Ladies and gentlemen, thank you for standing by, and welcome to MINISO's Earnings Conference Call for September Quarter 2024. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will conduct a Q&A session. [Operator Instructions] And please be kindly noted this event is being recorded. Simultaneous interpret in English will be provided during this call. You may choose a language by clicking the interpretation into Zoom meeting. We have announced our September quarter financial results earlier today and earnings release is now available on our IR website. Joining us today are our Founder and CEO, Mr. Jack Ye; and our CFO, Mr. Eason Zhang. Before we continue, I'd like to refer you to the safe harbor statement in our earnings press release, which also applies to this call, because we are going to make forward-looking statements. Please note that we're going to discuss non-IFRS financial measures today, which we have explained and reconciled to the most comparable measures reported under the International Financial Reporting Standard in the company's earnings release and filings with U.S. SEC and Hong Kong Stock Exchange. The currency units in Chinese yuan, unless otherwise stated. In addition, we have prepared the slide presentation for today's call, which contains financials and operational information. If you are using Zoom meeting, you will be able to see it right now. You can also revisit it on our IR website. Now I'd like to welcome Mr. Ye to deliver the speech.

[Foreign Language] [Interpreted] Hello, everyone. Welcome to MINISO Group's earnings conference call for September quarter of 2024. As of September 30, 2024, the group added 859 stores on a net basis, including 324 new MINISO stores in China, 449 in overseas and 86 new TOP TOY stores. Both MINISO overseas and TOP TOYs net store addition in the first three quarters has exceeded their respective full-year number from last year as MINISO global store network continued to expand. In the first three quarters, the company's revenue increased by 23% Y-o-Y to RMB12.28 billion, with average store count increased by 90% with same-store sales growing in a low-single-digit. The world is changing and global retail industry experiencing major reshuffle. Consumers perception continue to evolve. In this time of the great transformation, China retail sector is facing opportunities for breakthrough. MINISO Group will firmly grab the two trends in the future, maintaining a focus on quality retail and interest-based consumption. The future will be characterized by a consumption model that combines product innovation and the consumer experience. And you can see in September, the company announced the acquisition of the 29.4% stake of Yonghui. Through this ongoing transformation, we aim to excel the quality retail, change traditional supermarket approach and deliver superior product service and consumer experience and investors as we transformed Yonghui store during this period, which should help us better understand our investment rationale. Moving forward, we will decide, dedicate more efforts to study consumers and understanding the changing consumption trends, maintaining a people-centric approach and returning to retail fundamentals. In the completion of Yonghui stake acquisition, MINISO will encompass three brands, MINISO TOP TOY and Yonghui. Those brands complement each other, while differentiating in product categories, targeted consumers and price points, gradually building a unique multi-brand metrics in the…

[Foreign Language] [Interpreted] Thank you, Mr. Ye. Welcome everyone to our meeting. Coming next, let me just go through MINISO Group's financial data in the first nine months of 2024. Please note, unless otherwise stated, all figures are in RMB. I will also mention some non-IFRS financial metrics that exclude stock-based compensation expenses. In the first nine months of 2024, our total revenue reached RMB12.28 billion, grew by 22% on a Y-o-Y basis. According to the forecast of the year, we are progressing towards our target. Average store count increased by 90% with comparable same-store sales growth by a low-single-digit number. Revenue from China region reached RMB7.74 billion, grew by 40% on a Y-o-Y basis. Within this, MINISO brand China revenue was RMB7.03 billion, grew by 12%. TOP TOY brand revenue was RMB700 million, grew by 43% on a Y-o-Y basis. Overseas revenue reached RMB4.54 billion, grew by 41%. Within this, revenue from direct operated overseas market was RMB2.45 billion, up by 64%. Distributor market was RMB2.1 billion up by 22%. Take a look at the revenue structure. In the first nine months, overseas revenue accounted for 37% of our total group revenue, where in the same period of 2023, the number used to be 32%. The contribution from direct operated overseas market used to be 50% last year, but now it's already 20%. The change in the revenue structure is the key driver why we have a record high GP margin, which has also resulted in the operating profit being more concentrated to the second-half of this year. Regarding the GP margin, in the first nine months of this year, GP margin grew by 3.7 percentage point, reaching 44.1%. Besides the adjustment in our revenue structure, the improvement also benefited from the IP strategy, which improved the GP margin…

[Foreign Language] [Interpreted] Okay, the first question is coming from Anne Ling, please.

[Foreign Language] [Interpreted] Hello? Hello, Eason. Can you hear me?

[Foreign Language] [Interpreted] Yes.

[Foreign Language] [Interpreted] Thank you very much. I have a few questions. I'd like to ask about the Q4 outlook. At least now we see that in China, the market was not looking very well. So I'd like to ask you, in Q3 of this year, the performance also see same-store decline. And the growth is only a single-digit number. So how you're going to comment on the Q4 performance? What about the Double 11 sales festival, what the situation may look like? Would you like to be more elaborative on Q4 updates? And what would be your growth opportunities in China market? That is my first question. My second question. You did a very good job for overseas business that I'd like to ask you in your direct operated market. How you're going to comment on the acceleration of the store expansion? For example, in U.S. or in European countries. If there any measures we're going to take in order to further grow our business in overseas market. I think you have already experienced the Black Friday, then how you are going to comment on the sales in festival occasions, how it's going to contribute or drive your Q4 performance? Thank you.

[Foreign Language] [Interpreted] Okay, thank you. Thanks for Anne. Thanks for your question. Let me just answer your question for the outlook of Q4. I will ask Mr. Ye to share with you our comments on the U.S. market in 2025. As been mentioned by me, we are still very confident in accomplishing the target we set by the beginning of this year. In Q4, we believe our top line growth would be around 25% to 30% within which the overseas market growth would be 45% to 50%. 45% to 50% growth, direct sell -- direct operated more are going to be 70% to 75%, where for distributor market, it's going to grow by a 20% number, were for TOY [Indiscernible], we're going to have a 50% to 55% growth. Whether in China, the growth would be a noting number, including e-commerce. I'd like to emphasize again. Even if after having Q3, we see a bigger pressure for the Earthly retail business. But I think for MINISO brand in China, we can still have a low-teens growth, which is achievable that is also our guidance for Q4. Where for store expansion in overseas market, altogether, we're going to have 650 to 700 stores. So in Q4, the overseas store expansion net growth will be 200, 250. For TOP TOY and in the previous three quarters, we have 86 new stores. For the full-year, we managed to make it more than 100. What we can say for domestic China, we're going to have around 400 new stores in 2024. So for the full-year, we are going to have 700 overseas new stores, 100 TOP TOYS and around 400 MINISO stores in China altogether, 1,200 new stores, where in China, we have on track performance of the store expansion, accelerated store growth in overseas countries. For the profit, as I have already mentioned last year, our net profit target would be RMB2.8 billion remain unchanged. Net profit will be highest in Q4, where for the guidance, we also would like to keep our net profit margin between 16% to 16.5%. In 2024, according to the guidance, we believe our growth will be accelerated, compared with 2024. Our direct operated business is being divided for a while, it can help to us to better control the cost and be more capable of the same-store gross. Your next question is regarding U.S. and Europe, right? So Mr. Ye will take over the floor to answer your question.

[Foreign Language] [Interpreted] Okay. What's a question about European market. You know that I heard from your presentation, you hope you can have a better business development in Europe, taking U.K. as your base camp, right? Okay. Great. I'd like to know if there's any progress there?

[Foreign Language] [Interpreted] Okay. Let's ask Mr. Ye to talk about the U.S. market.

[Foreign Language] [Interpreted] Well for the U.S. the YTD growth is actually a mid-single-digit number in line with our expectation. And the channel expansion is being accelerated, those stores going to reduce great sales potential, especially in Q4, we're going to have more store expansion in U.S. to take care of the best sales season. Well for this year, in U.S. stores, the OPM will continue to go up. We will have more revenue from U.S. And we also adopt measures to improve the operational efficiency of our direct operated stores. We will continue to improve the operating leverage, improving the profit rate. We also organized a local management team control the cost of warehousing logistics, rents and labor cost. I do believe with refined operation, and the operational cost will be stabilized or even trending down. We have very strong confidence for our Q4 U.S. profit and the profit for 2025.

[Foreign Language] [Interpreted] You have any OPM target Mr. Ye?

[Foreign Language] [Interpreted] We don't have it yet. Let's talk about the U.K. For U.K., the same-store performance growth was 35%. We have already been effectively supporting the distributors to adjust their product and operational’s. We have already improved the interior decorations of the U.K. stores, optimizing the consumer experience. And we also have some very popular IP products and SQL and the API has been greatly improved. And at the same time, attachment rate has been further improved, that is for U.K. market.

[Foreign Language] [Interpreted] Okay, great. Thank you.

Next question from Xiaopo Wei from Citi, please.

[Foreign Language] [Interpreted] And all of you hear me. Hello? Thank you. Thanks for Eason. Thanks for Jack. I just have one question, that is a question. I'd like to direct Mr. Ye. Yonghui is indeed a transaction that has been spotlighted by the whole capital market. And especially, there are some transactions regarding the super hyper business. And the announcement has been made for one to two months. I know you're also making research -- in your opening remarks, you already shared with us some of the strategies of your operation. Would you like to elaborate on some executables? How you're going to improve the performance of Yonghui? Is there any concrete measures you have in place?

[Foreign Language] [Interpreted] A few points I can share with you, actually four points. First of all, the both sides, Yonghui and the MINISO team has already started to talk and engage each other. And we also have a MINISO team to help Yonghui to further optimize their procurement cost. This is the first thing. The second thing, MINISO is supporting Yonghui to build self-owned brands, improving the contribution from the self-owned brands to improve the GP margin. As I mentioned, in the near future, for super hyper, the most important thing is to have the self-developed product. For example, like Costco and Sam's Club, they all have great contribution from the self-made product. So that's the reason why supporting your way of building their self-brand product. The third one is to optimize the product and service of the store, improving store operational efficiency to reduce the cost. We're improving the human efficiency. After three months, we hope that we can improve the labor efficiency. This is indeed what we hope to make sure that each of the improvement store need to make positive profit. If the pilot store can make a very good performance improvement, then we can ask the landlord to provide a concession on the rents. Nowadays, for the store, the highest cost is still the labor cost. So that's the reason we're going to follow the professional service to further improve the professional service efficiency. After two months to three months, we can schedule more new people to new stores, improving the operational efficiency of the store by having the skilled labor force. Fourth point, resources concentration and also adjusting the store metrics. Just to keep -- shut down those profit losing stores, we'd like to stick to the high quality development, only work on those well performed stores, keeping an eye on the primary resources, the best primary location to open stores. So for Yonghui, in the near future, all the adjusted stores need to make positive money. We don't need so many numbers of the stores. Here now for Yonghui, they have 790 stores. We're going to close those financially losing stores. For those one with severe financial losses, they're going to be turned off. We're going to keep an eye on those best performing Yonghui stores. Even if we have less stores, but the performance of each store has been further improved in the near future. If we only keep 400 stores to 500 stores, if the efficiency has been good, then even the total output is better than the 100 low-performing stores. So I think those are the four measures we have regarding the procurement cost, labor efficiency, the metrics of the store to further improve Yonghui's future performance.

[Foreign Language] [Interpreted] Mr. Ye, I just summarize in this way. Both teams are already talking to each other. So financially speaking, right after the completions -- the transaction has been completed, we're going to see the immediate performance of Yonghui on your balance sheet, right?

[Foreign Language] [Interpreted] We have to complete the transaction then to show you the performance. We're still in the early stage. There are some transitional arrangements. You know that especially for procurement, for brands, it takes time for both parties to talk to each other. It's still time consuming. We're still in the early stage preliminary discussions, business alignment and the communication. We foresee in H1 of 2025, we will be able to complete this transaction, the sooner the better. Then first party will be able to have material cooperation on business.

[Foreign Language] [Interpreted] Okay, great. Thank you both.

Okay, great. Next question coming from Goldman Sachs, please.

[Foreign Language] [Interpreted] Thank you. Thanks for giving me the opportunity to raise the question. I come from Goldman Sachs. I have two questions to you. The first question is regarding same-store performance in China. From Q4 to now, what would be the overall trend? What about the overall trend in 2025? You mentioned the channel going to be a great driver. Last month when you have the brand strategy upgrading conference, you mentioned you're going to have the brand metrics and the store metrics? How you're going to see its future growth? The second part is regarding IP. What is the contribution from Harry Potter IP recently? In overseas and the domestic market, what would be your key IP in next year in your pipeline? And what would be your key strategy? Thank you.

[Foreign Language] [Interpreted] Let me help to respond the first question regarding the same-store performance. I will ask Mr. Ye to respond to your second question. For same-store performance, the overall trend, because we used to have a high baseline in Q3 of 2023. In 2023, in the summer holiday, there's very strong demand for travel and the popular sales of Barbie IP. So in the first three quarters, indeed, same-store sales has been pressured. ASP saw a slight increase, but the traffic's been reducing for 6%. Take a look at Q4 and still traffic being the key source of the pressure. According to our monitoring, our same-store performance is even better than other peers in the same industry. We're looking to the future. As I have already shared with you, in the next five years, our revenue growth target already built the uncertainties of the micro environment and the uncertainties of the offline retail store into our forecast. In the near future, if consumption has been trending up, we're going to be benefited from a higher growth. But even if the micro environment has not been improved a lot, our business model still be full of resilience. We still have many other drivers to grow our same-store performance. We will continue to optimize our operationals to further improve our target achieving performance. First of all, we're going to have refined management on IP allocation. For this year, in the higher tier city, the same-store performance is better than the lower tier cities. A big difference is because in higher tier city, the ASP made single-digit number improvement, compared with last year because there are more IP allocation in higher tier cities. So IP-based strategy and interest-based consumption be a key driver for our future performance. In the near future,…

[Foreign Language] [Interpreted] Harry Potter co-branded product is our first pilot to have the omnichannel presence, which has already made some sales record in overseas market, very great response from the China market. But it seems that our inventory has been more efficient in overseas market. It actually helped to further improve our Q4 sales in overseas countries. In Indonesia and we also continue to launch the IP, it's single-month sales has already more than RMB30.85 million by leveraging Harry Potter IP, which again take the new historical record. Harry Potter IP product sales accounted for 85% in MINISO land stores for 95%. And in Hong Kong, seven days of the Harry Potter IP related product has already been more than HKD5 million, a single day sales accounted for 850,000 or even in one month, the fresh store sales is already more than HKD12 million, where in Malaysia, a 30 square meter flagship store, the single day sales is RMB430,000. U.S. is about to enter the Black Friday shopping season. We do see IP-related product to register very good growth. We're going to have a more classic IP in our pipeline and ready to be launched next year. Besides Harry Potter, we also have IP resources. We have 150 IP in our pipeline in the reserve. In the near future, you're going to see more IP product to emerge in the market. Now the corporation is still in the confidential stage. When time comes, we're going to make the announcement. Obviously speaking, for IP strategy, we work horizontally and vertically. We leverage more IP to improve the IP co-branded success. We also vertically to improve the IP operation to further extend the revenue.

[Foreign Language] [Interpreted] Thank you.

Okay. Next question coming from UBS. You're allowed to raise your question.

[Foreign Language] [Interpreted] Hello, Mr. Ye and Mr. Zhang. My name is Samuel Wang from UBS. I have a question to you regarding TOP TOY overseas business. 2024 is the first year for TOP TOY to go for international expansion. You also have the TOP TOY store in Thailand. And you can notice in Southeast Asia, the Trendy Toys being very popular. What about your operationals of TOP TOY in overseas market? What would be the future strategies you may have? That is a question regarding TOP TOY. I have another question. You mentioned about the horizontal and vertical cooperation for IP. I'd like to ask a follow-up question. In your media press, you mentioned you're going to have the plush toys and the pad product? Is there any more details you can share with us? The third question, that is O2O business. This is indeed a very popular topic in the industry. You invested a few in the O2O in Q3. So what about the predictability of O2O? What about its future prospects?

[Foreign Language] [Interpreted] Thank you, Samuel. Let me just try to answer the first two questions. The third question will be taken by Mr. Ye. Regarding TOP TOY international expansion, first of all, maybe one point has been not mentioned in our presentation. For TOP TOY, the business, the trend is looking very good. I mentioned the top-line growth 43%, but it is worth mentioning it was making positive profit for four consecutive quarters. In the near future, TOP TOY is going to take a very prudent attitude. We're going to improve profitability, optimize product structure, improve the margin and go for international expansion. TOP TOY has a store in store in the Indonesia IP land. And in Singapore, we also have some dedicated shelf for TOP TOY. Its first store has been opened in Thailand. In Southeast Asia market, the demographic is pretty young. The economy is doing very well and with our increasing consumption power, all those advantage takes TOP TOY as the first global expansion of having Southeast Asia market. I do believe with the Southeast Asia market further improvement, TOP TOY is going to register a bigger growth to lay a solid foundation for global international development. As you mentioned about the plush and also the pad product, the same as ACG, they're also going to be the key categories we keep an eye on for 2025. MINISO and especially TOP TOY have some exclusively licensed product with Sanrio. We did two patch of the product with very good sales result. The third question will be responded by Mr. Ye regarding Meituan warehouse store.

[Foreign Language] [Interpreted] Meituan warehouse store is still in the faster development stage. It's a strategic development for our retail business, 24/7 warehouse store can stand -- make us stand out in the differentiated environment. It's very different from the Walmart or from a POPO. You know that, we have more faster consumables along with 40% of the daily necessaries and other fresh fruits. Well, for Meituan, many of the stores are the white label grocery stores. The product quality has been inconsistent. So somewhat, we would like to work with Meituan fresh purchase as very good partners to work with to further improve the brand power. We're going to leverage our very strong supply chain and the product power to continue to improve differentiations between the 24 superstores and the regular stores to have a very refined product allocation. We also continue to improve the transportation network, regular stores being located in the shopping malls, which are going to limit the business hours. But the superstores or the warehouse store by Meituan going to be a great complementary. So we will be able to realize the incremental growth here now Meituan warehouse store, its profitability and ROI also demonstrated our belief. And we're going to have more announcement when the business model will be more stable in the near future.

Next question. Let's welcome Lucy Yu, please.

[Foreign Language] [Interpreted] Hello. I'm Lucy from Bank of America. I have two questions to you, Eason. You mentioned in Q4, in China, the expected growth would be a low-teens, still be accelerated, compared with the mid and the highest single digit number in Q3 of this year. Do you believe you are going to have more growth on ASP or more traffic compared with Q3 of this year? My second question is regarding 2025. You mentioned growth would be faster than 2024. Is it revenue growth or profit growth or both? The third question, for store expansion, if we take a look at 2024, store expansion in line with expectation in China, but overseas market go beyond expectation. In the next two to three years, for that 900 to 1,010 store expansion plan, are you going to have more in overseas countries, but tend to be more conservative in China? Thank you.

[Foreign Language] [Interpreted] Thank you. Thanks for Lucy. Q4 of this year or should I say in H2 of this year, the offline retail has been greatly challenged in China. Why should I say so? The reason is because in China, the full-year would be a low-teens growth, high-teens in H1 and in H2 of this year in Q3 and Q4. For the full-year, we believe the growth would be a low-teens growth. I have already mentioned, MINISO continued to upgrade our brand. We provide such a guidance to the market, including the e-commerce business. Our low-teens growth include the e-commerce business. In China for the full-year, it's going to be a low-teens growth. Where for 2025, the guidance is going to be more clear by the beginning of 2025. We're still in the budgeting stage. But let me just tell you, we have every confidence to be so. We have many store expansion in overseas market, which lay a solid foundation for top-line growth next year. Secondly, our U.S. market is being well tracked and the expenses control also going to be more refined. In other words, we're going to control expenses better. In 2025, no matter for top line or bottom line, we're going to have a faster growth compared with 2024. Thirdly, for store expansion. This is actually a unique point of MINISO. We have MINISO China, MINISO overseas. We have distributor markets and self-operated markets. We also have TOP TOY. So every year, we can dynamically adjust our store -- new store allocation in different markets. Thank you.

[Foreign Language] [Interpreted] Thank you. Thanks for Eason.

Next question is Shiyu from Huatai Securities, please.

[Foreign Language] [Interpreted] Hello. I'm Shiyu from Huatai Securities. Thanks for giving me the chance to raise a question. I have two questions. The first question is regarding the U.S. market. Your self-operated market was expanding very fast. In the near future, you may also have the retail partners to work with, right? Would you like to update us on the retail partner model? What about the progress now? If in the near future, you have self-operating model plus the retail partner model in U.S., how it's going to impact your profitability in U.S? My second question, you mentioned about the middle economy was developing very fast. But I think in the market, there are also some new players who started to be very aggressive for the channel expansion, how you're going to comment on the competition landscape and the competition pressure? Thank you.

[Foreign Language] [Interpreted] Okay. Thank you very much. First question, that is a timeline for retail partners in U.S. Till now, we don't have a timeline to share with you, but I can confirm with you for MINISO, we're still going to keep the asset-light business model no matter in China or in the overseas market. In the near future, we're going to take a very flexible store to operate our business. We can, in some direct operated market, introduce third-party stores to improve our leverage. But internally, we'll still review our store expansion experience to optimize our strategy in 2025. We're going to make the due announcement when time comes. Well, for middle economy, it was a very popular concept recently. But I think no matter what MINISO do, we will always be the most professional and dedicated one, especially for ACG. You have to be professional. Otherwise, you're going to end up with a high pulse of the stocks. So no matter the IP partners or the Thailand building, I do believe MINISO has already enjoyed great advantage.

[Foreign Language] [Interpreted] Well, for the more specifics, as I have already showed you, in 2025, every month we're going to launch new product. We're going to have more elaborations next year. Thank you.

[Foreign Language] [Interpreted] Okay. Thank you.

Ladies and gentlemen, here comes to the end of our earnings call. Thank you very much for your time. Let's meet next.