Ladies and gentlemen, thank you for standing by and welcome to MINISO Group Holding Limited Earnings Conference Call for the fourth quarter of fiscal year 2021 that ended June 30, 2021. At this time all participants are in listen-only mode. After the management prepared remarks, we will conduct a question-and-answer session. Please note this event is being recorded. Now I like to hand the conference over to your host speaker today. Mr. Eason Zhang, Director of Capital Markets. Please go ahead, Eason.

Thank you. Hello, everyone. And thank you all for joining us. We have announced our quarterly financial results earlier today. And earnings release is now available on our Investor Relations website at ir.miniso.com. Joining us today are our Founder and CEO Mr. Jack Ye, and CFO, Mr. Saiyin Zhang. Before we continue, I'd like to refer you to the Safe Harbor statements in our earnings press release which also applies to this call, as we've been making forward-looking statements. Please also note that, we'll discuss non-IFRS measures today, which we have explained and reconciled to the most comparable measures reported on the International Financial Reporting Standards in the company's earnings press release. And filings with the U.S. SEC and Hong Kong Stock Exchange. With that, I will now turn the call over to Mr. Ye. Please go ahead.

[Foreign Language] Thank you. Hello, everyone and welcome to MINISO Group June quarter 2022 earnings conference call. This marks the last quarter of fiscal year '22 and the first time we have announced results as the dual primary listed company in the U.S. and Hong Kong. [Foreign Language] Thanks to the efforts of our dedicated team. We've completed our listing in Hong Kong on July 13 this year. Our listing in Hong Kong was an important math arrangement from the perspective of -- prospects protecting the interests of our existing shareholders, and proactively responding to the evolving regulatory environment. We believe it will also provide us with more broader financing channels to drive the company's future development, help us expand our shareholder base and promote the sustainable healthy development of our business. On behalf of the company, I like to express my gratitude to each and every employee for their dedication and to our investors who have always cared for support in MINISO. Going forward, we're confident that we will create long-term value for shareholders by enabling everyone to better enjoy life and a little bit of surprise. [Foreign Language] So as we have repeatedly emphasized in our earnings conference calls over the past few quarters that retailers are capable of passing through economic cycles. Our business model has demonstrated great resilience despite the pandemic weighing our near-term results. During this quarter, we have been promoting our brand upgrade efforts in China. And the gross margin of our domestic operations in the June quarter increased by about 3% from the same period of last year, as we have launched a new portfolio of high gross margin consumption-based products. During this quarter, as the domestic of our retail sector faced unprecedented challenges, which focused on growing the recovery of our overseas…

Hello, everyone. Thank you for joining us today. I will walk you through the financial results in June quarter, as well as the full fiscal year 2022. Please be noted that all the numbers are in RMB unless otherwise stated. And I will also refer to some non-IFRS measures, which has excluded the share-based and compensation expenses. Revenue in June quarter reached 2.3 billion above the midpoint of our guidance range, which was 2.1 billion to 2.4 billion, which implies a better-than-expected performance in our domestic operation in June. Revenue from China was 1.5 billion, including 1.4 billion from MINISO grants and the 95 million from TOP TOY brand and 28 million from others. Of these revenue from MINISO brand experienced a year-over-year decline of 23% consistent with the decline trends of GMV and offline traffic to [shop in more] [ph]. Revenue from TOP TOY increased by 33% year-over-year. During this quarter, TOP TOYs sales was significantly impacted by the outbreak of Omicron virus due to the concentration of stores in Tier-1 and the Tier-2 cities. As we have included in the previous call in May, although the impact of the pandemic on short-term performance is inevitable as we continued to follow our established strategy and made a steady performance in refined, TOP TOYs [indiscernible] model products and only channel strategy. For our overseas market, its revenue increased by 49% year-over-year to 785 million. If we look at the financial year 2020, the year-over-year increase in revenue was also about 50% which demonstrated that recovery trends of our overseas operation is very clear. For full fiscal year 2022, total revenue reached 10.1 billion, an increase over 11% from fiscal year 2021. Revenue from our domestic operations was 7.4 billion increased by 2% from a year ago. Of this, revenue from…

Thank you. We will now begin the question-and-answer session. Your first question today comes from the line of Michelle Cheng of Goldman Sachs. Please go ahead.

[Foreign Language] So my question is about brand upgrades. So [indiscernible] actually drive the gross margin quite significantly in the past quarters. So can management comment on strategies into second half? And what's the gross margin update and whether there's any related operating expenses for the brand upgrade? Thank you.

[Foreign Language] Thank you, Michelle, for question. This is Jack, and for questions, as we have communicated in our last call back in March. All MINISO brands strategic upgrade will count from three weeks in product and channel and in marketing. In terms of products, we will continue to improve the gross margin of newly launched products, especially those inter-based consumption products in our record base [indiscernible]. As mentioned just now know, as all domestic gross profit margin increased by about 3% year-on-year, this quarter, to about 54% from nearly to Q1 last year. So our current plans is that by the end of fiscal year 2023, which is this time next year, we plan to have improved our gross merchandise margin by another five percentage points close to 60%. In terms of channels, we plan to systematically optimize offline business and profitability in the Tier-1 and Tier-2 cities, and to help our retail partners to reduce operational risk. And in terms of marketing, we originally had marketing plan in the September quarter as we communicated, and the budget was around RMB50 million or so. But however, considering the current domestic situation of the pandemic, and its possible outbreak -- restrict control measures will continue for some time. So we have decided to delay or postpone these market compares and to save a pot of cost. And this will have positive impact on profit in September quarter. So I hope this help answer your question. Thank you.

[Foreign Language]

Thank you. The next question is from the line of Anne Ling from Jefferies. Line is open, please go ahead.

[Foreign Language] Now, let me translate in English. Just regarding your letter to the public regarding like minimize some of these like sort of “the Japanese interest”. So, what exactly, as a strategy regarding how do we change in terms of the operation? Our concern is that whether all these changes will impact your image or your performance or your brand equity from the consumers angle both for overseas as well as the domestic client. So I would like to get more information about what is your plan? Thank you.

[Foreign Language] Okay. Thank you, Anne for your question. This is Jack. So, in terms of your question was about the correction plan of this event. So, we have three specific measures. The first is, strengthening the internal control environment of our distributors in overseas markets, and especially, in relation to the political sensitive issues. And we will establish our headquarters our globalized headquarter of branding center. And we have all these marketing person in overseas market report to headquarters, and this headquarter, it will regularly organize related trainings for the frontline personnel. And the second is on the operational side. And we have given a timeline in the correction plan that the rectification shall be completed before the end of March next year. And the third is from product level. So we will explore more Chinese culture or China's traditional elements embedded products and planned to launch a series of Chinese IT products to overseas markets. For your second question about the impact on our sales, in Chinese market -- in domestic markets, we have not observed any impact from those China and overseas markets. So in China in July, the total GMV was about 95% of last year. And if you look at the first three quarters of August, it was planned year-over-year. And as we mentioned earlier, in last several quarters this recovery from sales in China net income from the recovery the foot traffic to shopping malls where our ASP remains -- gross or low single digit. And in terms of overseas market, if you look at the July and the first three weeks of August. The total GMV in overseas distributors increased by about 30% to 40% on year-over-year basis. And if you look at our directly operated business, the year-over-year growth was even higher about 50%. Thank you for question.

[Foreign Language] Is there any additional costs involved in this exercise?

[Foreign Language]

[Foreign Language]

Thank you, Anne. And this is Steven, let me quickly translate for Steven. So, for the interim control measures, there will be some but we do not think that it will increase our related expense significantly and will not impact our earnings. Thank you.

Thank you. The next question is from the line of Lucy Ziyan Yu from Bank of America Merrill Lynch. Line is open. Please go ahead.

[Foreign Language] So we are facing potential recession in U.S. and Europe. should we worry about the impact of recession on our business and whether that will impact our overseas expansion plans? Thank you.

[Foreign Language] Thank you, Lucy. This is Jack. I will cover this question. So in terms of question, on the store expansion in overseas market, we have to say that commonly we see a strong demand from our overseas distributors and the pipeline is also strong. But we also have to be frankly speaking that the Russia/Ukraine complex and the evolving geopolitical risks in some of overseas markets are now impacting in different ways and aspects to our distributor store opening plan, and some of them have delayed store expansion plan in this quarter. But if you look at the past several years, from fiscal year 2020 to fiscal year 2022, our overseas markets net added 375, 121 and 163 stores. So we are now quite confident that in fiscal year 2023, the net addition of our scores in overseas market as a whole will be significantly higher than that in 2022. Thank you.

[Foreign Language]

Thank you once again for joining us today. If you have any further questions, please contact me or Investor Relations team. Our contact information can be found on today's press release. We'll see you next quarter. Have a nice day.