profitable overseas operations, which was 19.8% of net revenues in this…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Michelle Cheng from Goldman Sachs.

I have three quick questions for management. First one is the Company introduced a new retail platform a strategy, and we successfully develop TOP TOY. So can management share the thought about the future development and also quite experience we can learn from TOP TOY development? And second question is about the overseas recovery. So on one hand, we control the inventory and also the expansion. But have we like reviewed the overseas distributor's financial situation and the business environment and how this will impact our expansion in the future? And thirdly, for the domestic business, we have been expanding aggressively in the low-tier city. And can you share with us for those stores opened in the past few quarters, the operational situation, and also how do we see the business opportunities in the lower-tier city going forward? Thank you.

[Foreign Language]

Okay, Michelle, thank you for question. For your first question on X strategy, we certainly have some [indiscernible] new categories but [Technical Difficulty] our TOP TOY has gained preliminary success at this moment and [indiscernible] [Technical Difficulty].

[Foreign Language]

Okay. Michelle, for your second questions, for the overseas, I think these questions need to be analyzed case by case. Now we had more than 1700 all these stores by now, and in terms of overseas distributors, the top 10 distributors accounted for more than 60% of our overseas stores. So the concentrated is quite high and stable. Please note, for these big distributors, they have -- they absolutely are comfortable at this moment. But outside the very strong cash position in shareholder structure and our cost control abilities. So our adjustment is that there's no big risk for these big distributors. For the smaller ones, absolutely, some of them will face even bigger difficulties. And as we showed before that, we now have 80 distributors in our overseas market. Certain distributors' financial difficulty will not influence the whole big picture of our overseas market. And if you look at the positive four quarters performance of our overseas business, no matter in revenue or in net income, I think the most difficult time has passed and we even see some -- in some of overseas markets some distributors are accepting their pace of expansion. Such as Italy and Portugal, which we have entered during the first quarter and second quarter this year, and for example, this country alone has opened six stores in the first quarter. So that's answer for the second question.

[Foreign Language]

For third question on lower-tier cities, first of all, we think MINISO product and our model is very competitive in lower-tier cities. As Mr. Zhang mentioned just now, the key operating metrics such as average sale price, cross-selling rate [indiscernible] [Technical Difficulty]. And in terms of addressable market, as what today, MINISO has entered about less than 300 cities in China. But if we look at the Tier 3 and Tier 2 alone, there are 270 more in China [indiscernible] [Technical Difficulty] in China. So the addressable market is being enough. In terms of [indiscernible], [Technical Difficulty] therefore store there can generate sales of RMB3 million to RMB4 million annually and the range therefore can be controlled with 8% of sales, so payback period can be at 6 to 8 months to MINISO [indiscernible] [Technical Difficulty].

The next question is from Lucy Yu from Bank of America. Please go ahead.

The first question is about membership. So we have a committed members' world while. So what we have learned from this big data? And how are we going to more utilize this data to help with our operations? Second question is about the GMV recovery in China and overseas market in April and May? And how should we think about the recovery trajectory for the second half? Third question is about TOP TOY. So what's their store opening plan for this year as well as more operating metrics? Thank you.

[Foreign Language]

Okay. Lucy, thank you for your question. For your question on member, as we show that by the end of this quarter, and we have accumulated this point to members, and we are using various reads to outreach and activating things. So we have some mix figures to share. In terms of average sales price, the members were double of that of nonmembers, and in terms of repurchase rates, on ordinary customers of means on average the com and by for 1.5x each year versus 3x of members. So as Steven added that, we have realized the important growth that members have made in our improvement of [indiscernible]. So outstanding of the importance of members have been improving during the past year and will make more efforts to improve that in that way. So we have -- for example, we have managed our members in different stages in the last quarter so that we can carry out more targeted marketing to of rates reach and increase the retention and repurchase rates of these members.

[Foreign Language]

Let me give quick update on our business in China and overseas markets. In April and May, we have two public holidays in China. So, we can see very strong sales increases during the two holidays. But after the holidays, we can see a quick decrease and get to normalize of the sales. So we believe that, in China, the pandemic is still there so the overall recovery can still at 95% or so. In overseas market, by the end of last month, by April 30, the overseas market, as a whole, is a bit -- a little bit worse than we were in the end of March. We have more than 300 stores temporary shutdown because of the stricter COVID control measures actual measures by the treated countries. And for those stores in business, the recovered surgeon average was lower -- over 5% lower than in the last month. If you look at the second half of this year, we see stable growth and stable recovery in China and [indiscernible] situations in overseas. And the pandemic recovery for overseas market is still way to say. For example, in India, well, where we have 150 stores, as for now, 90 of them are not open. And for some developed countries such as the U.S. where the vaccine rejection is quite proved, we actually see a good recover the sales trend. But in the U.S., we now have only more than 30 stores, so the influence is quite big and [indiscernible] for all these markets. Thank you.

[Foreign Language]

Okay in terms of TOP TOY, in terms of the expansion plan, we have no big change with our update. We maintain our guidance of 90 to 100 stores by year and calendar year-end. In terms of economic model, it is continuously being refining and I want to share in our DreamWorks store, the four new more stores. The monthly sales of each have been quite stable at RMB2 million in a month. And we are also testing our Type C stores, which sales -- monthly sales can be stable at 600,000 per month. In terms of the retail partners, we also held a quite big road show of our retail partners by the end -- at the end of April, and we saw strong willingness of our renewal partners to open TOP TOY stores. And we have been receiving positive feedback and quite positive proposals, effective proposals from then.

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Okay. Thank you again for joining us today. If you have any further questions regarding MINISO, please feel free to contact me and the IR team, and our contact information can be found on today's press release. We will see you next quarter, have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.