MINISO Group Q3 2023 Earnings Call Transcript

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Provided by Quartr
May 16, 2023

Key Takeaways

  • Miniso delivered a record Q3 with 26% year-over-year revenue growth to RMB2.95 billion, a gross margin of 39.3% (up 9 ppt) and adjusted net profit of RMB481 million (up 336%).
  • China offline business rebounded strongly, posting 25% same-store GMV growth and reaching ~85% of pre-COVID levels, while net store openings doubled to 58 in the quarter.
  • Strategic categories and IP collaborations drove margin gains, with merchandise gross margin up ~7 ppt and standout category growth such as perfume (+60% YoY) and accessories (+80% YoY).
  • Overseas operations scaled further, with revenue up 55% YoY to RMB800 million and GMV +45%, led by North America (+100% YoY), Latin America (+60%), and mid-30% gains in Europe and Asia.
  • Top Toy segment continued its turnaround, achieving 24% YoY revenue growth to RMB140 million, >2 ppt gross margin expansion, and narrowing losses as China Bricks drove >25% of sales.
AI Generated. May Contain Errors.
Earnings Conference Call
MINISO Group Q3 2023
00:00 / 00:00

There are 3 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Miniso's earnings conference call for the 3rd quarter of fiscal year 2023 that ended March 31, 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 session. Please note this event is being recorded. We have announced our quarterly financial results early today.

Operator

An earnings release is now available on our Investors Relationships website at ir. Minizong.com. Joining us today are our Founder and CEO, Mr. Jeff Ye and our CFO, Mr. Yizeng Zhang.

Operator

Before we continue, I would like to refer you to the Safe Harbor statement in our earnings press release, which also applies to this call as we will be making forward looking statements. Please also note that we will discuss non IFRS financial measures today, which we 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 U. S. SEC and Hong Kong Stock Exchange. In addition, we have prepared a PowerPoint presentation for today's call.

Operator

This meeting is being recorded. This meeting is being recorded. This meeting is being recorded. This meeting is being recorded. This meeting is being recorded.

Operator

This meeting is being recorded. This meeting is being recorded. This meeting is being recorded. This meeting is being recorded. This meeting is being recorded.

Operator

This meeting is being recorded. This meeting is being recorded. This meeting is being recorded. This meeting is being recorded. This quarter.

Operator

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'd like to hand the conference over to Mr. Ye, and Mr. Zhang will translate for Mr.

Operator

Ye. Please go ahead, sir.

Speaker 1

Hello, everyone, and welcome to our earnings conference call. We delivered a strong start to calendar year 2023 with the best market quarter performance in our history, shaking off 3 years of uncertainty caused by the pandemic, Driven by the strong recovery of our offline operations in China and the continued development of our overseas business, Our revenue for the March quarter increased by 26% year over year and reached RMB2.95 billion. I'm also pleased to see that our margin profile continued to beat expectations. Gross profit margin of all business segments saw healthy year over year improvement, bringing the overall gross profit margin to 39.3%, which is 9 percentage points higher than the same period last year. Adjusted net profit exceeded RMB418 1,000,000, an increase of 3.36 percent year over year.

Speaker 1

Adjusted net profit margin expanded 16.4%, a 12 percentage point increase compared to the same period last year. Both figures set new records for Minso. I'll now walk you through business updates for our 3 major segments, Minso China, Minso Overseas and Top I will start with Minsoo Brands China Business, which recorded RMB2 1,000,000,000 in revenue for the Q1, a year over year increase of 19%. Within Minso China Business, revenue from offline stores totaled RMB1.83 billion, a year over year increase of 12%, of 25%. As we shared during last earnings conference call, January was the best month in terms of domestic cordless sales in Minnesota's history.

Speaker 1

In February March, as the pent up demand from the pandemic gradually dissipated and the Chinese New Year holiday ended. The pace of recovery in retail industry moderated to a certain extent. That said, our performance continued to outperform the industry according to data from the National Bureau of Statistics. Retail sales consumer goods in China increased by 4.9% year over year in the March quarter, while Minister China's offline business recorded over 25% year over year. Our per store GMV in the March quarter has essentially returned to the same level of the period in 2021, reaching around 85% of the pre COVID level in 2019.

Speaker 1

Entering April, we have seen sustained strong performance and even marginal improvement in store level performance. Total offline GMV increased by 80% year over year, higher than the 16% of sales growth in retail sales of consumer goods reported by the National Bureau of Statistics just today, while per store sales increased by 50% year over year, reaching 85% of pre COVID level in 2019, representing a substantial sequential improvement from the previous 2 months of February March. During the Labor Day holiday, total offline GMV increased by 75% year over year, personal GMV increased by 45% year over year and to a comparable level of 2019. We opened 58 new stores on a net basis during the March quarter, double the figure from the same period last year. More than 53% of new stores were in Tier 1 and Tier 2 cities.

Speaker 1

In addition, store closure rate was 0.6%, a record low. The strong performance further bolstered the confidence of our retail partners and we are quite confident now that we will meet and exceed our strong store opening target of 250 to 350 in calendar year 2023. We are firmly committed to pursuing high quality growth as we stressed in our previous quarters. In addition to maintaining a steady pace of store openings, we continue to improve store performance with better merchandise and operations in 2023. From a merchandise perspective, we adhere to our IP strategy as a core and focus our efforts in strategic categories.

Speaker 1

This paid off in the past quarter as our merchandise gross margin increased by nearly 7 percentage points from a year ago. Let me first address our IP strategy. As scheduled, we launched a highly anticipated series of Hopemun IP products in March quarter. We collaborated with Hopemun to design multiple high quality products featuring 4 classic characters. These products generated a great response from consumers and sold out soon after their release.

Speaker 1

As we emphasized last quarter, we are going to surprise and delight our consumers with an exciting series of IP collaborations in 2023. In upcoming quarters, we'll be unveiling collaborations with blockbuster IPs. 2nd, we remain focused on strategic categories, which we define as categories with emotional resonance, global peer and high growth potential. Take perfume as an example. We believe this category exemplifies MINISO's value proposition of better life and has strong emotional resonance with consumers.

Speaker 1

In China, we have identified perfumes as our most important strategic category. In the March quarter, sales of perfume products increased by 60% year over year, sales contribution increased by 1 percentage point. Furthermore, sales of 70% of perfume related SKUs met our internal standards of bestsellers, indicating a significant increase in the success rate of product development. Accessory. Accessory is another strategic category we devoted a lot of resources to this year, and we believe it has strong global peers.

Speaker 1

We had a solid foundation in this sector, and we continue to strengthen it by setting up a new warehouse in Zhejiang, Yiwu and strengthen our designer team and we hope to forge this category into a signature category in overseas markets by high frequency product launch and more efficient logistics. The preliminary results have been very promising with its sales increasing by over 80% year over year and sales contribution increased by 2 percentage points. Let's move on to our overseas business, which continued to maintain strong momentum in March quarter in the following aspects. Firstly, revenue from overseas market was RMB800 1,000,000, an increase of 55% year over year, another record for the March quarter. Secondly, GMV in overseas markets increased by 45% year over year with both the direct operated and distributed models achieving a similar GMV growth rate of around 45%, primarily driven by a 30% growth in personal GMV and an increase of 12% in our store number.

Speaker 1

All of our major overseas markets continue to experience rapid UU growth in GMV, including 100% in North America, over 60% in Latin America and about 30% in both Europe and Asian countries excluding China. Certainly, I want to stress that personal GMV increased by about 30% year over year in March quarter, recovering to around 80% of where it was in the same period of 2019. North America increased by 9% year over year and was 50% higher than in the same period of 2019. As we continue to see impressive growth in this region, the U. S.

Speaker 1

Market has been our largest overseas market in terms of revenue contribution for 2 consecutive quarters, while Canada is also among our top 10 markets. In North America, we continue to enjoy tailwinds from merchandise, brand and operations. That said, as a company which operates globally, we'll inevitably face geopolitical challenges. However, I'm pleased to see that our business in North America is increasingly integrated into local communities, providing value for money products to local consumers under such a high inflation environment and contributing to local employment and the tax revenue. I believe that only through sufficient globalization can complies in our position effectively mitigate country specific risks.

Speaker 1

I'm pleased to see that in March quarter, personal GMV recovery was also quite positive in a range of our overseas markets. For example, Latin American market saw EUV growth of over 40%, including a 60% growth in Mexico. And Asian market recorded a UVE growth of 15%, including a 90% growth in Singapore and 50% for both the Philippines and Thailand. Finally, let me provide an update on top toying. Revenue was RMB140 1,000,000, a 24% year over year increase.

Speaker 1

As of quarter end, there were 100 and 16 top toy offline stores, up 24 from a year ago. In the March quarter, our exclusive products made greater sales contribution and helped increase Top Toy's gross profit margin by more than 2 percentage points year over year. China bricks, the most important strategic category for Top Toy, continued to play a key role in driving sales and accounted for more than 25 percent of TopToi's total sales during the period. The strong performance of China Bricks was the key driver for the increase in Tubtoys gross profit margin during the quarter. Our designer talent pool continued to enlarge and mature, churning out a string of highly popular products in toy bricks category, including co branding products with Cereal's Kurami, Rapid Breaking the Future, Dawn Astronaut, Luban 7, Kamilong NeoBricks and others.

Speaker 1

We are particularly excited about Dawn astronauts, the latest IP product of Taltorius cooperation with China Aerospace. This self developed series is designed to educate young consumers about space and cultivate pride in China's strong national aerospace industry. We are as firm as 2 years ago in long term prospects of the toy market, especially in China Bricks, which is Top Toy's number one strategic category. We are long termists on Top Toy business and will work very hard in product innovation as its key focus. We aim to grow this business further and establish it into an influential brand in this industry.

Speaker 1

2023 marks Minsoft's 10th anniversary as well as the 1st year of our journey to become a super brand. On May 20, we will celebrate the grand opening of Minso's global flagship store in New York City, marking another milestone in our history as Minso will become the first Chinese consumer brand to open flagship store in Times Square, a global crossroads. We remain committed to executing our roadmap to transfer Minstou into a great Chinese consumer brand. We will firmly anchor our focus on the 3 transformation and continue to serve every consumer with the happiness philosophy. Thank you all very much.

Speaker 1

That concludes my prepared remarks. And now I'll turn the call to Yi Sen for a review of our financial performance in March quarter. Thank you, Mr. Ye. Hello, everyone.

Speaker 1

Thank you again for joining us today. I will walk you through our financial results for the March quarter. Please note that all numbers are in renminbi unless otherwise stated. And I will also refer to some non IFRS measures, which have excluded share based compensation expenses. Revenue in the March quarter was CNY 2,950,000,000, an increase of 26% year over year, driven primarily by an 80% year over year increase in revenue from China and a 55% year over year increase in revenue from overseas markets.

Speaker 1

Revenue from China was CNY 2,150,000,000, including CNY 2,000,000,000 from Minaso Brands and CNY 152 1,000,000 from other business, including Top Toy. Revenue from Minaso Brands increased by about 19 percent year over year, driven by a year over year increase of 25% in revenue from offline store, but a year over year decrease of 23% in other small channels. The 25% year over year increase in offline revenue was primarily due to a 19% year over year increase in per store revenue and 5% increase in store number. On a single store basis, average number of orders and the average order value both increased by 8% year over year. So, we were seeing quite healthy performance improvement across all of our operating metrics, including traffic, ASP and store numbers in March quarter.

Speaker 1

Revenue from overseas markets was RMB800 1,000,000, increasing by 55% year over year. This growth was primarily driven by a 38% year over year growth in average revenue per menstrual store in over market and 12% year over year increase in average store count. Revenue from distributor model was RMB 430,000,000, an increase of 47% year over year. Revenue from directly operated model was RMB370 1,000,000, an increase of 64% year over year and accounted for more than 46 percent of total overseas revenue as compared to 44% last year. Gross profit was RMB162 1,000,000, representing a 64% year over year increase.

Speaker 1

Gross margin was 39.3 percent compared to 30.2 percent in the same period of last year. The year over year increase was primarily due to 3 reasons as we have explained in earnings release. I want to make some supplementary notes here. First, we have seen positive growth in GP margin in all of our business segments. As Mr.

Speaker 1

Ye shared earlier, merchandise gross margin in China increased by nearly 7 percentage points from a year ago. That translates into a higher increase in our accounting gross GP margin, say 10%, considering our revenue share percentage with retail partners fixed. For e commerce, its GP margin improved significantly, thanks to its operational optimization. Meanwhile, we took a series of measures to optimize Top Toy's product mix and store operations, which helped increase its accounting gross profit margin by nearly 9 percentage points year over year. Let me remind you here, Tubtoys' business model is now progressing towards the profit model we have planned 2 years ago.

Speaker 1

2nd, when we look at the shift in our revenue mix, I think there are 2 major shifts here notable. The first one is the increased contribution from overseas market as a whole. The second is the increased revenue contribution from our directly operating model from 44% to 46%, which has the highest GP margin among our business segments. Selling and distribution expense were RMB 432 1,000,000, representing a year over year increase of 23%. This increase was mainly attributable to increased licensing expense in relation to our IP products, increased personnel related expense and logistic expense in relation to the growth of our business and to a net lesser extent, increased promotion and advertising expense, primarily in connection with our strategic brand upgrade of Minso brand in China.

Speaker 1

G and A expense were RMB151 1,000,000, representing a decrease of 12% year over year. The decrease was primarily due to decreased personnel related expense in relating to our cost control measures among our corporate crew and decreased depreciation and amortization expense due to the capitalization of our depreciation of land use rights in construction cost of our headquarters building. Other net income was RMB3 1,000,000 compared to RMB0.5 million in the same period of 2022. Other net income mainly consists of net foreign exchange loss, investment income from wealth management products and others. The year over year increase was mainly attributable to an increased investment income and a decrease in other losses.

Speaker 1

Turning to profitability, operating profit was RMB576 1,000,000, a year over year increase of more than 300%. Net finance income was RMB25 1,000,000, representing year over year increase of 445%, mainly due to an increase in interest income from bank deposits. Adjusted net profit was RMB483 1,000,000 a year over year increase of 3 36%. Adjusted net margin was 16.4% compared 4.7% in the same period last year. Adjusted basic and diluted earnings per ADS was RMB1.52 per quarter, increasing by 3 22 percent year over year.

Speaker 1

Turning to cash position. As of quarter end, our combined balance cash position was approximately RMB7 1,000,000,000 compared to RMB6.2 billion and RMB5.8 billion as of December 31, 2022 June 30, 2022, respectively. Turning to working capital, turnover of inventories and trade receivables remained stable. As Mr. Yair commented, we delivered a strong start to this year with the best marketable performance in our history, shaking all 3 years of uncertainty.

Speaker 1

Looking forward into June quarter, we expect our sales will 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 improve on a year over year basis. Despite various challenges risks by external environment, we'll continue to focus on those elements of the business that are under our control and remain focused on our long term strategic goals, delivering on our globalization strategy, bolstering the strength of our product offerings and optimizing our store network. Thank you. And this concludes our prepared remarks.

Speaker 1

Operator, we are now ready to take questions.

Operator

Okay. Now is Q and A section. So okay, the first question comes from the line of So I have two questions for management. Firstly, is for gross margin. Given gross margin continue to be driven by brand upgrade strategy, so can management comment the gross margin upside and also the product mix adjustment progress?

Operator

And related to this question is for the IP product, can management share the IP product contribution right now and also the future targets? That's my first question. And second question is regarding the overseas operation. So can management comment different market, the upside and also the improvement progress for some countries like North America. So what are the key drivers that we can do better?

Operator

And also for certain regions, especially Asia, where is the pressures coming from and also how we are going to adjust this? Thank you.

Speaker 1

Thank you, Michelle. This is Jack here. Now maybe you still remember, we firstly introduced our MINISO brand strategic upgrade in last March. And then we give the market outlook that about 30% of Minsos products will be interest based and the other 70% of our products will still be of high value proposition. In terms of the whole project progress, and we estimate that by the end of June quarter this year, our merchandise gross margin will close to 60%.

Speaker 1

So if we look at the March quarter, I would say that we are a little bit ahead of this estimated timetable. Our product is upgraded different from the past. Our margin gross margin of different product categories now varies. That said, our future gross room of gross margin will come from the change of the product categories. For example, I just mentioned accessories.

Speaker 1

This product category's sales contribution increased by about 2 percentage points in the March quarter. But on the other side, for accessories, this category, its gross margin increased high single digit compared to the same period last year. So it contributed positive contribution to our increase of GP margin as a whole. So this is the first part. And the second part, don't forget that we still have the efficiency improvement project from our whole supply chain.

Speaker 1

So I currently estimate that we still have some reducing or optimizing our product cost structure going forward in this year. So this is the answer to your first question. And to your question about IP product contribution, I would say, the market quarter, we still see about 20 ish ish IP related product contribution. I would say it's flat quarter over quarter and a little bit higher than last year. And we do not have specific sales target of IP related product.

Speaker 1

But we will try to keep a very competitive product portfolio in terms of IP products. And for your questions about the overseas market situation, so we have divided our overseas market into 5 major markets. That is North America, Latin America, Asian countries excluding China, Europe, Middle East and North America. We will address them 1 by 1. So for North American markets, its GMV increased total GMV increased by more than 100% and the farthest among our overseas markets.

Speaker 1

Now, we have around 120 stores in North America, accounting for 6%, but its GMV contribution is nearly 10%. And in terms of GMV per store, this quarter we saw 90% year over year growth and it has also recovered to 150% of the pre COVID level. If you look at Latin America, total GMV increased by 62% year over year and the 2nd fastest in overseas markets. Now we have about 22% of stores in this area, but its GMV contribution is close to 40%. In this quarter, we saw stores in Latin America, its average sales per store increased by 42% and its sales per store is the highest among its peers.

Speaker 1

If you look at Asian countries, in this quarter, total sales, total GMV increased by about 30% and it accounted for about 45% of our total overseas stores, but its GMV contribution is relatively low at about 30%. So, if you look at the pre COVID same period, I would say the GMV contribution from Asian markets still have a lot of room to grow in this year or in next year. And if you look at the personal GMV, this quarter it increased by about 15%. If you look at Asian markets, you will see that this is a very different it's a large market with different countries with a lot of population. So the country specific recovery rate varies.

Speaker 1

As I just mentioned, if you look at Singapore, it recovered to it increased by about 9% year over year. The Philippines and Thailand also saw 50% year over year growth. But in Asia, we still we also have Indonesia, one of our largest overseas market. It increased by 21% in this quarter, faster than the average. But if you look at countries like India, it was slower than other peers, primarily due to the short of inventory in this quarter, and we are trying to solve this problem now, and we will solve it.

Speaker 1

If you look at Europe, GMV increased by 34% in this quarter and European stores accounted for about 10%, but its GMV is also comparable to that level. And the per store GMV in Europe recovered to about 85% of pre COVID. North Middle East and North America GMV increased by 20% this quarter and its GMV per store increased by single digit in this quarter. And we have 7% of stores there and the GMV contribution about 10%. In terms of our store opening target in calendar year 2023, we, at this moment, do not want to our target our target, and we want to have some time to we want to observe more and then decide.

Speaker 1

Thank you.

Operator

Yes. Thank you. It's very clear. Thanks. The next question is from the line of Lucy Yu from Merrill Lynch.

Operator

Lucy, please go ahead. So domestically, we mentioned that its store opening is going to exceed our previous expectation. So how many stores have we opened in the Q2 so far or year to date so far? Which part of the China are we seeing accelerating expansion pace? 2nd question is on the domestic consumption pattern.

Operator

Have we seen any change in terms of shopping frequency, type of consumed products ASP as well as consumer like Momo shopping consumer in our stores. And lastly is on the overseas. Although we are not revising our full year guidance at the moment, but we have seen in the Q1 store openings still lagging is slightly lagging behind our expectation. So could we please share the reason behind that as well as the Q2 quarter to date store opening in the overseas market? Thank you.

Speaker 1

Thank you, Lucy. This is Yi Chen. I will answer your question. So for the first question, yes, you are right. And we are highly confident that we will surpass our previous guidance of 250 to 350.

Speaker 1

Currently, we estimate that we can open 350 to 450 stores in China market on net basis in calendar year 2023. And we will absolutely adjust dynamically according to the recovery of the whole market in China. And if you look at the structure, I would say Tier 1 and Tier 2 will have a lot of opportunities in this year. Maybe you have read from news report that we have opened a lot of flagship stores in China's top tier cities in recent months. So if you look at Q1, if you look at March quarter, about 53% of new stores come from Tier 1 and Tier 2 cities.

Speaker 1

This is a new things that we have never seen during the past 3 years. And if you look at our retail partners, yes, they are highly confident. We can tell from our strong pipeline in terms of new stores. And both new our old retail partners have opened stores in this quarter. And especially in March quarter, we still we see a lot of our old partners, they have opened a lot of new stores because of their store recovered quite well.

Speaker 1

But by the end of the quarter by quarter end, on average, our retail partners have 3.4 minuteu stores in China and that is comparable to historical average. But your second question about the customer behavior, let me take April as an example as Mr. Jie just shared. Total GMV increased by about 8%. Personal GMV increased by about 50%.

Speaker 1

I would say this 50% year over year increase come from high single digit ASP hike and about another 40% or so increase in our orders. And this has been the trend year to date. In terms of product categories, I would say interest based related products are among the best sellers. As you can see in the PPT now, this is some examples of our best sellers in this quarter. Many of them are IP related products.

Speaker 1

So we have seen that in this quarter, no matter in China or in overseas market, our co branding, IP related buying box or plush toys increased very fast. And maybe we can share more in next quarter about our overseas buying business. In terms of customer profile, I would say there's no change. We're still focused on young people and most of our customers are females. And in terms of your third questions about overseas store expansion plan, yes, we want to wait for a while to see if we have to adjust this plan.

Speaker 1

But if you look at historical numbers, the majority of our annual addition happens in the second half of calendar year. So I would say this will be the case in this year. And if you look at March quarter, originally, our plan was about 20 stores about 40 stores. And then we at quarter end, we added about 20%. I would not say that this is a very bad case because considering that in April, we still add a lot of new stores in overseas market.

Speaker 1

I would say we are still on track for new store openings in this market. Thank you.

Operator

Thank you. Okay. The next question is from Ant Lim from Jefferies.

Speaker 2

Thank you. Now my question is, first, is on what is the mix of the best selling items? What is the definition of the best selling items for Millisso? And what is the mix for this quarter versus in the previous quarter? And then the second question is regarding the overseas as well as the domestic market.

Speaker 2

What is the operating margin mix for this quarter? What has been driving these like improvement in terms of margins? And also, this lead to another question is regarding the selling expense, the SG and A. Moving forward, are we going to increase our selling expense ratio so as to drive higher sales now when the market is fully opened? Thank you.

Speaker 1

Thank you, Anne. This is Sison. I will answer your question. So in terms of best selling items, yes, we have internal definitions and standards that we have a certain threshold that when a certain SKU sales contribution in a certain time period surpass that threshold, we call it bestsellers. In March quarter, we still see that a lot of our best selling SKUs comes from the strategic product categories as Mr.

Speaker 1

Ye mentioned. Let me share some numbers. So, in this quarter, about 40% of our total sales in China comes from these strategic categories. And in terms of UU growth, this best selling SKUs, they achieved about 120% year over year growth, these best selling SKUs. So I see these results are quite promising.

Speaker 1

And in terms of your question about segment margin, I would say we now have different extinct business segment, including Minstow China and Minstow Overseas. If you look at Minstow China, I would say it's above the company level operational margin as you can see in our P and L in this quarter the 4 minutes overseas market as a whole because we still have the directly operated model in hand and it's ramping up. So, we still see that overseas market as whole, its OP margin is lower than the copy level. And hopefully, we have seen that Top Toy's margin profile increased significantly as Mr. Tejas just shared, its gross margin increased by 9%, right?

Speaker 1

And it's both mine, its loss ratio significantly narrowed compared to last year. So the third question is about the OpEx trend, right?

Operator

Yes.

Speaker 1

Yes. If you look at the OpEx historical average, we are highly confident that we can still control OpEx ratio to about within around 20%, as you can see in this page of PBT, that if you look at the pre COVID times, right, our SG and A ratio is below 20%. And during the 3 years in the COVID, we have some flags. But during the past 3 quarters, we still managed the whole OpEx ratio within or around 20%. In the future, we still target to control our OpEx ratio around 20% or so.

Speaker 1

So thank you.

Speaker 2

Okay. Just a follow-up, Ethan, as we have like overseas market growing a lot faster and then half of it is like wholesale order, does it mean that we have more operating leverage for the overseas market versus the domestic market or it doesn't really matter?

Speaker 1

This is still way to be seen because during past 2 or 3 quarters, we have seen the most significant operational leverage in China business because we are running our business in a unified market, right, a lot of costs that you can share, right. But for overseas market, especially for distributor business, because we have distributors in different markets, different countries, so a lot of cost that we cannot share with. But I probably agree with you that in the long term that with the increase of the sales of this business overseas market as a whole, we still have some potential in terms of operational leverage. Thank you.

Speaker 2

Thank you.

Operator

Thank you. Okay. The next question is from the line of Veronica Son from Credit My first question is about MINISO's directly operated overseas markets, mainly Indonesia, India and U. S. A.

Operator

So what's the current store EUE and profitability? Is there anything you can share? And also what kind of profitability shall we expect in the coming quarters? And my second question is regarding Top Toy. So the company has been adjusting its store model in the past quarters.

Operator

You also mentioned that we've been narrowing losses as well for Top Toy. So in the coming year, what will be our key focus for this brand? And also what kind of profitability shall we expect in the coming quarters? Thank you.

Speaker 1

Thank you, Veronika. Yes. We have some major countries in terms of in our direct operational model, including the U. S. Market, including the Indonesia and Indoor market, as we mentioned.

Speaker 1

Compared to the U. S. Market, our business in India and Indonesia is more mature and has a longer history, right? So for these two markets, we now are running in a very ideal status. If you look at its operational, if you look at its bottom line, I would say it's very solid even under such circumstance in which its sales recovery rate is about 60% or even something like that.

Speaker 1

For our U. S. Market, if you look at its margin profile, I would say it's still too early to make judgment or to share with investors this kind of information. But as I mentioned, the U. S.

Speaker 1

Market as a whole increased by more than 100% and its personal sales increased by nearly 6 percent. And we are very positive about our future growth in this market and we still need some time to ramp up the store unit economics and see and make plans for next stage of growth. For Top Toy, I'd say, we do not have specific target in terms of store opening, in terms of top line or in terms of bottom line for it in this year because as Mr. Just mentioned, China Breaks is its number one priority in this year. So we want Top Toy to make as much as it can in terms of product innovation and the whole team building and so on.

Speaker 1

But that doesn't mean it will still making loss this year. That's not necessarily the case. If you look at the top toy business, I would say its top line growth as a new business will still be higher than the company's overall revenue growth in calendar year 2023. And because of its sales leverage and its exclusive product getting more and more sales, we will reasonably estimate that Tuptoix will significantly narrow its lost status in the coming year. Thank you.

Operator

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

Operator

Thank you.

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