MNSO

Hello, everyone. Thank you for your patience, and welcome to MINISO 2026 Interim Earnings Result Presentation. All participants are currently in listen-only mode. Following the management remarks, we will host the Q&A session. Before asking your question, please state your name and the institution you represent. Please note the event will be recorded. English simultaneous translation will be available for this call. You can select your preferred language by clicking Interpretation in the Zoom meeting. We released our Q2 and the interim results of 2026 earlier today, which is now available on our ir.miniso.com. Joining us here today are Founder and CEO, Mr. Ye Guofu, and our CFO, Mr. Zhang Jingjing. Right before we continue, please refer to your safe harbor statement in our earnings press release, which also apply to this call, as we are making forward-looking statements.

Please also note, we will discuss non-IFRS financial measures today, which has been expanding our earnings release and referring to SEC and Hong Kong Stock Exchange, and reconciling to the most comparable measures reported under IFRS. Unless otherwise stated, all figures are in RMB. In addition, we also prepared PPT slides containing financial and operational information for today's call. If you are using Zoom, you can see the information. You can also preview it later on our IR website. Now, I would like to welcome Mr. Ye.

Hello, everyone. In H1, MINISO Group revenue reached CNY 11.5 billion, up 22.4%. EPS grew 8.2%, and operating cash flow rose 46%. Our global store accounted 8,674. MINISO today stands at a pivotal moment as we operate a larger and better store, building our own proprietary IP and develop our overseas organizational capacity. Opportunities and challenges coexist.

I firmly believe the strategic direction and the stage-by-stage significance of those initiatives matter far than the near-term number. I will walk you through our business performance this quarter across three segments, including MINISO China, MINISO Overseas, and TOP TOY. Official data show that China total retail sale of the consumer groups grew by 1.3% on YoY basis in H1 of this year. Against this micro backdrop, MINISO China H1 revenue grew by 26.2%, not only far outpacing broad retail sales, but also exceeding our private guidance. This was our fastest H1 growth rate in the past three years. Importantly, the quality of the growth is truly high, driven primarily by the mid and high single-digit growth number.

On the channel side, as of the end of 2022, the Q2, MINISO China store count reached 4,665, with a net addition of 97 stores in H1, among which Land format store net addition 59, flagship format store 159. Regular store record a net closure of 121. On August 22nd, MINISO Land Chengdu Eastern Suburb Memory Store officially opened, marking our 100th Land store here in China. Store count number was growing solid, but the quality is even more important. At the end of June, our China store count was up 8%, while the revenue grew by 26%, reflecting a substantial increase in per-store output and healthy growth in the overall sales per square meter. I'd like to show you three sets of the data. First of all, sale per square meter and the rent ratio varied each month.

The Land format store delivers sales per square meter roughly twice as that of the regular store. Compared with existing stores, the store newly opened in 2026 are significantly larger, yet the sales per square meter held steadily with the rent to sales ratio improved. To most, our new store format is no longer a mere tenant, but also the engine for foot traffic. Secondly, our store renovation pace continued to accelerate. We completed 189 store renovation in H1. Post-renovation store performance has been doubled YoY. Against a full-year renovation target of 355, we have every confidence to exceed it by the end of this year. Thirdly, franchise return continued to improve, whether measured by the payback period, the profit margin, or proportion of the profit store. The profitability of the MINISO Land worldwide and MINISO store nationwide in H1 reached its best level since 2019.

Franchisees are increasingly willing to open larger and better store, which is the most direct endorsement for our channel strategy. From swapping the cage to bring the better birds or large store-driven growth, our channel upgrade strategy has underway for two years, and remains significantly for the future. This assessment with the two facts. First, the proportion of the renewed store in China remain low, and second, we continue to innovate on the store format. This year, we introduced a new member to our store matrix that is Super MINISO, the most important innovation of 2026. Looking back to the evolution of our channel upgrades over the past two years, in 2024, MINISO Land validated the IP immersive flagship store. In 2025, MINISO FRIENDS entered into mid and high-end shopping districts in the affordable luxury tiering.

In 2026, Super MINISO brought the IP experience to the broader mass consumer base. Its product matrix was 50% IP merchandise plus 50 general lifestyle products. Since its launch, it has become one of the most popular store formats among the consumers. The clever aspects of our Super MINISO is not overturn the consumer existing brand perception, rather is build upon them and retain consumers familiarity with MINISO. Value for money merchandise, we're injecting freshness and the trait-driven experience through IP. Other formats like FRIENDS, Land, and Space progressively deepen the IP merchandise and might share, helping consumer move from lifestyle general merchandise to IP wonderland as part of the brand upgrade. But I'd like to say the success of the large store is not merely channel innovation, it's a systematic innovation by having content plus space and operation. The store is a space.

IP is a soul to fill it. The momentum of the larger store and value of the IP reinforce each other, forming an ever-accelerating flywheel. In June last year, we launched YOYO, our first proprietary IP. Within just one year, YOYO has entered into 53 countries worldwide, generating nearly CNY 500 million in related revenue in H1. The most iconic milestone was YOYO plus Disney Toy Story 5 collection. YOYO version of Woody, Buzz Lightyear, and the Slinky Dog sold strongly across stores in multiple countries. In just one year, YOYO success has propelled its validated proprietary IP to a new stage where it can engage top-tier global IP as an equal. Beyond the MINISO flagship store and brand, the TOP TOY has also built its own IP metrics. Its flagship IP, NOMI, has surpassed CNY 300 million in cumulative GMV.

And you can see that while YOYO validated the methodology within our flagship brands, NOMI, YOYO, and DUIDUI has proven different style under the TOP TOY brand. Around proprietary IP, we have accumulated a full-chain SOP, standing artist, signing product definition, design to development, supply chain scheduling, all the way to the pre-launch standing default channel, in-store events, and fan operation. Our group-wide target of CNY 1 billion in proprietary IP sales, set at the beginning of this year, was achieved ahead of the schedule by the end of July. This all proven our multi-IP, multi-category globalization strategy is successful. They fully demonstrate MINISO's unique resources endorsement in building proprietary IP. We have the full category coverage, all channel penetration, global footprint, and full chain operation. Looking across the globe, MINISO only imposes the greatest flexibilities and expandabilities in product categories.

The strongest control and innovation capacity in channel, the boldest and the highest quality global store network in terms of the footprint. On the operation front, MINISO leverages full chain advantage from signing scientists to design to development to marketing and selling product. We deeply empower artists at every stage, maximize the potential of each IP. Those are precisely MINISO's highly differentiated and scarce resources, and they are also the key to MINISO's leap forward development and overtaking the proprietary IP. There are four fulls enable us to complete the entire process from IP concept to shelf more efficiently than the vast majority of the companies. Everyone, YOYO is just the beginning. On August 22nd, we newly launched artist IP, CHOUCHOU, sold out entirely on its debut day, far exceeding expectation. We have already signed multiple designer toys.

You can see on the evening of 26th, 5,000 sets of CHOUCHOU was sold live within one second. At the same time, we have already signed multiple designer toy artists, recruiting top creative talents worldwide through our IP Protégé program. Our ambition is going forward, leading 100 Chinese IP onto the global stage. At the moment, global IP market is entering into unprecedented boom. The rise of the great nation is inevitably accompanied by the birth of the culture symbol and their global accident. MINISO, we are backed by our world-leading channel, product, and IP operation to secure our top position in this historic moment. Our vision is to become the world's leading IP operating platform.

Measured by channel scale, we are already the world's largest retailer of the IP products, and our proprietary IP business is building a new growth engine that is at once distinctive, explosive, and replicable. Our strategic pivot towards proprietary IP is a long-term choice grounded in the trend of our era, where we will sustain long-term investment. Even in the short term, the proprietary IP product line has delivered excellent report card. We not only have YOYO proven to be success, same as CHOUCHOU, our second IP. In its H1, profit margin was above company average. Inventory turnover was kept within 30-40 days. Proprietary IP strategy has placed no pressure on overall profitability, laying a solid foundation to continue our IP ecosystem. Coming next, I am going to talk about membership strategy. Last year, I said membership would become another important engine for MINISO growth.

The value of the strategic membership is steadily materialized. Member scale and contribution continue to reach new level. In H1, our China membership grew by 31%, reaching 130 million, the all-time high. Member contribution sales rose to 57% in the same period of last year to 60% for the full year last year and 33% in Q1 and further 77% now, where at the same time membership is the latest evidence of MINISO's growth shifting from the opportunity-driven to the system-driven. The value of the membership manifested in two sell sides. The core engine of the lifting average transaction value. Average transaction value rose by 5%. Working with global IP, for example, like Sanrio, Disney, and Harry Potter, as well as Chiikawa, combined with the blockbuster effect of our proprietary IP, large store has become the core stronghold of the high-value members.

As a result, our customer contribution of China member was two times higher of the non-member. Average transaction value of IP member is more than three times of the non-IP members. Secondly, the top-level engine to improve the retention. Through the precise targeting and benefit-driven retention that can help to further extend the active lifetime. Our precise identification of the member consumption preference and category needs enable new product to reach targeted consumer efficiently, will upgrade the benefits such as the cash paybacks credit turn into the purchase into direct momentum for the next purchase. IP member newly acquired in 2025, the retention rate in H1 of this year was 80% point higher than the non-IP members, with purchase frequency two times higher than the non-IP members. Member who use cash back credit repurchase 1.6x frequent than those non-members.

IP-driven acquisition and large store quality upgrade and repurchase extension is our underlying formula to achieve highly sustainable membership value. When we have scale structure and frequency driving together, they would be able to sustain the long-term success. Let's also take a look at the overseas market. In H1 of this year, overseas revenue grew by 40.9% to CNY 4.06 billion. Store number accounted for 3,644. Frankly speaking, overseas performance fell short of our expectation, weighted somewhat our group profit. The overseas contribution to company profit declined from 35%-40% in 2023 to 10%-50% in H1 of this year. The impact are coming from two factors. First of all, a decline in distributor business revenue, and secondly, our direct operated market outside North America still remain in early investment stage. The store model are still in the refinement and not yet profitable.

We also made some internal review for those issues. Expanding our overseas directly operated store, we will be more focused and more prudent, vigorously assessing ROI of the new stores, concentrating resources to deepen our presence in priority markets. I ask them to slow down the pace of the store openings, unless you have 100% confidence. In H2, we will first concentrate on operating our existing 800 existing overseas directly operated store and replicate after a single store model matures. Overseas market is our vast horizon. Short-term fluctuation won't change our long-term growth trends. We have corrected our past growth approach that overemphasized on scale and store count, so that the terminal sales growth, inventory turnover, and headquarter shipment once again would form a closed loop in a healthy way. You know that now it is also the time for us to really improve the performance in overseas market.

Our overseas business is now in the holding stage. We would like to make sure we refine our store model, and more importantly, we need to make sure the China transformation will be successfully validated in the international market. It is actually the time for another upgrade for the international market. For that reason, we have already made significant adjustment and transformation for international business. I would like to take this opportunity to encourage our overseas teams. From 2015 to now, our overseas journey has been spanned 11 years. The deeper we go for overseas, the more profound I can realize how difficult it is for a Chinese company to truly gain a solid foothold and earn sustainable profit abroad. It was not a product strength and supply chain, it also organizational capacity, management control model, and localization strategy. MINISO overseas business has been profitable from day one.

Yet, we must recognize overseas challenges today are precisely a sign that MINISO globalization has entered into deep water stage. As a share of the direct operated business rise, we must settle again and pursue refined operation, localization, stronger organizational capacity, and a globalized management control model while solidifying our management fundamentals. We see many international consumer brands entered into China, did well in the past one decade, but started incurring losses in recent years. No matter international brands come to China or Chinese brands go for international market, we have to be adaptive. Otherwise, profit would be nothing to be talked about. This is also the so-called secondary upgrading and transformation every company need to have faced if they go for internationalization. MINISO China transformation over the past few years achieved a great success. We have preliminarily realized brand upgrade and business model iteration.

China business started to burst with fresh vitality. The challenge we are facing for overseas business today is essentially the same as China three years ago, shifting from the scale first to quality first. Over the past three years, China delivered its transformation report card from landing grabbing expansion to wonderland style upgrade, and then the refined operation. This methodology applies equally to overseas market. We are never short of the product supply chain or channel. What we lack of is more patience to fully refine the single store model. Going global is a marathon. Every adjustment and every investment we made today lays a solid foundation for the long-term value. Every additional food store MINISO open overseas, every additional consumer well-served, every additional member accumulated brings us one step closer to our vision of becoming a world's leading IP operating platform. I have faith in my overseas team.

Give them time, give them patience. I believe that overseas market tomorrow will surely be better than what we have today. Coming next, please allow me to talk about TOP TOY. In H1, TOP TOY revenue was grown by 32.7%, global store numbers 365, including 48 overseas. This quarter, TOP TOY first U.S. store is being located in Times Square of New York, making it the first China designer toy brand entered into the crossroads of the world. In H1, proprietary IP accounted for 10% of TOP TOY sales, with proprietary IP metrics continuing to expand. We have some pop-up events that are quite popular, especially YOYO. Especially in Hangzhou debut. A single month GMV is already more than 50 million. Coming next, I am going to welcome Eason to walk us through the financials in H1 of this year, please.

Okay, thanks for Mr. Ye.

Now, I will walk you through our key financial metrics. Today, rather than going through the financial lines by line, I will offer some explanation on several data points that are top of mind for you. First of all, let's review how we performed against H1 2026 guidance we gave to you in the May earnings call. H1 revenue, which is in line with the China same-store guidance, but not that for the North America market. H1 revenue grew by 22.4%, slightly ahead of our guidance; that is 20%-22%. On that, China revenue grew by 26.2% in H1, with Q2 in particular grew by 23%, versus our earlier expectation of only a low double-digit growth in China for Q2. This upside in China came from two factors. First of all, an accelerated channel upgrade.

China saw a net addition of 25 stores in Q1, but 72 in Q2, far exceeding our projection of around 40. Secondly, the sales contribution from proprietary IP, especially YOYO. China same-store sale also achieved the guided mid-single digit growth, where for YOYO, the proprietary IP, saw a very good growth. As Mr. Ye has already mentioned, for the short run, our proprietary IP delivered excellent result. The profit of our proprietary IP product is higher than the company's average level, and the inventory turnover has been controlled within 30 to 40 days. But for sure, 30 and 40 days may still be short of the supply now; we're improving. In that way, proprietary IP is not pressure on our overall financial of the company. Overseas revenue grew 15% in H1, below our guidance of a high double-digit growth.

The main reason was a 10% decline in distributor business revenue, and both Asia and the Latin American markets experienced temporary revenue declines. As I have already shared with you, North America mid-single digit same-store sales growth came in below our private guidance of the high single to low double digits, largely because we see the weakening of the same-store performance in North America in June. I will walk you through the reason later. Adjusted operating profit excluding the forex gains and loss, grew by 5% on worldwide basis, slightly below our earlier projection of the high single-digit growth, mainly due to the decline in distributor revenue, a high margin part of our business. In H1, MINISO overseas offline GMV grew by 40% year-over-year basis to CNY 8.29 billion. The revenue grew by 50%, reaching CNY 4.06 billion. Let me just break down by region.

First of all, let's take a look at Asia. In H1, Asia terminal GMV grew by low single digits year-over-year, while revenue declined a low single digit year-over-year. Markets such as Indonesia, India, and the Philippines were the main driver, weakening on Asia overall performance. Objectively speaking, those markets are facing micro challenges, but it is undeniable that our localized operating capacity still have some further room to improve. Our localized understanding of the market shifts and the product channel matching are not deep enough. Our merchandise planning, channel strategy, and terminal execution are not as efficient as what we have made in China business. At the same time, we proactively cleaned up a bunch of underperforming low-efficiency stores. For example, in markets such as Philippines, we closed the stores with outdated formats and persistently weak output, which had some short-term impact on the revenue.

This cleanup of the low-efficiency store in overseas distributor market will continue for another two quarters. We can also see that for markets like Vietnam, following an earlier phase of the higher-end store closure and the product mix adjustment, it already started to show improvement in H1 of this year. Its efficiency has been continued to improve, the best in the past three years. Vietnam same-store sale grew by 20% in Q2 with continued positive growth momentum. This shows our future direction is correct. Going forward, we will continue to deepen our understanding of the Asian market, enhancing our localized operating capacities in market-specific manner, focusing on channel upgrades and product mix adjustment, actively explore the product assortment and the price brands adapting to the change of the local consumption market. Let's talk about Latin America.

In H1, Latin America terminal GMV grew by high single digit YoY, but revenue declined by low double digit YoY. These were several reasons for this divergence. For example, a number of the core market, including Colombia, faced multiple external challenges such as political volatilities, rising freight cost, natural disaster, which had a fierce impact on the overseas orderings and the shipments. However, the terminal demand remained resilient. For example, the top four Latin American countries contribute 80% of our performance here. All delivering solid terminal GMV growth in H1, with Mexico also post high single-digit growth, excluding the forex impact. Actually, if you use the local currency, the Mexico local GMV was grown by nearly 20%. As external adjustment disruption fading away, we have our confidence for the long-term development. The third part would be the North America market.

North America market in H1, revenue grow by 37%, reaching close CNY 1.8 billion, broadly in line with our expectation, with a mid-single-digit same-store growth. By Q2 quarter, Q2 revenue grew moderately slightly to 25%, where two-year CAGR hold at around 50%. However, in Q2, the two-year CAGR was still around 50%, five, zero, resilient performance against the high base. The moderation was mainly due to three factors. First of all, a temporary gap in the cadence of the IP product launches. North America has a high share of the IP product and is therefore more sensitive to the IP launch cadence. In H1 of this year, we didn't maintain a sufficiently steady launch frequency, which affected the store traffic and conversion to a certain extent. This was providing valuable lesson for optimizing our IP product cadence planning going forward.

Secondly, the sale share of the locally directly sourced product in the U.S. market used to exceed 50%, but not fully in line with our plan at the very start of this beginning. Earlier this year, against the backdrop of the tariff policy changes, we set out to control and gradually reduce the share of the overseas direct sourcing. You can see the direct sourcing are focusing on the category that are not operated by the headquarter. However, it takes time to adjust the product metrics, which was not being reflected in H1. Going forward, we will further improve the advanced planning of the overseas merchandise. Thirdly, the upfront cost investment for the newly directly operated store. We have a net increase of 75 stores in H1, nearly double the same period of last year.

The upfront investment will have some short-term impact on the profitability, but the good news is that the new stores opened for this year deliver significantly higher profit margin and sales per square meter than older ones, outperforming in site selection, quality channel matching. Entering into H2, we will shift our focus to deepen our store operation and running our already opened store deep and through. For the full year, North America and Europe market will still maintain relatively high growth, as for North American store will continue to prove out the success rate. We expect North America will reach close to CNY 4 billion in scale with 10% net margin for the full year. Europe is also a market we are positive on, but it is still in the early stage for direct operation development, so fluctuation is expected.

In H1, Europe revenue growth moderated to 26% with the same-store sales down by mid to single digit. Our European team is building organizational capacity, refining the store model. Let us give them the confidence and the patience to allow the market to prove our strategy. In H1 of 2026, MINISO mainland China achieved a mid-single digit same-store growth in line with our expectation, leaving ample room for our full year target of low single digit same-store growth. MINISO overseas same-store sale declined low single digit, with North America achieving a mid-single digit same-store growth. North America same-store performance was quite strong in Q1, grew by 10%, but moderated in Q2. Particularly because the stock-out of the certain best seller, especially the best-selling IP product. We expect this stock-out would be eased in September. In H1 of 2026, the GP margin was 44.3%, flat versus same period of last year.

For the GP margin, it was including approximately 0.6 percentage point from the U.S. tariff refunds. For Q2, the GP margin was 45.3%, one percentage improvement compared with last year. This was due to the tariff refunds, which bring 1.2 percentage positive growth. Based upon the refunds received to date, the company expects tariff refund will also have the 20 basis points to 30 basis points support to the overall GP margin for the next two quarters. Excluding the external investment and convertible bonds financing, the profitability of our core business in H1 was as follows: adjusted operating profit was CNY 1.49 billion versus CNY 1.59 billion in H1 last year, down by 6%. Excluding the forex effect, the figures was CNY 1.63 billion and CNY 1.55 billion, grew by 5%. Excluding the forex effect, the adjusted net profit was CNY 1.22 billion and CNY 1.24 billion, down by 1.7%.

The corresponding adjusted net margin declined by 2.6% on YoY basis. This was also proving that our selling expense ratio rose 2.7% this period, with last year it was 23.1%. To be specific, rental and depreciation expenses related directly operated store rose from 7.1% of the revenue in the same period last year to 8.1% in H1 of this year, grew by 1%. Advertising promotion expense grew by 2.8%, where regarding IP licensing fees rose from 2.6% in H1 last year to 3.1% in H1 of this year, grew by 0.5%. The increase in the two item largely reflect our strategic investment in proprietary IP. Selling related labor cost rose from 6.8% last year to 7.2% this year, up by 0.4 percentage point. The growth of the above four expenses altogether contribute to 2.6% of the expenses increase.

By business unit on this slide, it shows very clearly the main reason for the YOY margin decline was a structural shift in the revenue. For example, in H1 of 2026, the revenue contribution from the high margin franchise and the distributor business, the net profit margin was more than 30%, but it's now fell 6 percentage points. While the contribution from the overseas directly operated business rose by 3 percentage point. However, last year, this number was a single-digit loss. Let's also take a look at the working capitals. Inventory turnover in H1 was 102 days versus 97 days in same period of last year. MINISO China inventory turnover was 67 days, which was 73 days last year. MINISO overseas inventory turnover for international market was 273 days, which was 240 days last year.

Going forward, our overseas business must prioritize inventory health and take decisive measures to react to support the inventory. Besides that, in the peak seasons, we have to leverage on the IP launches and the holidays for those sales peaks time, coordinating membership, promotion, and gifting activities to use blockbuster products to drive the monetization of the slow-moving inventory. At the end of June, our cash reserve was CNY 7.39 billion. Net cash inflow of the operating activity in H1 was CNY 1.48 billion, grow by 45.5%. We constantly place high priority on cash flow management. This robust level can also provide solid support for the company's transformation. On shareholder return, in H1 of 2026, the company returned CNY 1.31 billion to shareholder, including dividends and buybacks, of which the company repurchased CNY 520 million, combined with Mr. Ye's personal share purchase, approximately CNY 54 million in H1.

Our buyback sale in H1 was already exceeding the full year total of 2025, which fully demonstrate the confidence into the future business. We did not declare any interim dividend this time because of the company believe the current valuation is highly attractive. We will conduct substantial buybacks over the coming period and make a reasonable dividend decision by the end of this year based upon the full-year profit. The company's shareholder return policy for this year is buybacks plus dividends of the no less than 50% of adjusted net profit, excluding forex effect. Looking back on H1, our domestic business exceeding expectation, once again, validating our path for opening large store, building IP, and pursue high-quality development works. Overseas market sustained a compound growth rate of nearly 40%. Now, we are in a transition period from the scale expansion to quality operate.

We still need time to build up organizational capacity. Based upon the company's current projection, we expect the company's revenue to grow by high single digit YoY in H2, mid-double digit for the full year. On this, in H2, MINISO China revenue expected to grow by mid-double digit YoY, but overseas revenue will grow by low single digit. Overseas distributor revenue to decline by low double digit. Overseas directly operated business will grow low double digit. TOP TOY revenue is expected to flat in H2, with low double-digit growth for the full year. Compared with our full-year outlook at the start of this year, both domestic revenue and profit are somewhat better, with the differences mainly coming from overseas and TOP TOY. In H2, we'll proactively slow down overseas, continue to close a batch of the low-efficiency distributor store, and also controlling the pace of the directly operated stores opening.

We expect a net reduction of 50 to 70 stores across overseas market in H2. A net addition of 40 to 50 directly operated stores, and a net reduction of 100 to 110 distributor stores. For the full year, our guidance for the low single-digit same-store growth for MINISO China and MINISO North America remain unchanged. Excluding forex, the adjusted operating profit is expected to decline by a high single digit YoY. The adjusted operating profit margin expected to decline 3 to 4 percentage point on YoY. Our profit outlook is more cautious than the guidance we gave at the start of this year. When we expected accelerated full-year profit growth versus last year, with an implied margin assumption of a 1 to 2 percentage point decline. However, we now believe it is going to be down by 3 to 4 percentage points.

Given the overseas distributor market revenue will decline over the next two quarter, there will be some impact on our margin. This conclude my remarks. Now let's move to the Q&A session.

Thank you. Ladies and gentlemen, please rename yourself as your name plus the institution you represent. Please make sure you limit your question with just one. Now let's welcome Michelle from Goldman Sachs, please.

Hello, Mr. Ye and Eason. Thanks for giving me the chance to raise a question. I have a question regarding your largest store format in Mainland China. Mr. Ye has already mentioned the large store was performing out of our expectation. We know that for many of the larger store, when they first opened, the performance was pretty well. If the store opening dividend or the first store impact are gradually digested, what would be the normal performance of those larger stores?

Especially, compared with the normal stores, what would be the difference on the sales efficiencies and the sales per square meter? Whether you have any target in your mind, and you have any criteria in selecting the regions or the sites for those large stores? The questions are mainly regarding the large store format, please.

Thank you. Let me just start with my overall view. The larger store model continues to outperform company expectation because our first large store has been opened for two years. It is not going to be a short-term action, where at the same time, we have multiple large stores at the same time. It is not just for one to two stores. From this perspective, we are not a short-lived bust driven by the opening hurdles. It is a sustained growth trend. Our store metrics keep evolving, and now we have a park format, flagship, regular, and pop-up.

Let me just break down the larger store unit model with a few metrics. On our store performance, the park format family is very healthy. MINISO Land, our earliest format in this family, still deliver the store performance above CNY 3 million baseline, while the Super MINISO, newly launched in 2026, has already surprised us a lot, which can basically steady above CNY 1 million baseline. On the sales per square meter, the park format was running twice as that of the regular stores. The rent-to-sale ratio, the park format ran slightly higher than the regular store by a single-digit number. But the year worldwide trend was downward, thanks to the prime treatment after talking to the malls. On the paybacks, the park format store achieved a payback within six months in the early stage, and now average speaking, one year, faster than 60 to 80 months of the regular stores.

Franchisee profit margin and share of the profit store has risen in tandem. In H1, the profitability of the MINISO store nationwide, which is best level since 2019. In H1, more than 30 Land format store entered into the same store base with average daily sales per store up to 30% growth YoY. Flagship format 400 stores, average daily sales per store grow mid-double digit YoY. We will stick to the quality over speed. The share of the large store and the flagship store will keep rising based upon our analysis. MINISO China total store number would reach 7,000 to 8,000. MINISO Land format family would be 1,200 with 95 in Super MINISO and MINISO FRIENDS. Flagship format reach 2,000, regular format 4,500. On site selection, location value, and traffic will always be our key criteria.

We will take a look at the commercial district. Prioritize on top traffic versus a prime commercial area. For example, we look at the store structure, prioritize the corner position, the street-facing front. Thirdly, we take a look at the consumer circulation, making sure that a store is sit right on the main customer traffic corridor.

Thank you. Thanks to Mr. Ye.

Thank you. Now let's welcome Yang Runbo from CICC.

Hello, Eason and Mr. Ye, I'm Yang Runbo from CICC. I have a question. In H1 of this year, MINISO China performance was truly ideal. However, the domestic retail environment in China volatile in July to August. Some of the retail companies said that they are pressured. Can you share the consumption trends you were seeing in the market, and how the company is going to respond to that with concrete measures? Thank you.

This is a very good question. According to the data from the National Bureau of Statistics, as many of you can see, you can see that in June it was declining, and in July it was only grow by 0.6%, which is not ideal at all. But for MINISO China, we remains strong. Since July, MINISO China GMV has grown about 20% YoY, driven by both rising shares of the larger store and also the Land format in our store mix and steady same-store development. You can see that in July, the same-store average daily sales has grown by mid-single digit. At this point, we see MINISO China will have a mid-double-digit revenue growth in H2. Those results are inseparable from our strategies we mentioned. Let me just share with you people, product, and stores.

First of all, even if you see the social retail was going down, however, I see for traditional retail business, we still need the consumer to work. However, you see that for emotional sales, the sales was going up, for example, outdoor products, trendy toys, the sales was growing up, but traditional retail business was not growing that fast. That's the reason we have to continue to build our MINISO Land, because we are building immersive IP scene. That is the future trend. Let's also talk about people. Membership operation are key growth lever for us, especially build out the membership system. We shared some progress on membership program during the earnings call, including the growth in membership number, membership contribution to the sales. We need to have the refined operation of the store. Secondly, you need to talk about the product.

Our product mix are now truly aligned with IP. For example, our proprietary IP, which can actually provide the most interest-driven product with many emotional value. Those product sales were growing very fast, especially in H1 of this year. Proprietary IP led by YOYO became a notable incremental driver with the designer toy category. Proprietary IP now already has a mid-single digit share of the offline sales and a double-digit share of the online sales, growing very fast, especially in top-tier stores such as MINISO Land and MINISO Stage. In the Genie collaboration, we have been deliberately pushing into higher price band to test more prime merchandise. We are also going to have the first Lisa-branded pop-up store, which will be available starting from the 1st of September. Many international celebrities and superstars are happy to embrace and work with MINISO.

I hope they will be able to work with us to continue to work on the interest-driven consumption market in China. The economy was not good, but Chinese population is still huge. China has 1.4 billion people. Generation Z and people born after the 1980s and 1990s are still going to be a big proportion. Those people are never short of the material consumption. They need emotional value, and they need the interest consumption. Our competitors are also growing very fast, which showcases China has a huge potential to go further. In terms of the channel, I was talking about swapping the cage to bring in the better birds strategy, which will provide empty room for sustainable development of our domestic business in the upcoming years. Upholding the principle of quality over quantity, our domestic business is still in a fairly ideal state.

We will keep advancing the renovation with existing store. I have already highlighted MINISO China 4,665 stores and a variety of the store formats. We are going to go for the lower-tier stores. You can see young people in China, they all need the interest-driven consumption with emotional value. If we are going to build good store scenarios, immersive experience, our trendy toy product and IP product are more attractive. That can actually help us to continue to improve the consumption and continue to draw the designer toy enthusiasm and move the price band further. I was coming back from northeast part of China. I see many of the stores being well positioned. I was mentioning about our store efficiency is no less than our competitors. Some of our stores can even outperform Pop Mart. That is our internal goal.

If you have time, I would like to suggest you to take a look at our store at the Harbin Parkson store. We have two stores there facing each other. You can see that our performance outperforms Pop Mart at Harbin Parkson shopping mall, which actually boosts our great confidence for the larger stores. We internally proposed we need to improve the sales per square meter over the competitors. That is indeed the internal target we have. We have every confidence to make this target happen because you know that for our product and our trendy toy product in the land was more than 35, and we are going to make it more than 40. We already have two proprietary IPs now, including YOYO and CHOUCHOU. CHOUCHOU was just launched two days ago.

If our proprietary CHOUCHOU proves to be successful, then we are going to have two proprietary IPs with annual sales of more than 1 billion. If we successfully hit this target, then I believe our diversified format plus proprietary IP is going to be a 50% performance from the trendy toys IP collaboration product for another half. In that way, our business model will be more stable, more sustainable, and more immersive and more experimental. Majority of our stores are having more than 800 square meters, including two floors. So I have every confidence in our large store format, especially the land format, even if we are facing challenges now. However, I truly believe we are still in the pain stage of the transformation. The profit has been under pressure. However, we have a promising future and I surely believe the business model we are running on still makes us feel excited.

That is for domestic market. For international market, we are facing many problems. You know that starting from H2 of this year, I will spend more time working on the international market. In H1, we are working for the store format refinement in China. In H2 of this year, we are going to move to the rest of the international market. In Mexico, from the 10th to 15th of September, we are going to also have the MINISO Land format in Mexico. Problems that happened in China are also being faced in international markets. In Mexico, we are going to celebrate the anniversary. The Latin American consumer preferences are similar to that of China. Their income, population structure, and population density are very close to that of China. It is also the time for them to embrace the transformation and operating.

You see the microeconomic picture, as far as I believe, interest-driven consumption, emotional value would be the next driver for the future growth. We probably do not need too much material value. Only in some African countries we are still in great need of the so-called material value. However, some developing countries like China and Asian countries, we will be shifting from the material value to the emotional value for interest-based consumption. Thank you.

Thank you. Coming next, let us welcome Anne from Jefferies. The line is open please.

Hello. Mr. Ye and Eason, and the IR team, I have a question that was about your latest performance. What are the latest same-store sales, SSS figure for July and August? Has weather been a factor? Could you split same-store sales into average selling price, ASP, and traffic?

How much have store upgrades, renovation, and product mix shifts contributed to the growth? Which product categories are performing best? Given the softer retail and last year's high base, what is your outlook for the same-store sales in H2 of 2026? Are there any difference between the higher-tier and the lower-tier cities? Thank you.

In July and August, MINISO China seems to perform very steady, which is beyond our expectation, especially when we have the Super MINISO store. The performance was quite competitive. The store format, breaking down order value or volume contribution, 80%. Average transaction value grew by 20%. The volume and the price are rising, which is very healthy. We also mentioned we are going to have a higher consumer unit price and higher gross margin, which is not being started yet. We actually opened more high-end stores in The MixC, as well as the Taikoo shopping malls.

The products are still in the refining stage, need to be further improved. I also would like to mention, same-store growth is driven by multiple engines, including the store upgrades and the product upgrades, along with the memberships. Where for the upgrades are not the sole source. Within a mid-single-digit same-store growth, store renovation contributed roughly low single digit. The rest are coming from the better refined operation, including the optimizing the product channel matching, making sure the right product in the right channel, and also tailoring the product mix to different store style or types. I have already mentioned to you, we have more high-end stores. But we are still going to improve our product. Product adjustment takes time, but that's not for the store adjustment.

When we're talking about a store adjustment, we're still building the infrastructure, building it right, and then we're going to count on our product to continue to grow. We have our proprietary product, along with the accelerated development of the product mix. As you can see, no matter for large store model or designer toy, they are now in the tier one, the tier two cities. Penetration ratio in the lower tier cities are very low. This means lower tier cities offer broad room for expansion and are a potential source of the future same store growth. Let's talk about the category performance. Big toys is one of our best performing category with share of the total sell up to 1 percentage point on IP shares. IP products overall accounted for around one quarter of the sales. The share from the proprietary IP and artist IP rose by 4%.

Let me talk about H2 outlook. The high base vending coming from the Zootopia race in November and December last year, and we also have a decent IP lineup for the same period of this year. Overall speaking, with same store sell growing mid-single digit year to date, we remain confident in delivering full year low single digit same store growth in China, and the mid-double digit revenue growth in H2. We also see several important levers. First of all, keep optimizing low efficiency store. Second, on the product front, back to school season is a key focus. We did not do particularly right last year, and we will make sure we capture it this year. We are seizing opportunities for cultural creative categories, and we're going to work on that further. It's also going to be a good opportunity for us.

Thirdly, on holiday, we will capture the sell search window around National Day and the Mid-Autumn Day, firstly strengthening repurchase and the market share through the membership cashback credit mechanism.

Okay. Thank you, Mr. Ye.

Thank you. Next question. Let's welcome Shi Di from Huatai Securities, please.

Thank you. Can you hear me? Yes. Okay. Good evening. Thanks for giving me the chance. My name is Shi Di from Huatai Securities. You know that, thanks for providing us a very clear guideline. In H1 of this year, the company have many new IP and many new product. For example, collaboration with Genie and generated a strong buzz in H1. Your proprietary IP, CHOUCHOU and YOYO, are also performing very well. What IP types and category expansion are planned going forward in H2? What are the levers for creating the blockbusters in H2? Any holiday season you have in your pipeline?

Our IP strategy remains driven by two engines, licensed IP and proprietary IP. Each has its own plans. For the licensed IP, we have partnered with 180 global IP, spanning anime, film and TV, and celebrity IP, accumulating end-to-end experience from IP selection to product development to operation. You also talk about the Genie collaboration. Our product, for example, like accessories, blind box and plush, designing and producing 70 SKUs. You also see from the 1st of September, those product would be available. We also have more IPs in the pipelines. At the same time, we also have CHOUCHOU, which just started to release its great potential. At the same time, you can see for CHOUCHOU, the demand is far go beyond than the need, and which is actually the sold out.

We never expect this going to be that popular from the very beginning, which is another way to look forward to that. It was very, very popular on the Red Book, which enjoy very good progress. On 12th of September, was going to officially launch collaboration with Lisa in Thailand. At the same time, 9th of September, we're going to have the Lisa collaboration IP exhibition. You all know how impactful Lisa might be. We're going to be the IP collaborator and IP exhibitor worldwide. We have already mentioned we're going to have the product, for example, the blinded box, as well as the cloth product or the patent. The price would also be quite friendly to the normal consumer. You can see the price would actually be further improved compared with what we have last year. The GP margin contribution is also reaching the best level.

We are actually continue to improve that and continue to improve the product, the price, and be more experienced for the global layout. Regarding the proprietary IP, that is our long-term strategy lever. We're going to work with a large store format. As I have already mentioned, for YOYO, in June and July, its sales was more than CNY 100 million for two consecutive months, and was going to have a major IP collaboration later. That's going to go beyond the Disney collaboration. As you can see, YOYO also have the collaboration with McDonald's and also working with Luckin Coffee. All those advertisement could be identified on Xiaohongshu yesterday, and we also noticed that YOYO is indeed a very popular one, and all the consumer brands would like to work with us for that. So take a look at the Xiaohongshu.

You will see how popular YOYO would be. You'll see that the success of CHOUCHOU proved again our proprietary IP model is truly successful and feasible. We're also going to have a good design. The team is getting more confidence. Success could be luck, but there are two success. It's not luck at all. You need the methodology and the set of the strategy to be mature. We're also working with different celebrities, especially our collaboration with Liu Yichun, which is very, very well established, which is also the global leading strategy. As you can feel that is already go beyond the doubt. We're learning, but we're also surpassing. That is a great strategy of my team. We're going to launch better and good marketing innovation in the near future, go beyond our peers, really surprise the industry, society, and the consumers.

This can also help us to further clarify our commercial proprietary IP are actually going from stage to stage to a more mature phase. To summarize my answer to your question, I think we have a few levers. We continue to work with the top licensed IP, celebrity IP, insist on incubating our proprietary IP with our existing IP metrics. We are going to have the IP and the product working together. We are going to work with different categories and SKUs, leveraging our large store and different format to continue to convert the IP sales and continue to advance our proprietary IP. You can even come to our store to take a look at that. You can see that for Disney and YOYO, we are now having the blind box been working together.

You can also see that for CHOUCHOU, the blind box was also being well created, very much professional. As far as I believe, our blind box is making huge progress regarding the collaborations, which is no inferior than our peers. This is also something we are progressing very fast. As long as we have a good use case, good IP, if the consumers come to our store, they believe we are professional, especially after working with Liu Yichun, and we surely believe the MINISO trendy toy consumer measure is continue to progress. That could also help to build future collaboration. While at the same time, it is going to be a great driver for our future growth. That is all for me. Thank you.

Thank you, Mr. Ye. Hope we will hear more IP from you. Next question, Samuel from UBS, please.

Thank you. Thanks for Mr. Ye and Eason for the question. I have a question regarding the U.S. market. As being shown and talked, you have already proposed a target for $4 billion for revenue and $400 million for profit. But in Q2, we see the sales being somewhat slowed down, and how you are going to complete this target. Are there any driver you have? But at the same time, regarding the profit, how you are going to improve the profit?

Well, thank you very much. Internally speaking, we actually make U.S. and Canada as a whole. I have already mentioned, and for North America, our performance target was $4 billion, and we hope that it is going to be 10% of our net profit margin. Excluding the short-term data, if you take a look at the U.S. only, MINISO was the fastest-growing retail in U.S. in 2025.

It was being covered by Forbes. However, it is not only just for that. When we converted our sales from direct to the indirect, U.S. business posted a CAGR of 120 from 2022 to 2025, where for same-store performance, we are going to maintain a full-year target of low single-digit growth, which is in line with our expectation. Improving U.S. margin still going to count on the operating leverage, even optimizing the store numbers. For the past two years, we actually opened some stores with large foot traffic, where at the same time, as you have already mentioned, we are going to slow down. Slow down a little bit. Also continue to work together and improving the profit and revenue as a whole.

Next question coming from CITIC.

Thank you. Thanks for the question to raise this question. Hello, I have a question.

In H1 of this year, you have already mentioned that you open stores in peak season and operating your business. I was talking to you for Eason and for Mr. Ye, you are quite confident.

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What will be your expenses planning and look into H2 of this year, whether the interest are going to be accelerated. Thank you.

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I was recording a few numbers. You can see that in H1 of this year in North America, the store net addition was 75. In other words, we really want to make sure the stores being opened before the peak season, making sure that we accelerate the growth of the North America store, where for the full year, sales and profit, which is very typical to the retailer in North America.

We are not making money in H1 of this year, all the time we count on H2 or even Q4 to help to drive the overall sales. In my prepared remarks, I have already shown you a slide that is a 5BU profit rate. You can also see that for 2025, you could take a look at the last year. As you can see that the number was around 30% for franchise and agents business, which already in line with what I have already mentioned, the sales peak season for the seasonality. Look into H2 of this year. As you can see that our profit will continue to steadily increase. International agency remains stable. However, we would like to split the direct sales into two parts, including the North America direct sales, which was 10%, where at the same time, we also have the direct sales business that are still in the growth stage, for example, Europe, Australia, and Asia market. We are going to continue to optimize North America back office expenses. In H1 of this year, the back-end expenses ratio in U.S. decreased slightly. Profit margin will continue to grow, where at the same time

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You can see.

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Okay, well taken. You see hope that in 2027, we are going to have a good performance and improvement on net profit. Thank you.

Thank you, Eason. Next question coming from[inaudible], from Changjiang Securities.

Thanks for the team. Thanks for the opportunity of raising the question. My name is[inaudible]from Changjiang Securities. I have a question regarding your U.S. business. Some investors has already asked the question, I would like to ask you for U.S. merchandise strategy. You know that as well, adjusting our product metrics. I would like to ask for the management team, what would be our key focus next year in the United States in H2 of this year? How you are going to comment on the balance between the domestic direct and the indirect sales?

For U.S., refining the product mix is something we do continuously, particularly amid micro policy change. We have constantly adjusting our overseas profit product mix. In terms of the sales contribution, the stationery remain our largest category in U.S., contributing over one third of the sales, especially in wheel plush performing especially well. You can see that majority of that in the U.S. are built on the licensed IP. We plan to launch a proprietary IP next, which should contribute incremental growth going forward. At the same time, in Q2, some best-selling IP product were out of stock due to merchandise planning. We bridged the sales gap through rapid direct sourcing. As a result, due to the product planning, some of these product are out of the stock. That is not going to be our key. We are going to continue to differentiate the product where you can see that in U.S., the sales was declining from 60% to 70% in early 2024 to close to 40% in H1, while the share of the directed sourced product rose considerably.

Among those directed sourced stacks have significantly improved the conversion and attachment rates in store. Where U.S. is actually under pressure, we are still adjusting our product metrics. Even we slow down the store openings in the United States. For U.S., our headquarter is now actually making huge investment on the merchandise center. Regarding the GP margin, the U.S. market GP margin was around 65%-70%, part due to the tariff rebates, which will also give us some positive contribution in H2 of this year. At the same time, the asset ratio is well under control with the launch of the blockbuster IP and increase in the proportion of the IP. We believe the GP margin U.S. would increase in H2 of this year. Thank you.

Thank you, Mr. Ye. The next question, Wuchang Xi from[inaudible], please.

Okay. Thank you. My name is Wuchang Xi. Thanks for giving me the chance to raise a question. As you have already mentioned about the distributor operation are still facing some resilience. I would like to ask you, what is the company's outlook and plan for the distributor market growth? Thank you.

Okay. Thank you. I am Eason. In H1 of this year, distributor slowed. They are restocking. However, it is being slowed down, so the revenue was growing. Looking to H2 of this year, you see that the distributor revenue was still going to dump by 10%. I think the negative growth in revenue won't necessarily mean the end demand was problematic. What is the situation of the distributor market? For the full year of 2025, overall sales of the distributor business was more than CNY 10 billion.

The taka was more than 10%, which was always robust. Excluding the forex reason, you can also see that the GMV still maintain a high single digit in H1. We see the gap, which can see some of the channel are still digesting the inventory. In that way, the distributor restocking lags behind their own sales growth, a normal phenomenon in inventory digestion process. Secondly, behind the negative growth, there were also external factors and our own issues. Externally, some markets in Middle East and Asia were affected by geopolitical conflict, currencies warnings, and other micro factors. The inventory turnover in those market came under pressure in H1. North American market also faced micro currency and natural disaster headwinds, but its inventory turnover improved in H1. We operated in 80 distributor market overseas, with top 80 accounted for 80% of the overall business.

In H1, inventory turnover in the top 80 market was roughly flat versus last year, and somewhat better than the directly operated market overall speaking. Internally, as we have already candidly acknowledged, you can see that internally, we have the candid knowledge of previous communication, and we just want to maintain long-term health of the channel rather than pushing inventory into short-term result. Terminal sales were being normalized today. At the same time, we also further reduced the store number. For example, in New Zealand, in Philippines. Where at the same time in the mid of this year, and also due to the healthy channel issue, we actually made the strategic investment closing down some of the low-efficiency stores. We look forward for international market, and we are going to have another 100 to 110 in H2 net closure, where this decision makes short-term pressure on distributor revenue.

However, in the long run, it can also help to ensure healthy and sustainable development of the entire business ecosystem. As you can see that North American market is our key place. The local distributor are actually having very strong background and operation capacity, and the retail location of those market are actually seeing a low single digit in H1. Terminal performance was steady. In North America, likewise, we will not trade short-term revenue for channel health. You can see that Mexico market in Q3 and Q4 is going to celebrate the 10th anniversary. The market will also continue to roll out the improved format, and we are going to have a MINISO Land and a Super MINISO in those key malls in key cities. In terms of the product and operation, for distributor regions with established scale, we will deploy localized product.

On IP product, we fully recognize the launch cadence needs stronger planning. We have now built a more complete launch calendar that clearly marks the key local holidays and the launch timing for different stage IP. Through this way, we will be able to maximize the incentivize the sales momentum. For category with growth potential, we will help distributor markets iterate their marketing plans, offering better plans, iteration, and empowerment in scenario-based content, closing the content gap, lifting the sell-through of the high momentum categories. For the overall product mix, we will phase out low efficiency, low margin SKUs. Adding value for value for money everyday product to make up the volume, and also bringing high value for money local bestseller to drive the sales.

Okay. Thank you, Eason. Very clearly explained.

Thank you, Eason. Thanks for all the investors being interested in MINISO. See you next time.

Here comes to the end of today's call

Hello everyone and thank you for standing by. Welcome to MINISO March quarter 2026 earnings result presentation. At this time, all participants are in listen only mode. After the management prepared remarks, we will host a Q&A session. Before joining the Q&A, please state your name and institution. Please also be reminded the event will be recorded. We provide you English simultaneous translation for this call. Please select your preferred language by clicking Interpretation in the Zoom meeting. We released our Q1 2026 results earlier this year. Now please refer to our IR website. Joining us here today are Mr. Jack Ye, our Founder and CEO, and Mr. Eason Zhang, our CFO. Right before we begin, please refer to the safe harbor statement in our earnings press release, which also apply for this call, as we were making forward-looking statements. Please also note that we're discussing non-IFRS financial measures.

Those measures are extend, reconciled to the most comparable measures reported under IFRS. Also in our filing with SEC and Hong Kong Stock Exchange. Unless otherwise stated, all figures are in CNY. We have already prepared a slide deck for financial operating highlights for today's call. If you are joining through Zoom, you will see the slide now. You can also refer to our IR website after the call. Let me just hand the call to Mr. Jack Ye.

Hello everyone. Welcome to MINISO March quarter 2026 earnings call. In March quarter, the revenue rate grows to CNY 5.7 billion, grow by 28.5%, excluding the high end of our previous guidance. Adjusted net profit, excluding forex gain and loss, comes at CNY 630 million, grow by 8%. Operating cash flow grow by 40%. Free cash flow was up by 36%.

I'm not going to read through the financial items one by one. Eason will take you through the detailed numbers and outlook in CFO remarks. I'd like to focus on three areas. First of all, execution of our strategy. I may spend more time here because the details of execution can really tell you where a company is heading to. Secondly, an update on two overseas markets that are of your most concern: Indonesia and the U.S. Thirdly, my view on H2 of this year. Let me just start with strategic execution. Last year, I introduced a store upgrade strategy. We are right on that. MINISO brand store number grow by 280 in China, less than 10% growth, but offline store GMV grow by 25%. The two data tell the story best.

First of all, the share of the pro-rate franchisee base quarter reached the highest level in recent quarters. Franchisees are putting their own money on the line, so their P&L is most honest signal that you can get. The fact that the profitability is a new high tells you that large format store is not asking franchisees to take the risk, but helping them to make money. Secondly, we received thousands of new store applications, half of that requesting for large format or flagship stores. In the past, we have to convince franchisees to open large stores. Today, they're competing for this chance. Such shift is the market's most direct vote for the confidence in our large store format. On April 18, MINISO SPACE and MINISO LAND opened simultaneously at CDF Mall in Sanya.

Duty-free mall has been traditionally taken for luxury and beauty brands, with highest foot traffic density and spending power among the top-tier retail store. The fact that we can move in speak for the brand equity, most importantly, we bring something that people won't be able to take: an immersive IP-driven experience and pop culture to duty-free malls, and translate into incremental foot traffic and time for venue. The real barrier for running a large store isn't capital. It is content density. In a 1,000 sq m space, can you really make the customer want to stay without leaving? This comes to three things we accumulated for one decade. License right over 150 global IPs, a network of 2,000 global suppliers, and a supply chain that fast enough to refresh assortment every week. These are the three that can really make us stand out.

At the same time, we're systematically closing underperforming stores, those open for many years with under 200 sq m. At the same time, we upgrade our franchisee base, removing weaker partners to bring new, strong ones. This is what our store and the channel upgrade strategy is really about. Many people want to know how we have our IP strategy done. This is quite important. In Q1 of this year, we launched an IP operation training program out of our Guangzhou headquarter, bringing together regional manager, store representatives from South China, and functional team. This isn't a classroom-style training. We use our MINISO LAND store as a live training ground, breaking down operations in real store environments. The program covers our IP understanding, storytelling, operational execution, and the data capacity, working through everything from underlying logic to hands-on experience. Why it is so important?

Because IP operation is an organizational capacity. It is not a set of SOP. No matter how well a manual is written, if franchisees and your staff just follow it mechanically, the result won't be good. Only when people genuinely understand where IP resonates customer most, that can help our right half strategy. This can turn IP operation from a headquarter story into a muscle memory across the entire network.

On April 8th, we concluded our overseas trip there. The star of this event was YOYO, a proprietary IP that we built from scratch in-house. The fact that the proprietary IP took center stage is a signal our own IPs are now capable of standing on their own commercially, and the strong order volume from the distributor and overseas customers is the most honest vote of the confidence to our IP and our product. That's more telling than any market result.

YOYO surpassed CNY 100 million in sales within six months of launch. In April, it appeared on Met Gala, the Super Bowl Oscar of the fashion, a stage that has been traditionally for luxury brands and international celebrities. A Chinese original pop toy IP appeared as an accessory along with international stars and was featured as a piece at the event. This is not marketing. YOYO earned its place in the global fashion spotlight on its own merit. From CCTV Spring Festival Gala to Paris Fashion Week to Met Gala in New York, YOYO covered the ground in six months that many IP won't be able to make in 10 years. It's a full stack of the IP capacity from incubation to design to operation and global rollout. YOYO's success is not a coincidence. It's a signal that the proprietary IP strategy is going get into the harvest stage.

In Q1, total overall revenue of MINISO Group exceeded CNY 2 billion, and we also have a great way to extend our business. The success is whether our organizational capacity can keep the pace. Building organizational capacity is what we made a vast investment with. It won't immediately show up in financials, but it's by our long-term development. We have advanced a few things. First of all, standardization. The headquarters has developed operation and merchandising manuals. They deliver video case study and on-site training to ensure consistent understanding and execution across markets. Each market also set up regional management training with regular session for store managers and supervisors. Secondly, would be the benchmark and the rapid replication. When pilot project is selected, once it proves success, we roll out them quickly to other markets.

Thirdly, a membership model, helping experienced operator who deliver result with new comers and continue to have the generation pass on the information. This system means our overseas capacity no longer depends on a single individual. It becomes something that organization can grow on its own. The more market and the store we have, the greater the compounding effect might be. Deep organizational capacity along with IP-driven product, those two things give us strong confidence for our long-term overseas growth. Indonesia and the U.S. are the two markets many of you focused on. Let me give you an update on both. Indonesia has been one of the markets we master product in our international journey. It has truly been so going forward. Winning Indonesia isn't about market. Its young demographic and vibrant consumer environment in the market. We're going to have a long investment.

It also made a demonstration effect for confidence to our global team. We must have made it right. The business reach certain scale, hitting some bumps is entirely normal. The most difficult time is already gone. We already have a clear path forward. Our channel headquarters has set up dedicated negotiation team to proactively pursue primary location and select good locator stores. Our assortment, we have a one size fits all approach. Score on segmentation. Our new product operation headquarters providing direct support to strengthen local IP execution and retail merchandising plan. On the organizational side, we clearly define responsibility. Headquarters lead strategic development, while local team focusing on daily operation. In terms of the membership, we notice that we need to truly make the business from a traffic-driven to repeat purchase-driven. I'd like to spend a few words on membership piece.

We notice Indonesia consumer show a clear spike in store visit at end of each month, which correlates the local payday cycle. We made a payday week membership benefits program. The result was clear. Membership participants was 80.5% higher than during the normal member days. The repeat purchase rate and frequency are all improved. During the Ramadan, we saw participation climb even faster, which tell us this has become a real habit for the consumer. Well, for the first year, Indonesia delivered a solid profit contribution. I believe with our adjustment to event, the profitability in this year would be much better than last year. More importantly, the membership and the repeat purchase become the primary engine for growth. The growth would be even higher. I'm truly confident on Indonesia. Let's also talk about North America, which is another heat.

I have already walked you through the store model and the strategic updates. Today, I'd like to address two questions, including tariffs and the consumer behavior under inflationary pressure. I believe those are opportunities for MINISO. First of all, our price band gives us the structure, the advantages. Our core price range in U.S. was around $5-$25. In that range, what drives purchase, emotional connection with IP. I love this, so I buy it. Where at the same time $5-$25 is quite alluring, but at the same time, a consumer looking for merchandise of specific IP won't walk away because of the small price increase. The tariffs and inflation translate directly into price elasticity. However, for us, we don't apply that the same way. Secondly, MINISO Supply chain capacity is being further upgraded.

From building a localized and specialized merchandising team, we're improving the entire supply chain, including product, strategy, and the supplier development. With strong cross-functional and the supply chain collaboration, we have launched our first SAL program, which can help to improve our supply capacity. Our goal can really support the U.S. business development. We operate in 120 countries and regions worldwide. Any successful store model from one market, proven IP playbook, could be quickly adopted worldwide. At the same time, the stable cash flow and scale economy can also give us the confidence and resources to invest in the U.S. The global complementary framework is not there for our competitors. Tarriff and inflation are cyclical and short-term variable. They come, and they go. Where consumer demand over emotional IP experience is structural, it doesn't appear with micro volatility.

For strong companies, cyclical pressure is also the growth opportunity. This force is going to accelerate industrial shakeout and let truly differentiated brands stand out. In U.S., we are that differentiated brand. Let me just attend to TOP TOY now. In first quarter 2026, TOP TOY revenue grew by 51%. Net store grew by 21, reaching 355, 360 in China, and 79 overseas. In Q1 of this year, we launched a new proprietary IP, Xiao Yu, Daidai, and Bao Long Long. Along with proprietary IP same stores, together with Nomi, TOP TOY portfolio of proprietary IP stand out. The portfolio products become more mature. Our proprietary IP is being validated by the market. By the end of this month, we'll announce Zhao Lusi as TOP TOY's global brand ambassador. Her influence and recognition among young consumer will help us accelerate and reach more young consumer.

Coming next, let me just walk you through my H2 outlook. There are four drivers. First of all, membership is the most important lever for our same-store sales growth. The data tells a clear story. For full year 2026, member contributed 60% of the total sales. In Q1 of 2026, this number rose to 73%. In other words, nearly three-quarters of MINISO China business are coming from our members. There are two structural shifts behind that. I see that consumer accounted for 79% of the total sales for us. Are two highlights. First of all, contribution from repeated purchases continue to grow. In Q1 of this year, repurchase has already accounted for 60% of the member sales. New member acquisition is also accelerating.

In the first purchase contribution from the new members rose from 6% to 11% in Q1, which tell us when we convert new consumers into members, the quality of those new members are also improving. When more than 70% of your business revenue are coming from the consumers you can directly reach and engage, the growth shifts from being opportunity-driven to system-driven. That's the underlying logic behind our confidence why we are there for repeat purchase and ARPU expansion in H2. Secondly, benefit our channel upgrade already started to come through. For the full year, we plan to open close to 500 large format stores, with MINISO LAND and flagship store making up increasing share. Certainly, North America and Europe set to enter into harvest phase in H2. The new store we opened in U.S. and Canada was of high quality.

This cohort will reach maturity and deliver high-quality same-store sales growth and margin improvement. 2026 is the year with highest density of IP. As we move into summer peak season, we have a very strong pipeline of major IP collection launch lined up. We could see some return this quarter from our earlier investment in the AI space. I firmly believe that we surprise lies in the efficiency gain AI can bring to our core business. Strong management capacity get amplified by AI, and the technology dividend from AI will flow first to organizations that already have high execution discipline and a very strong learning capacity. I surely believe we're going to continue to leverage AI to really support organizations who already have a very strong learning capacity.

For me and for my team, we are improving our understanding over AI and also continue to develop AI. What is MINISO? MINISO is a high-density operating organization, launch thousands of new SKUs every year, manage over 8,000 stores, and extends more than 100 markets and regions. For an organization like us, the drive for efficiency is our DNA. On the product development side, AI is supporting the trend forecasting and the assortment decision. On marketing, AI can improve our efficiency in content production and the customer stratification. On operation side, our smart floor system are helping us managing foot traffic by time and day. We approach change with a sense of humility. We see AI as an amplifier, amplifying the supply chain advantage, product development speed, and operational precision that MINISO already has. Recently, we also would like to leverage AI to forecast the product need.

In that way, we will be able to improve the customer loyalty. Those are the two prepared remarks I have for you. Now, I'm going to welcome Eason to walk you through the financials. Thank you.

Thanks, Jack. Welcome, everyone, to today's call. Please allow me to walk you through our financial result of this quarter. Unless otherwise noted, all figures are in RMB. Let's take a look at the completions of guidance. Let me just start by reviewing how we performed against the guidance we provided on the March earnings call. We delivered on every metric we guided for this quarter. First of all, revenue. Group revenue was grown by 28.5%, which is higher than the 25% we made for the previous quarter. I will break down the growth driver by business unit later in my remarks. Next, on same-store sales.

In Q1, MINISO China Mainland delivered high single-digit same-store sales growth, where North America delivered mid-double-digit same-store growth. The two strategic priority markets maintained a very strong momentum we saw in Q4 of 2025, driving group same-store growth to a mid-single digit number. It is worth mentioning, Europe and Latin America also delivered positive same-store sales growth in Q1. The trend will be continued in Q2. Let's also take a look at the top line. In Q1 of 2026, group GMV reached CNY 10.1 billion, grew by 26%. Total revenue grew by 28.5%, reaching CNY 5.7 billion. Let's break down by brand. MINISO Brand revenue was CNY 5.17 billion in Q1, up by 26.6%. MINISO China Mainland was CNY 3.23 billion, up by 29.6%. MINISO China Mainland continued to perform exceptionally well.

This was the fourth year-over-year growth rate in the past nine quarters, and the fifth consecutive quarter of accelerated growth following Q4 of 2025. The success of our China business validates our strategic direction is right, our operating playbook is solid. We will use China experience as our benchmark, use this proven operating experience to drive breakthroughs in international business, turning China's success into a powerful engine for overseas growth.

MINISO overseas revenue was CNY 1.94 billion, grew by 22%. TOP TOY revenue was CNY 510 million, grew by 51.4%, continued a very strong growth trajectory. Let's take a look at same-store sales. In Q1 of this year, Mainland China delivered strong same-store sales growth with high single-digit growth number. MINISO overseas, including the third-party distributor, also delivered solid low single-digit growth. Looking ahead, we will continue to strengthen our same store across three dimensions, people, product, and stores. First of all, people.

We leverage in-store traffic data to capture peak hours, regularly run in-store engagement activities, capitalizing on peak occasions like Mother's Day, 520 Lover's Day, and Children's Day, and the Dragon Boat Festival to drive traffic through online to offline activation. On the other side, we use internal mechanisms such as in-store competitions for the best in-class mentoring to continue to improve our operation capacity. At the same time, as Jack Ye has already mentioned, the value of our domestic membership system continued to be unlocked. In Q1 of 2026, members' contribution to the sales growth from 60% to 73% this quarter. Empowered by our large store and IP strategy, we continued to acquire new customers and use refined operations to close the loop from acquisition to retention and repeat purchase.

In the near future, we will leverage AI capacity plus membership data to make sure we continue to have the demand forecast, the precision targeting, and the channel iteration continue to drive the same-store growth number. Second, let me talk about the product. We continue to align category with seasonal and holiday consumption trend, use hero SKUs to drive a structural upgrade in the personal sales mix. In H1 of this year, our IP preparation has broke through across diversified categories, covering high-value IP for K-pop superstar brand Jennie, the sweet world brand growth, and classic lifestyle aesthetic task season. This fully validates the connectivity of our global IP platform. In H2 of this year, we're going to heavily launch the World Cup collections, Chiikawa plus Sanrio collaborations, and the Toy Story movie. The hero IP will help to drive the high attachment rate. Secondly, our store.

We continue to upgrade the store display and visual identity. In Q1 of this year, we completed renovation to around 80 stores. The average daily sales improved by more than 50% post renovation. The result validates the effectiveness of the model strategy. We will continue to make it right. Let me also talk about our store network. At the end of this quarter, we have already more than 8,500 stores. MINISO, we have 8,210 stores worldwide, a net increase of 722 stores. MINISO China store number grew by 380, where overseas we net added 404 stores, reaching 3,670 stores by the quarter end. TOP TOY have 875 stores, with 355 stores by the quarter end. 39 are located outside China.

In Q1 of this year, we opened high-quality theme park, for example, MINISO LAND and MINISO SPACE in Sanya CDF Mall, MINISO LAND in Grandview Mall in Guangzhou, MINISO LAND in Dongmen and Shenzhen, as well as MINISO FRIENDS in IAPM Mall in Shanghai. By the end of this quarter, the SPACE, LAND, and FRIENDS stores reached 44 in total. In this quarter, we're going to have the SUPER MINISO, a new theme park lineup, bringing the total to 61 by the quarter end, covering 32 cities across China. Together, theme park stores, flagship ones, and the large store ones accounting for 12% of the total store count contributed 30% of the sales. We expect to roll out more better theme park stores by the end of this year and deliver a joyful and unique shopping experience to our user. Let's talk about our GP margin.

GP margin was 43.3% for Q1 compared with 44.2% in the same year last year. We have a 0.9 percentage point decline due to three reasons. First of all, high-margin overseas business represents a small share of the total group revenue. Secondly, the return of the value-for-money assortment in China. Disciplined pricing has translated into higher volume. Thirdly, an increasing mix from our new domestic product, like the quick commerce stores, which are still in a margin ramp-up stage. Let's also take a look at expenses. The total operating expense, excluding SBC, grew by 34% in Q1. The total expense ratio was 29.2%, compared with 28% in Q1 last year. Within that, selling expense grew by 37.7%. The selling expense ratio was 24.5%, up by 1.6 percentage points. G&A expenses grew by 17.4%, slower than the revenue growth, representing 4.7% of the revenue, a decline of 0.4 percentage point.

The growth of the selling expense was primarily driven by investment in operating store licensing fees and advertising and promotion activities. First of all, in Q1, the revenue from direct operating stores grew by 50% YoY, while related expense grew by 35%, demonstrating an ongoing optimization in our DTC store-level economics. Direct store-related investment include staffing, rent-related expenses, depreciation, and amortization. Secondly, advertising and commercial expenses grew by 74%, accounted for 3% of the revenue. That was mainly because of the brand upgrade initiative and the proprietary IP marketing. We invest in brand awareness to reach a broader consumer base, reflecting our strategic investment in building brand equity. Thirdly, logistics expense grew by 43.5%, stably representing between 1.5%-2% of the revenue. Fourthly, licensing fee grew by 42% in this quarter, in line with our strategic investment in IP development, stably representing 2.4%-2.6% of the revenue.

The growth of the G&A expense was primarily due to higher staffing cost. In line with our business expansion, G&A grew slower than revenue. Let's also take a look at other net gains. As being talked with many of you, for the previous quarter four, in Q1, we recorded a large investment gain with other net income related to our direct investment in an AI company. Following that company's recent IPO and meaningful share price appreciation, we recorded RMB 870 million in fair value gains. I'd like to remind all of you, the management doesn't view this type of gain as reflective of our profit and the core operating business, so it's been excluded from adjusted operating profit and adjusted net profit. In addition, the line item also include net foreign exchange gains and losses.

With forex volatility in Q1, we record a net forex loss of more than CNY 8 million in this quarter, which going to impact our margin by 1.5%. Generally speaking, our forex exposure may come in from the holding foreign currency-dominated assets, for example, cash equivalents, or receivables, or carrying foreign currency-dominated liabilities such as our USD-dominated convertible bonds. In Q1, the forex losses mainly come from the intercompany receivables from our subsidiaries in the U.S., Canada, Europe, and Indonesia. The forex gains and losses don't reflect the true operational performance of our core business. As the share of our DTC business continue to grow, the impact of the forex will also increase. The guidance we're going to provide you will exclude the forex impact. Well, for non-IFRS, there will be some item need to be adjusted.

I listed it here for you, including six. The first one is equity settled Share-Based Compensation, SBC. SBC expense in Q1 was CNY 410 million, an increase of CNY 84 million because of the top line. The second one is gain from the indirect investment in our AI company. This is actually a non-IFRS with an investment of CNY 817 million represent unrealized and the mark-to-market gains arising from the change in the fair value.

The third one is losses from the fair value change in derivatives and the issuance of the cost related to convertible bonds. By the beginning of last year, there will be a one-time issuance fees that won't occur this quarter. In Q1, the interest expense on convertible notes was CNY 50.4 million, of which CNY 45.7 million are non-cash. The actual cash interest paid by the company for this convertible note was only CNY 4.7 million.

Interest expense on the loan used to acquire our stake in YH was CNY 23 million. In Q1 for YH, the performance was truly good. The net profit was CNY 290 million as we hold 29.4% of the equity stake in YH. We recognize approximately CNY 77 million in income from YH in Q1, and we also have the change in carrying value of the redemption liabilities arising from the preferred shares. All those items will be excluded from adjusted net profit.

Effective tax rate was 24.9%, which was 20% last year. Let's take a look at the profitability. I was talking about adjusted operating profit. Adjusted operating profit, excluding the net forex loss, grow 40.3% reaching CNY 840 million in this quarter. The adjusted operating margin, excluding the net forex loss, was 40.7% compared with 60.6% in the same period of last year. Let me just walk you through the gap.

First of all, gross margin declined by 0.9% YoY. The total operating expense, excluding SBC, grew by 1.2% YoY. The above partially offsetted by other items, resulting in a total impact of 1.8 percentage point on the adjusted operating margin. It's been declined from 16.6% to 40.7%. As you can see that for this quarter, the increase in our overall expense ratio was increased significantly compared with the previous quarters, where for the full year, we aim to well control the expense ratio and continue to stabilize the GP margin. In other words, we are going to stabilize the operating profit margin for the company as a whole. In H2 of this year, as a peak sales season of the overseas market continue to approach, we are going to honor our commitment for this goal.

Regarding working capital, by the end of Q1 of 2026, the inventory turnover was 101 compared with 102 days in the same period of last year. MINISO China managed inventory turnover was at 67 compared with 83 last year. MINISO overseas inventory was 254. That was 208 last year. The increase of overseas inventory was primarily driven through the inventory build-up ahead of the store opening. The second one is due to the logistics instabilities. In some strategic market, we have a more flexible supply chain management strategies, increase the safety stock in overseas market. Over the time, there will be significant room to optimize overseas inventory turnover. Let's also take a look at the cash flow, liquidity, and capital allocation. By the end of this quarter, our cash position stood at CNY 7.05 billion, remaining healthy.

In April and May of this year, we distributed dividends over $160 million, bringing our cumulative shareholder return to CNY 6.23 billion. We believe our share price is currently significantly below its intrinsic value. Jack has already announced by the end of April, he intends to increase his shareholding. The company also planned to conduct share buybacks based on the market condition. Going forward, we will continue to maintain disciplined cost control and prudent working management. We are balancing the growth with a delivery stable and predictable returns to the shareholders. Last but not least, let me just give you the outlook. Standing here by the end of May, we are highly confident in achieving the full year target. We expect for the full year 2026, the revenue we're going to have a high double-digit growth. Three-year compound growth rate would be no less than 22%.

Full year net store addition would be 450-500. Jack has already mentioned, we're going to pay more attention to the quality of the development. 450-500 net store increase would be adjusted as we continue to balance the quality of the store. However, overall speaking, we are still very confident in hitting our target. Regarding the same-store performance, MINISO China and North America, we hope we can continue a positive same-store sales growth. Excluding forex gains and losses, we expect adjusted net profit growth to accelerate compared with 2025 on full year basis. While the overseas macro environment presents significant challenges, our expectation for the first half operating readout remain unchanged. We believe the revenue will grow by 20%-22%. Net store addition will be 210-230. The MINISO China same-store sales maintain a mid-single digit positive growth.

North America same-store sales maintain a high single-digit to low double-digit growth. That concludes my prepared remarks. I'm happy to take your questions. Thank you.

Thanks for Eason, thanks for Jack. All the investors and analysts, please state your name to have your name and the institution you represent. Please make sure you only raise one question each time. Let's first of all welcome Michelle from Goldman Sachs to raise the first question.

Hello, Jack and Eason. Thanks for giving me the chance to raise a question. Congratulations for the company of having a good performance despite the challenges. My question was regarding overseas markets. They're being touched upon by Jack Ye. You see the crude oil price have risen and stay elevated. Could the management team share with us what is the demand from the key overseas market?

What would be the distributor order, pricing, cost of goods sold, and the transportation and the logistics? What are the impacts on your business, and what would be your response strategies? If in the next few quarter, there are some key upside and downside risks, which are the market and factors that you are most associated with? Are there any market that's going to have a huge fluctuation, and what are the market you're confident on? Thank you.

Thank you very much. A very good question. Let me help to address this question. First of all, on product mix. While systematically laying out the share of the high-margin categories. Proprietary IP product and IP collaboration limited edition are key focus. We also started to pursue narrowing but deeper strategy, concentrating on the true hero product and proactively on the tailor and SKUs.

Fewer categories, but a greater operating depth and efficiency in each. This is, in itself, the most direct way to hedge against cost pressure. On the supply chain, we have extended the raw material stocking circle from the SKU from two months to three to four months, locking the cost ahead of the time. End-to-end stocking price is still stable, gives us sufficient buffer. For U.S. market, over the past two weeks, we started the differentiated price tags, taking price first on high frequency, high velocity items. For example, like a bottom to water and a T-shirt. On the bottom now, we see GP margin already improved compared with April. The price increase roll out further. We believe that U.S. GP margin would continue to stay stable or even go up.

Looking ahead into the next three quarters, the upside risks include successful execution of the pricing adjustment, structural margin improvement, the rising mix of proprietary IP, as well as the logistics cost pressure from the sustained high crude oil and potential pressure on the ticket size if the consumer sentiment is certain continue to go weaken. Overall speaking, we're still very proactive for cost management.

Thank you very much. Thanks for Jack.

Coming next, let me just welcome Samuel from UBS. The line is open for you, please.

Thank you. Thanks for Jack Ye, and thanks for Eason, and thanks for Christina. I have a question regarding your Indonesia and Mexico market. I heard a few remarks from Jack Ye regarding the Indonesia market outlook, but let me just ask you a follow-up question. What are the same-store sales and the overall sales trends in Indonesia and Mexico over the past two months in April and May? What is your strategy for both market, especially Mexico? How should you comment on the sales and profit growth outlook for both market in 2026? Thank you.

Thank you. I think I have already covered Indonesia market. Let me talk about Mexico. The Mexico trend was positive. Same-store sales already turned positive. Latin America are also delivering positive growth. From April to May, same-store sales improved meaningfully. Strategically speaking, we're going to work on channel upgrade. Mexico used to be dominated by small stores under 300 sq m. This year, we're going to roll out another store. Larger store not only means a larger floor footage.

It represent a comprehensive upgrade on IP density and dwell time to improve the higher ticket size and repeat purchase. Our largest store practice in China is fully validated. We're going to have it in Mexico now. Looking to the full year, Mexico, the same-store sales should maintain positive. New store benefit as the channel upgrade would be visible in H2. Latin America has a substantial consumption power and the fragmented competitive landscape. As long as we open right store and execute IP operation well, the market is still quite promising. For Mexico, we're going to have larger stores starting from H2 of this year. We really look forward to its performance. Thank you.

Thanks for Samuel, and thanks for Jack. Let's welcome Anne from Jefferies.

Thank you. Thanks for Christina.

I have a question regarding the mainland China market. As you can see that generally speaking, social retail data is not looking right. However, as I was talking to the expert, we found out MINISO store, your performance is much better than other peers. Is it possible for you to share with us, are there any strategic updates that you can share with us? What are we going to do next? Just now, we have already mentioned some of our franchisees, they're happy to open the large stores. Can I just kindly ask you, are there any capital support we provided to our franchisees? Any strategies you have on the China market we'd happy to hear.

Thank you very much. Let's talk about renovation progress. We renovated around 80 stores this quarter with clear result. Average daily sales increased by 50% post renovation, validating the effectiveness of our store upgrade strategy. For 2026, we plan to renovate more than 300 stores, we need to do it in a phased pace and a proactive intervention way. In other words, open big, close small, open good, and close weak. Transferring those aging undersized stores into new store formats with place to emphasize on evaluating the visual identities, standard display, IP experience mix, and to have efficient renovation strategy. Let's also talk about franchisee profitability and paybacks from Q1 2025 to Q1 2026. The share of the profit franchisee store continued to go up. The GP margin continued to expand. On payback period, larger store are meaningfully higher than the store level profitability.

For some of the best performing MINISO LAND store can even achieve a payback within 6 months, compared with around 18 months for the standardized stores. In 2026, we continue to reinforce the franchisees their understanding over the large stores. We received some positive feedback from many of our large store franchisees. About 50% of the new store application received by the headquarters are for large store format. The feedback indicate the franchisees are increasingly willing to invest in large store renovation. It also reinforce the importance of our strategic shift towards improving per store quality. Thank you.

Thank you, Anne. Coming next. Let's welcome Yang Runbo from CICC please.

Hi, Jack and Eason. I have a question regarding Mainland China this season. As we can see in April and May, the micro consumption data in China is still fluctuating. I'd like to ask the management team, in terms of the foot traffic and willingness to spend, are there any change? What trend are you observing across different city tiers and consumer cohorts?

Same-store average daily order volume and average ticket size are both going up. The ticket size is approaching CNY 14. There's one driver that is becoming more important for our China growth, that is membership operation. It's most important strategy we have. A high quality, highly engaged membership system provide more predictable growth with strong resilience going through the industrial cycle. The data tell us very clearly, members spend at a meaningful higher than the non-members. The higher the share of the member sales, the higher the quality and predictability of the overall business might be. For the past few months, our membership ratio increased from 60% to more than 70%, driven primarily by new consumer acquisition.

In H1 of this year, we'd like to work on the member acquisition. In H2, we will focus on repeated purchase. When the two are combining together, it can help to complete a membership growth flywheel. Taking a look at the city tiers, we observed some positive trend. Consumption potential being unlocked for all tiers. Same-store sales are all positive for all city levels. Provincial capitals are driven by large store as well as top level IP. Tier cities are driven by potential penetration and customer acquisition. The growth was pretty healthy during the Chinese New Year. We roll out the trendy toys to the countryside strategy, bringing MINISO IP product and the same product experience to county level market, and which can help us to have the same-store sales in county level reach double-digit number.

This tells us emotional demand for IP and the trendy toys cover a much broader audience. Young people in county, they also have the same demand. They simply don't have the shelf and adequate supply before. This can also see MINISO brand has already covered different consumer cohorts. The depth of the China market is far greater than what is being generally appreciated by the market.

Coming next, let's welcome Xu Xiaofang from CITIC please. Okay. We may move to the next question first. Let's welcome Shi Di from Huatai Securities first.

I don't know if you hear me.

Yes, great. Loud and clear. Thank you.

I'm Shi Di from Huatai Securities. I have a question regarding the same-store sales in China. We see in Q1 of this year, the company did a good performance on same-store sales. In the next few quarters, the baseline was being elevated. How are you going to comment on the same-store base rising and the subsequent quarter performance? What strategies and tactics are in place to sustain the same-store growth?

You're right, the baseline is indeed rising, but we have a clear and a systematic strategy in place. Let me just share with you a few data. During the May Labor Festival, domestic sales grew by a high double-digit number, outpacing major competitors. Average daily sales hit an all-time high, even higher than daily average during the Chinese New Year holidays earlier this year. We see some third-party data show us foot traffic was under pressure during the May Day holiday, but our store, the entry level improved by 4.1%. Average personal traffic also grow, means we drove traffic against the headwinds. By categories, toys, digital accessories, and travel categories delivered 25% growth, which is a hard-earned result.

For sustaining same-store growth, we have the following strategy. For IP preparation, we continue to deliver differentiated and high-frequency launches. For example, with the global exclusive license for F1 plus Disney collaboration. In May through June, there will be a few gifting seasons with Mother's Day, Children's Day, Father's Day, and 520 Lover's Day. We have already built a dedicated assortment and event plan according the gifting data to improve average ticket size. For operating, we also roll out the foot traffic contest at a store, and to further empower our store. The supply chain also continue to improve. Even during the May Day holiday, we can unlock the sales window. Even if the baseline is going up, we have a diversified toolkit, and we are confident we continue to deliver strong same-store performance. Thank you.

Thanks for Jack. Madam Xu, are you there from CITIC? Can you unmute yourself for questions?

Yes. Christina, thank you. I have to say sorry, there might be some technical issue with my line. Jack, Eason. Good afternoon. I have a question regarding your proprietary IP. For the past few six months, we see that your proprietary IP started to show up in your store media and the lower cities. The design's been quite interesting. Is it possible for you to share with us your proprietary IP, for example, YOYO as well as the pipelines?

Thank you. A radical question, let me elaborate on that. Third-party licensed IP and proprietary IP, since selling the same product, the logic would be different. Let's talk about the GP margin. Proprietary IP product have a high margin compared with licensed IP, the underlying logic matter the most. Proprietary IP is most exclusive and absolutely differentiated.

If you want to sustain the GP margin, you need to have a proprietary IP. The pricing power, operating elasticity, and the entire value chain of the proprietary IP sits fully in our hands. It also provides long-term high margin mode. You need to think about how to diversify the monetization model. A mature proprietary IP isn't sell product. You can sub-license it to the third party. You operate across multiple formats, and it can also drive content production and upgrading the IP capacity. Those are all extreme high-margin business model that compound over time. YOYO appearance on the red carpet and entry in professional way reflect build up the brand value rather than sell product only. We're building our proprietary IP. We're building a business model on an entirely differentiated style. That is most important upgrade for MINISO long-term profit structure. Thank you.

Thanks for Jack. Coming next, let's welcome Mr. Ting from Changjiang Securities, please.

Thank you. Thanks for the management team. I'm Ting Yang from Changjiang Securities. I have a question regarding the Europe business. It seems the business growth in Europe is quite fast, and you are still in the investment phase. Europe is a big market for you to explore. Can I ask Jack Ye, can you share your view on the long-term opportunities in Europe and the specific strategy plan? For the mid and the short run, what would be the pace of the store investment in Europe this year, the profit quality of the new stores, and what would be the change of the margin for the store? Thank you.

Europe has delivered continued positive same-store sales growth this year, with the leading category being trendy toys categories, for example, like the vinyl plush and the Blind Box. This is also the reason for us to go for international expansion. We're not bringing in product others already selling. We're rather bringing the consumption scenario of IP trendy toys, open new demand. Channel upgrades are progressing in parallel. The store will roll out in H1 of this year. Regarding the profitability, Poland and Germany are strong proof point. Both directly operated stores have outperformed expectation. The store-level and marked-out or operating margin reached double digits. The Germany overall operating margin for us more than 10 stores has already stabilized with double digits. Other markets are ramping up. Q1 is traditional the off season for retail. It is also the best window to prepare for new store opening.

Our long-term profitability target for Europe at DTC SKM. Germany has already achieved that. Other markets will follow up. Europe is a market with long-term cultivation. We have the patience and we have a clear pathway there. Thank you.

Thanks for Jack Ye, and thanks to Mr. Ting for the question. Coming next, let's welcome Wu Chenxi from Guotai Haitong. The line is open, please.

Thank you. Jack, Eason, and Christina, thanks for giving me the chance. I have a question regarding U.S. It says that you operate the largest store format in U.S. for quite a while. Is it possible for you to walk us through the operational details as well as the operational result? We can see that, what would be the purchase frequency of your U.S. members? Is it improved as you roll out large stores?

Thank you, Ms. Wu. As I was emphasizing again, that is what we are doing now. For the past two to three years, MINISO continued to build up our non-U.S. consumer goods, the largest DTC network in the local area. Starting from January of 2024, we started to explore the large store. Before that, you say that we entered into U.S. market in 2017. By then, majority of our stores are located in U.S. shopping malls. From January of 2024, we started to have our bottom-proof stores being opened, and we started to build our understanding of a buzzer. By the beginning of this year, Javier went to U.S. to tour around our stores. We find out our buzzer store has already moved into a 2.0 version time. What does 2.0 version mean? Our 2.0 version store is not picky about the business district at all.

You can say that for our good and large buzzer stores, even in an average business district, its store sales and efficiency per square meter is still been looking right. Compared with the 1.0 version buzzer store, the 2.0 version are actually showing better profitabilities. We have already provided you a single store profit model in the U.S. Generally speaking, for a single store, the payback takes around one year in the U.S., where for the 2.0 version store, the payback period is being controlled within one year. Well, for MINISO, we are committed for the long-term business, and we stick to the long-term investment. For the 2.0 version store, and it provide above expectation single store performance, and it is also sustained and continued with improvement.

In other words, in the near future, our U.S. 2.0 version store can be rolled out to more cities and more business districts. It's a proven success, which can help us to continue to unlock its potential in the U.S. market. The second question, you were talking about the sales data from our members. In China, we have a very mature and well-established CRM operation system. In that way, we will be able to extend our success China membership management to the U.S. For the past one year, the sales growth from our U.S. members has been quite significant. The China started to do membership in 2018, and in 2021, the membership sales exceed half of our total business. We made five years making membership spending accounted for half of our revenue, where in the U.S., we only spent one year to make that happen.

We can also see the repurchase rate of the U.S. consumer is no less than that of the Chinese members. That's the reason. We believe we're going to have a very healthy store efficiency this year, and we have every confidence for that. Thank you.

Thanks for Jack Ye, and thanks for Eason. Thanks for all the investors and analysts for your questions. Thanks for everyone to be a part of our earnings call. If you have any further questions, feel free to contact my team. Thanks for your attention this call for MINISO. See you next quarter.