MINISO Group Q1 2024 Earnings Call Transcript

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Provided by Quartr
November 21, 2023

Key Takeaways

  • Record Q3 results: Revenue reached RMB 3.79 billion (+37% YoY), gross margin hit a first-time 41.8% (+6.1 ppt), and adjusted net profit was RMB 641 million (+54%), delivering a 16.9% net margin.
  • China segment resilience: GMV per store in China recovered to 100% of 2021 levels (85% of 2019), with 198 net new store openings and a low 1.4% closure rate, hitting the 350–450 annual net opening target.
  • Overseas acceleration: Overseas revenue grew 41% to RMB 1.3 billion, with directly operated markets up 89%, GMV per store +27%, and 126 net new overseas stores this quarter toward a 350–450 full-year goal.
  • IP-driven innovation: IP products now exceed 40% of overseas revenue, boosting margins, and collaborations with Disney, Sanrio and others have generated high-margin themed stores and blind-box concepts with record sales per square metre.
  • Top Toy expansion: Top Toy revenue jumped 46% YoY with GMV per store +30% and store count +70%, moving toward breakeven in 2023 through new partnerships with licensors like FanDynamcon and 52 Toys.
AI Generated. May Contain Errors.
Earnings Conference Call
MINISO Group Q1 2024
00:00 / 00:00

There are 6 speakers on the call.

Operator

Welcome to Minnesota's Earnings Conference Call for the September quarter that ended September 30, 2023. At this time, all participants are in a listen only mode. After the management's prepared remarks, we will conduct a question and answer section. Before joining the question and answer section, please mark your name and institution.

Operator

And be kindly note that this event is being recorded. We have announced our quarterly financial results earlier today. An earnings release is now available on our Investor Relations website at ir.miso.com. Joining us today are our Founder and CEO, Mr. Jack Ye and our CFO, Mr.

Operator

Yixin Zhang. Before we continue, I would like to refer you to the safe harbor statements in our earnings press release, which also applies to this call as we will be making forward looking statements. Please also note that we will discuss non IFRS financial measures today, which we will have explained and reconciled to the most comparable measures reported under the International Financial Reporting Standards in the company's earnings release and filings with the U. S. SEC and Hong Kong Stock Exchange.

Operator

In addition, we have prepared a PowerPoint presentation for today's call, which contains financial and operational information for this quarter. If you are using Zoom meetings, you should be seeing it right now. You can also revisit it on our IR website later. Now, I would like to hand the conference over to Mr. Ye.

Operator

And the operator will translate for Mr. Ye. Please go ahead, sir. Hello, everyone, and welcome to Minicel Group's September 2023 earnings conference call. Our overall performance once again reached new highs during this quarter, as both of our revenue and profitability maintains high quality growth based on the breakthroughs we achieved in previous quarters.

Operator

Total revenue hit RMB3.79 billion and set a new record, increasing by 37% year over year. Gross margin exceeded 40% for the very first time, reaching 41.8% with an increase of 6.1 percentage points compared to the same period last year. Our adjusted net profit exceeds RMB640 1,000,000, representing a year over year increase of 54%. Our adjusted net profit margin reached 16.9%, increasing by about 2 percentage points compared to the same period last year. Now I will walk you through business updates for our 3 major segments, MINISO China, MINISO Overseas and Top Toy.

Operator

Let's start with MINISO China. During the peak season of summer vacation, GMU of MINISO Upline Store in China achieved RMB3.6 1,000,000,000, refreshed its historical report, compared with a year over year increase of 5% in domestic retail sales of the customer goods, according to National Bureau of Statistics of China. On a first off basis, average transaction volume increased by over 70%, and average transaction value increased by more than 3% year over year. During the 1st 10 months in 2023, GMV per store of Minas of China recovered to 100% of 2021 level and around 85% of the pre COVID level in the same period of 2019, consistent with our expectation at the beginning of the year. Entering into the Q4 of calendar year 2023, some investors worried about the weak domestic consumption environment.

Operator

However, Minnesota has maintained resilience as always. According to our weekly sales data, the current first dose sales since July today this year was consistent with the normalized pattern in the same period of 2019. No weaknesses were noticed. It is more about seasonality. We will keep tracking this trend and staying alarmed and taking positive measures to cope with the macro headwind.

Operator

We opened a total of 198 new MINISO stores on a net basis in China during September quarter, continuing on the trend of our store expansion, including 80 new stores in Tier 1 and Tier 2 cities and around 60% new stores in Tier 3 and lower tier cities. While the numbers of stores is growing rapidly, we continue on a focus on unique economics of our operating stores, driven by the healthy closure rate of mid single store at only 1.4% in this quarter. Long history average. As of September 30, we have accomplished our target of opening 3 50 to 4 50 stores in China on a net basis in calendar year 2023. Meanwhile, we celebrate the milestone of 6,000 municipal stores worldwide in this quarter.

Operator

We do well in both space and quality in growing and healthy global store networks for MINISO brand. Going forward, we continue currently expect to add another 102 100 new stores in China in the remaining calendar year 2023 on a net basis. Moving on to our progress on the international front. Firstly, overseas revenue was about RMB1.3 billion, representing a year over year increase of nearly 41% from a high basic loss share and setting a new report. Notably, revenue from directly operated markets increased around 89% year over year, contributing around 46% of overseas revenue compared to around 34% in the same period last year.

Speaker 1

Secondly,

Operator

GMV in overseas markets increased by 48% year over year, including an 80% year over year growth in the directly operated markets and 39% year over year growth in the distributors' markets. Overall, GMV per store in overseas markets increased by over 27% year over year, and average store counts increased by about 13%. Major overseas markets maintained rapid growth momentum, including a 160% growth in North America, a 60% growth in Latin America and a 50% growth in Europe. Firstly, we are encouraged that GME per store in overseas markets during September quarter recovered to 103% of 20.90 level and achieved a 27% year over year increase. The distributor markets recovered to 107% of pre COVID level in 2019, while the directly operated markets recovered to 93%.

Operator

In our major overseas markets, GME per store in North America nearly doubled that of that in same period in 2019. GME per store in Latin America and Europe recovered to about 110% and over 100% of 2019 net levels respectively. Key Overseas Markets, 80% of Overseas GMV were generated in top 20 markets, Hence, their performance largely represents the overall business performance of our overseas markets. Let me tell you a few things about it. Firstly, in terms of GMV, 1stosh sales in the top 20 markets increased by an average of 34% year over year, outpacing the average of 27% year over year growth for the overseas market as a whole.

Operator

Compared with the same period in 2019, per store sales in the top 20 markets have recovered to 98%. Secondly, 80 of the top 20 markets achieved positive same store sales growth in this quarter, with an average growth rate of about 38%, outpacing the average growth rate of 32% for the overseas market as a whole. Among top 20 markets, 15 have comparable stores in 2019. Among them, 6 markets including the U. S, Mexico, Canada, Spain, Kazakhstan and Vietnam have recovered to more than 100% same store sales.

Operator

For Southeast Asia countries such as Indonesia, India, the Philippines and Thailand, same store sales numbers were better than KIRSTOR sales numbers. Thirdly, top 20 overseas markets account for nearly 70% of the total overseas stores and contribute nearly 75% of the new store years today. Entering the second half of calendar year twenty twenty three, store openings in overseas markets have accelerated. During September quarters, we added 126 stores in the overseas markets on a net basis, making it the best quarter since 2020. As of September 30, 2023, we accumulated 198 new stores in the overseas markets on a net basis.

Operator

We will strive to deliver our target of opening 350 to 450 stores in the overseas markets. In September, Minisoc cooperated with Disney to create a Disney themed train to celebrate a 100th anniversary of Disney by decorating the carriages with the Disney's 4 Famous Eyed Peas and integrating Minnesota Super Symbol, Minnesota Wink to create immersive environment to the passenger. We also launched a market campaign to promote awareness of our flagship's fragrance and perfume products, which combine the master fragrance series products with the traditional festival culture to cater for social behaviors and consumption preference of our young target customers. As the industry leading IP powerhouse, the key difference between our IP strategy from other companies' life in our continuous effort in developing IP products to elevate our brand equity and capitalize on cultural phenomenon or influential trends by featuring their elements in our products design and adding exciting diversity to our products, which is different from the occasional marketing efforts of other players. Meanwhile, with more favorable margin profile of IP products, we are positioned well to leverage their huge fan space to grow both our top line and bottom line.

Operator

Meanwhile, by leveraging our capability in capturing customer insights and our fast supply chain, our highly refreshed assortment and continuous innovations have created huge sales opportunities. During this quarter, we have witnessed the birth of 100,000,000 sales products and a new venture of best selling products with more than 10,000,000 sales. For example, we see the trend of offline travel recovery to quickly launch a new disposable travel categories, generating more than 100,000,000 sales in this quarter. In addition, about 60% of our best selling products comes from strategy categories such as our interest driving products with improved hit rates. In this quarter, MINISO also made progress in Superstore initiative, Our newly opened Xi'an Datang All Day Mall stores and Wuhan Xuhe Hanjie Wanda stores gains positive response from customers.

Operator

In the future, we will encourage and prepare for more superstores to test different store formats and improve store unit economics. With initial success in China, we tested water in some overseas markets. In this quarter, the very first Minnesota blind box store in the U. K. Randomly opened in Chinatown with more than 50 kinds of IP related blind boxes, co branding with Disney's, Sanrio, Winnie the Pooh and other popular IPs.

Operator

Although only 30 square meters, its total sales and sales per square meters on its 1st day far exceeds our expectations. MINISO's first Sanrio themed IP store opened in one of the most popular shopping centers in Indonesia, featuring a spacious Sanrio IPs co branding display area. The sales on its 1st day set a new record in Southeast Asia. We'd expect that with the implementation of the Superstore strategy, it will strongly promote overseas performance and enhance the global influence of the MINISO brand. Let's move on to Top Toy.

Operator

Quarterly revenue achieved a 46% year over year increase with an about 30% year over year strong growth in GME per store and a 70% year over year growth in average store count. Although most of the past 3 years was covered by the pandemic, Softoy managed to be the unicorn with an annual GMV approximated to be RMB1 1,000,000,000 and in large influence in these sectors. During its partner conference in September, SOPTOI renewed its operational relationship with important partners such as FanDynamcon and 52 Toys, which lay a solid foundation to future optimize its product structure. Meanwhile, the grand opening of Top Choice store in Shanghai, Disney, becoming the only new customer brand to settle here in 2023. I will now turn the call over to Yixin for a review of our financial performance in September quarter of 2023.

Speaker 1

Thank you, Chen. Hello, everyone. Thank you again for joining us today. I will walk you through our financial results for the September quarter. Please note that all numbers are in renminbi unless otherwise noted.

Speaker 1

And I will also refer to some IFRS measures, which have excluded share based compensation expenses. Revenue was RMB3.8 billion, representing an increase of 37% year over year. Revenue from China was RMB2.5 billion, up 35% year over year. The increase was driven by, number 1, a growth of 41% in revenue from Min Son's top line stores and number 2, a growth of 46 percent in revenue from top toy. A 41% Y o Y growth of means to offline business was a result of 14% growth in average store count and 24% growth in cross store sales.

Speaker 1

The 46% year over year growth of Top Toy was a result of high teens growth in average store count and mid-20s growth in customer sales. Revenue from overseas market was RMB1.3 billion, up 41% year over year, driven by an increase of loadings in average store counts and a growth of mid 20s in personal sales in overseas markets. Revenue from distributed market was RMB304 1,000,000, an increase of 16% year over year. Revenue from directly operating markets was RMB592 1,000,000, an increase of nearly 90% year over year, accounting for 46% of overseas revenue as compared to RMB34 during the same period of last year. Gross profit in September quarter was RMB1.6 billion, up 61% year over year.

Speaker 1

Gross margin was 41.8%, increasing by about 6 percentage points from the same period of last year. The year over year increase was due to three reasons. Number 1, GP margin in overseas market increased as we made meaningful progress in optimizing our product structure and saw revenue contribution from IP products increased from less than 30% to more than 40%. In addition to that, GP margin in overseas markets in this quarter also benefited from increasing revenue contribution from our directly operated markets, which contributed 46% of revenue. As we enter the peak season of our directly operated markets, we may expect its revenue contribution surpassing 50% for the first time in the coming December quarter.

Speaker 1

And number 2, GP margin in China increased by low single digit percentage points, thanks to our continuous growth of merchandise GP margin and a better control of promotional discounts. Number 3, GP margin of top toy continued to increase as planned. SG and A expense as a percentage of revenue was around 20.8%, up from 19.3% in the same period of last year. Selling and distribution expense were RMB220 1,000,000, increasing by 67% year over year, driven by: number 1, increased personnel expenses related to brand upgrade projects. As we mentioned in our last earnings conference call, as we are executing our brand upgrade strategy both in China and overseas markets, we expect to see marketing expenses increase a little bit for a while.

Speaker 1

But this is totally controllable. Marketing expense as a percentage of total revenue just increased by 1 percentage points in this quarter compared to the same period of 2021. And number 3, increased IP licensing expenses. Licensing expenses more variable costs as we offer more IP products. IP licensing expense as a percentage of revenue increases by less than 1 percentage points in this quarter compared to the same period of 2022.

Speaker 1

G and A expenses were RMB167 1,000,000 flat year over year. Turning to profitability. Operating profit in the September quarter was RMB 788 1,000,000, representing increase of 55% year over year. Operating margin was nearly 21% compared to 18% in the same period of last year. Adjusted net profit in September quarter was RMB642 1,000,000, increasing by 54% year over year.

Speaker 1

Adjusted net margin was 16.9% compared to 15% in the same period of 2022. On a quarter over quarter basis, our margin profile improved because we enjoyed a significant foreign exchange gain in June quarter. If we exclude foreign exchange impact, adjusted net margin in this quarter would be 7.1% compared to 15.5% in the previous quarter. Turning to cash position. As of September 30, we have strong cash position of RMB6.7 billion.

Speaker 1

September quarter has once again witnessed breakthroughs and new hits in each major aspects of our operations. Looking forward into the December quarter, we expect our sales continue to grow strongly on a year over year basis, driven by better store level performance and store network expansion. Meanwhile, our margin profile will continue to optimize on a year over year basis. Thank you. And that concludes our prepared remarks.

Speaker 1

Operator, we are now ready to take questions.

Operator

Thank you, sir. Your first question today comes from the line of Michelle Chen from Goldman Sachs.

Speaker 2

So I have three questions for management. First one is regarding the GMV store versus same store sales growth upside. Given this year, we already benefit from the post reopening. So how should we think about the 2024 and long term Centaur sales growth? And secondly, regarding the overseas store expansion, given we are a little bit left behind in the first half, but we see your target to achieve the guidance for the full year.

Speaker 2

So can you share with us what where do we see the improvement and how should we think about the focus for expansion overseas next year? And thirdly, on the product, so we have a very good progress on IP and fragrance products, etcetera. So how should we think about or is there anything we can expect for next year's quarter? Thank you.

Speaker 1

Okay. Thank you, Michelle. This is Li Sen. I will translate for Mr. Ye and then I will make some add up.

Speaker 1

So first, Mist Year introduced the latest update of our same store sales. So for this year, year to date, in China, our same store sales has recovered to 93% compared to 2019 level. So compared to 2021, same store sales has increased by 9 percentage points. And compared to 2022, same store has more than 20% of year over year increase. And for overseas market, as we mentioned of our prepared remarks, the same store sales has recovered to about 94% as a whole in overseas market, among which top 20 overseas market has positive same store sales growth.

Speaker 1

In the long term, our major target here is if we want to have a sustainable same store sales growth, I think there are a few several key factors here. Number 1 is the traffic. Our business performance is positively related to traffic. Take this year as example. As I mentioned, in China, we reached 93% of same store sales recovery.

Speaker 1

But this recovery varies among weekdays, weekends and holidays. So in this year, in weekdays, the same store sales was 90%. In weekends, it's a little bit higher at 95%. But when we have public holidays such as Labor's Day, National Day and so on, our same store sales have low single digit positive growth compared to 2019 level. The reason behind this is that when we have public holidays, we have more traffic.

Speaker 1

When you have weekends, the traffic is obviously higher than weekdays. So that is why we promote, we launch the Superstore strategy. I repeated a lot of times internally only by opening Superstore can we make better performance. So with the brand upgrade strategy, we want to improve and optimize our store network by continuous introducing more superstores. And second, I think the key here is lies in the innovation of products.

Speaker 1

By brand by introducing brand upgrade, during the past year or so, our ASP has improved a lot, where we had stabilized cross selling rate. So this has been very key in supporting our same store sales growth. And the third is all about the branding. Only by becoming a super brand, so we can get more market share from the traffic under the backgrounds of the reducing traffic in China's shopping mall. So and I also want to add one point that just now, Ms.

Speaker 1

Tier talked about same store sales growth. But before that, Michelle, you know us, we disclosed our GMV per store. So GMV per store is more an average, but the same store sales is more related with comparable sales. So if you look at a year to date, the GMV per store in China recovered to 85% of pre COVID level because we have opened a lot of new stores in lower tier cities in China, which has some dilution to our average store performance. But if you look at the comparable sales, our same store sales have recovered 93% and which is very encouraging to us.

Speaker 1

For your 3rd questions about the product innovation, so in this year, have traveled around the major overseas markets of Minsaw. And I bring out brought out an idea that we should focus on 3 strategic category that is big beauty, big IP and big toys. For these three strategic categories, they are now contributing about 60% of overseas sales. And hopefully, we may see it increase to more than 70% in the near future. And for these 3 categories, I think there are 3 products SPU 3 products can represent them that is blind box, plush toy, fragrance and perfumes.

Speaker 1

So our next step is that we want to cooperate with more famous IPs, more big IPs to enhance our ability in product development in these three areas. So hopefully, next year, you can expect we our newer cooperation relationship with a lot of new IP partners. Among these three categories, plush toy has always been one of our best sellers in overseas markets and we shall continuously enhance our leadership position. And for blind box, during the past several quarters, no matter in China or in overseas markets, it's increasing is fabulous. So our key strategy here in buying box is that by cooperating with these established IP licenses, we are gaining market share.

Speaker 1

And Michelle, this is Yifan. Let me answer your second question about the overseas store expansion. Yes, we have mentioned, talked about the overseas store opening strategy. So for the first half of this year, because when we just reopened, when our people, our team come to overseas market, we realized that some overseas market need to some upgrade of their operations. So we paused a little bit of our store expansion plan.

Speaker 1

But during the past September quarter, we have been accelerating of our store expansion in overseas market. And hopefully, in the Q4, in the December quarter, we will strive to achieve the 350 to 450 year beginning plan. And then next year, hopefully, because the directly operated market has been a key driver, not only in overseas business, but also for the whole core municipal business. So we will see strengths in regions like North America, including the U. S, including Canada.

Speaker 1

And we also see Indonesia gaining strength in opening new stores because we kind of want to penetrate more into larger cities in these countries. So next year in general, our big opportunities will lie in overseas directly operating market. But that doesn't mean our distributing market will not open new stores. We still see a lot of chances in direct in distributor markets because we have so many markets, we have so many distributor partners. So in next year, we hopefully, we are very confident that we will open more stores in overseas market than this year.

Speaker 1

Thank you.

Operator

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

Speaker 3

I'll do the translation first. So the overseas distributor revenue this quarter growth is lagging behind the direct sales growth, partially because of the slower store opening in the first half of the year. So with the 3rd quarter store expansion started to accelerate, how should we expect the growth in the Q4 for distributor market in the overseas market? And secondly is about the product GP margin in China. Could you please give a little bit breakdown by category?

Speaker 3

And how should we think about the GP margin in China going forward? And lastly is on the selling expense, which has been increased a lot on both Y o Y and Q on Q basis. Could you please elaborate the breakdown? Thank you.

Speaker 1

This is Lee Sin. So for your first question about the upcoming growth of distributed markets, I'd say, hopefully, we can see an improvement in the December quarter compared to the past two quarters. But at this moment, I cannot comment too much because for the first half of this year, the distributor market as a whole, its net new stores was apparently fewer than our expectation. So we will wait and see how the distributor market, how the need from our distributors ramp up during the Q4. But hopefully, we can reasonably expect that it will improve on a quarter over quarter basis.

Speaker 1

And for the GP margin by categories, I'd say we now have more than 11 product categories, but we categorized them into 3 words. The first is big beauty, the second is big toys and the third is Big IPs as we mentioned. So for the IP related products, so it's a high single digits than the average of GP margin. So our average GP margin is like 60%. So for toys, it's the same case.

Speaker 1

It's just same case with this IP products. And we have small parts of our products, we call them general merchandise. General merchandises the products including home cleaning, seasonal food, snacks, stationery and the gifts, some small electronics and lifestyle products and so on. For this general merchandise product, it now accounts for about 40% of our total sales. And apparently, its GP margin merchandise GP margin is lower than IP products and toys.

Speaker 1

And now we also have about 40% of our sales in China comes from big beauty. So big beauty's GP margin is low single digits, higher than general merchandise. And our Big Toys accounts for about 20%, including blind box, including plush toys, including children's toys and so on. So this three together accounts for about 20% of total sales and its GP margin is low single digits, higher than the previous two categories. And for your questions about the selling and distribution expenses.

Speaker 1

So in this quarter, S and D expenses was about 16% of our revenue. The major part of our selling and distribution is staffing, so which is about 5% of revenue. Next, by marketing expenses about 3% and then depreciation, another 3% and licensing expense, was about 2% to 3%. So the year over year increase in S and D expense was related to 3 business updates that are just noticeable. The first one is our rapid growth of our directly operated markets.

Speaker 1

So we have increases in staffing in terms of store staffing and so on and including hiring more people in overseas directly operated stores and bonus accrual and increase in depreciation and amortization related to these new directly operated stores. And the second is related to our brand upgrade. So we invested a little bit more in branding, but it's total controllable. And the third is our IP offering. So it's with IP licensing expenses.

Speaker 1

This licensing expense, as I said, is more variable and it will increase with the increase of our IP sales. So going forward, if you look at the next few quarters, as we open more direct stores in overseas, some expenses will increase such as staffing, such as depreciation of our OE in PPE and so on. But in general, as we promised, we are confident that the total S and D expenses is controllable because in overall, we are still enjoying a significant operating leverage. So thank you.

Operator

So the next question is from the line of Samuel Wang from UBS.

Speaker 4

So I will translate briefly on my questions. My first question is regarding U. S. Markets. So could you update on the U.

Speaker 4

S. Markets profitability for September quarter and also introduce about the strategies how to improve in the future and also the store opening plans next year? And then my second question is regarding TopToilet. What's the management's target on profitability this year for Top Toy Business? And also what's the strategies going forward?

Speaker 4

I saw that in September quarter, the own brands mix has been a little bit lower than June quarter. Also, I saw cooperation with other brands like 52 Toys. So is there any strategy changes on self developed IP percentage point in the future? So thank you.

Speaker 1

Samuel, this is Sison. So for your first question about the U. S. Business, I would say everything is evolving very fast and is very encouraging. For example, in the September quarter, we sold GMV in this market increased by more than 180% on a year over year basis.

Speaker 1

And the best part, personally, I think that it's accelerating from 120% year over year growth from the June quarter and entering in the holiday season for the past several weeks, we still see this market maintain this triple digit growth on a year over year basis. So we can expect a fruitful holiday season this year in the U. S. And we also just celebrated the 100 new stores in the U. S.

Speaker 1

Markets. For the next year, although we are still making internally internally, we are making plans and barges for next year, but we do believe that the major driver of the overseas business will come from DTC market and the DTC market's major driver will be in North American market, including the U. S. Market. And we also include the Canada market here.

Speaker 1

It's more like U. S. Market 1 year ago. So it's in the door of ramping up and everything is very promising. And for Top Toy, to be frank, last year, Top Toy, it was loss making in CY 'twenty two, right?

Speaker 1

If you can remember, its net loss margin is nearly about more than 20%. So for this year, I would say, Top Toy is hopefully, it will close very close to breakeven, to be breakeven or significantly reduce its net loss status. So if you look at CY23, as Mr. Ye just mentioned in his prepared remarks, Tsubtoy in the past 3 years has become a unicorn with annual sales of RMB1 1,000,000,000, so increasing by nearly 50% compared to last year. And if you look at the bottom line, hopefully, the net loss for top 3 this year will be like 1.2.1 percent or 2%, something like that.

Speaker 1

And you are right that in the September quarter, the exclusive products of Top Toy decreased a little bit. When we talk about exclusive products of Top Toy, we mean our in house designed China rigs or our in house developed blind box and so on. We have we are in the middle way in building an internal designer team and the project product manager team and so on. So it takes time for this whole team to get mature, to get more connected. So we have enough patients to wait this business to get more mature.

Speaker 1

And we do not have any adjustments in terms of our self branded strategy in Top Troy. In the next couple of quarters, we are planning to launch more exclusive products. Thank you.

Operator

Next question is from the line of Anne Ling from Jefferies. Line is open. Please go ahead.

Speaker 5

Hi. Thank you. Thank you, management team. So I'll translate in English. The first question is on the overseas market.

Speaker 5

If we are looking at the overseas direct operated market, are there any additional markets that we have for this quarter? And like can we also provide a breakdown in terms of like within the direct operated markets, what is the sales mix between the franchise sales or wholesale sales versus the direct operated store sales? Secondly is on the operating margin side. Is there any like regular trend in terms of like how this quarter performed for Mainland China's OP margin versus the overseas market? And then my last question is on the year 2024, calendar year 2024s in terms of the sales per store or same store sales, what should what sort of growth rate we should be expecting given the fact that we are likely to still opening more stores?

Speaker 5

Thank you.

Speaker 1

Thank you, Ann. This is Lee Sin. So for your first question is about the DTC market. Is there any new members? I've said no in the past two quarters.

Speaker 1

So there is no reclass between the distributor markets into our DTC market in the past 1 quarter or 2. So the 80% year over year growth you have seen in this quarter was substantially all organic growth. Of course, in this year, we have some small markets such as Hong Kong, China, request from the distribution market to our DTC market, but its revenue contribution is insignificant. But going forward, as we talked a lot, right, in general, we believe if we want to penetrate more and do better in overseas markets, we should involve more into local markets. So one of the ways to turn them into direct operating market, the other is to invest in them or get ourselves more involved into their operation decisions.

Speaker 1

So I would say, I'm not surprised if we are going to see more distributed markets turning to DTC market in the upcoming few quarters. And for the revenue contribution of our directly operated stores in overseas market, I would say now we have about 700 stores in our directly operating markets. Among them, about 200 stores are directly operated. So considering the average store performances, there's no such significant difference. So you can calculate the contributions about 30%.

Speaker 1

We do not have the exact number. That's my rough estimate. And for the OP margin of overseas market, I see investors' big concentration is for our overseas direct operating markets. I'd say its margin profile has been improving in this quarter. So in this quarter, the OP margin for our DTC market, it was mid teens, so on OP level.

Speaker 1

So compared to last year, 1 year ago, it was just breakeven. So it's a significant improvement. And compared to last quarter, so it increased by low single digits on quarter over quarter basis. And in long term, I think it's too early at this moment to decide to project the OP margin of our direct model. So it's all dependent on our store model in the DTC market, I.

Speaker 1

E, if we adopt more franchisee model or if we adopt more directly operating model. So it's too early to project. And the 4th question about the same store sales growth in next year in China, as we answer Mr. Chen's question, in long term, our target should be maintaining both store network expansion and reasonable same store sales. So we will strive to achieve that goal.

Speaker 1

Thank you.

Speaker 5

Okay. Thank you.

Speaker 1

Thank you.

Operator

So now the conference call comes to an end. Thank you all for joining our call today. We look forward to seeing you in the next quarter. Have a nice day and goodbye.

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