MINISO Group Q3 2024 Earnings Call Transcript

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Provided by Quartr
May 14, 2024

There are 6 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by and welcome to Minnesota's earnings conference call for the March quarter of 2024. At this time, all participants are in a listen only mode. After the management prepared remarks, we will conduct a discussion.

Speaker 1

This meeting is being recorded.

Operator

For joining the question and answer section. Please mark your name and institution and be kindly noted 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.uviso.com. Joining us today are our Founder and CEO, Mr.

Operator

Jack Ye and our CFO, Mr. Yizheng 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 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 Standard in the company's earnings release and filings with the U. S.

Operator

SEC and Hong Kong Stock Exchange. The currency unit is Chinese yuan unless otherwise status. In addition, we have prepared a PowerPoint presentation for today's call, which contains financial and operational information for this quarter. If you're using Zoom meetings, you should be seeing it right now. You can also revisit it on our IR website later.

Operator

Now, I would like to hand the conference over to Mr. Ye and Ms. Ali Shen from Inisol IR team will translate for Mr. Ye. Please go ahead, sir.

Operator

Hello, everyone. Welcome to Miniso Group's earnings conference call. March quarter marked our highest Q1 store openings pace upward and latest solar foundation for the targets of net addition 900 to 1100 stores in 2024. Also, we have maintained a solid financial performance while rapidly expanding our overseas directly operated markets. At the group level, our revenue increased 26% year over year to RMB 3,720,000,000.

Operator

The increase was primarily due to an around 19% increase in the average store count and an overall around 9% same store sales growth. In the current uncertain economic environment compared to the consuming companies of similar scale globally, Minnesota have maintained a leading growth rate in the industry. Behind the RevPAR Group, we observed several trends that are shaping our future. Firstly, Chinese companies are expanding globally with vast opportunities ahead. As a company, we also leveraged Chinese supply chain capabilities to expand overseas at early stage and has secured a fast first mover advantage.

Operator

With a store network in over 100 markets and extensive local operational experience, now we are moving forward to globalizing our Minnesota brand. Secondly, along with the current of times, there will emerge a number of world class consuming brands from China. Minnesota's goal is to ride away and become a super brand. Thirdly, despite increasing uncertainties in the global economic environment, interest driven consumption is still on the rise. Our target is to achieve 50% IP product sales and 50% affordable product sales by 2028.

Operator

It was because after the pandemic, we observed the coexistence of rational consumption and interest driven consumption in domestic consumption behaviors. And this trend is similar across the world. And IP consuming goods is a good example for this trend. The scale of global IP consuming goods is around RMB 2,000,000,000,000 and remains highly decentralized. Per capita consumption of IP consuming goods in China, it's only RMB 51 yuan which is only 1 fourth of the global average and 1.60 of that in the United States.

Operator

This is in this case a vast opportunities for IP consuming. Gross margin stands at 43.4 percent, which is an increase of 4.1 percentage points year over year, setting a new historical high. This improvement was primarily attributable to the increased overseas revenue contribution and the optimization of the gross margin for Topsoid. Moving forward with the fast growth of overseas revenue, higher IP product sales contributions and the momentum for gross margin enhancement remains robust. Meanwhile, we're still committed to providing affordable products, pursuing healthy increase in gross margin.

Operator

Adjusted net profit of the March quarter was RMB620 1,000,000, increased 28% year over year with adjusted net margin of 60.6%. Now I will walk you through business updates for our 3 major segments, municipal mainland China, municipal overseas and top Let's start with Minnesota, mainland China, which continues to grow at high qualities. Off line GMV increased 60% year over year compared with 5% increase of the domestic retail sales of consuming goods according to National Bureau of Statistics. In particular, same store sales recovered to over 98% of last year's high space continued to outperform our peers. In this context, average transaction value remained stable and the transaction volumes recovered to 98%.

Operator

When entering into June quarter, same store sales trends remains positive with year to date same store sales recover rates reaching nearly 100% of the same period last year. Keeping an industry leading same store sales growth will be one of our priorities in

Speaker 2

this year.

Operator

We summarize two reasons for achieving outperformed same store sales. First, we stick to product innovation and solidify our differentiated product strengths, leveraging our observation of consumption trends and our own advantage. We are gaining market shares for strategic categories such as blind boxes, toys, street toys, and store related products, etcetera. In Q1, sales from such categories accounted for over 40% in China with a year on year sales increase of more than 40%, dragging a 60% growth of total sales in China. Among these, blind box categories saw a nearly 200% growth and the travel related products achieved nearly 70% growth.

Operator

2nd, our offline to online models or old to old developed rapidly. In Q1, its sales increased by over 80% year over year, effectively compensating for the natural decline in food traffic after the public holidays and driving the growth of our same store sales. Compared to in store sales, top selling SKUs within O2O are predominantly concentrated to IP products and items that cater for immediate consumer needs. This year, we have implemented several operational optimization measures such as extending the operational hours of O2O and improving service qualities. This quarter, we added 108 net new store in mainland China setting a new record for Q1.

Operator

Structurally, there are several things we're noticing. First, over 50% of new stores were located in the 1st and second tier cities. With the normalization of economics, we have identified lots of commercials within China's top tier cities that present promising opportunities for future store expansion. 2nd, the total numbers of our directly operated store have reached 29, nearly doubling 60 stores from a year ago. It was due to our ongoing exploration over the past year into various channel mattresses, including directly operated flagship stores.

Operator

We will continue to refine our channel strategy this year and looking forward to sharing more details about it in the near future. Lastly, store network in Mainland China has seen high quality development with store quota rate remaining healthy at around 1.4% for 3 consecutive quarters. Moving on to municipal overseas business update. Firstly, overseas business growth once again exceeds our most optimistic expectations. Revenue was RMB 1,200,000,000 up 53% year over year.

Operator

In particular, revenue from directly operated markets has seen a straggling year over year growth of 92% or 84% on a comparable basis, achieving a growth rate of over 80% for 4 consecutive quarters. Directly operating markets account for 58% of our overseas revenue with full year over year and quarter over quarter increase in revenue share. 46% year over year with a 104% increase in the directly operated markets and a 29% increase in distributor markets. If on a comparable basis, the growth rate were 78% 35% respectively. Amongst key regions, North America increased by nearly 110%, Europe increased by over 80%, Latin America was 40% and Asia was 34%.

Operator

Structurally, Latin America and Asia's other top two markets accounted for nearly 3 quarters of overseas GMV, while Europe and North America markets are growing rapidly with over 20% GMV contribution. Especially North America, when we relaunched its operations in late 2021 it accounted for only 7% of overseas GMV and now it's 13% already. We expect that the share of Europe and North America will continue to rise rapidly. Thirdly, one of the key driver of GME rapid growth was the same store sales, which grow by 21%. Within this, directly operated markets saw a 32% same store sales growth, while the distributor markets grew by 80%.

Operator

Across nearly all our overseas regions, we have achieved positive same store growth with North America increased by around 32%, Latin America by around 25%, Asia by around 19% and Europe by around 13%. In addition, top 20 overseas countries and regions as a whole achieved 23% in same store sales growth. In March quarter, we added 109 net new store in overseas markets, another new record for Q1 store openings. Having learned from the lessons of last year's store expansions, we will ensure stronger control over the pace of store openings this year, aiming to open more high quality stores for the peak season in Q4. Structurally, 60% of the new stores were contributed by directly operated markets with Indonesia and the United States together contributing over 40%.

Operator

Amongst key regions, Asia contributed over 60% of new stores while North America and Latin America contributed 70% and 10% respectively. In 2024, we further deepened our implementation of IP strategy. For example, we celebrate Chinese New Year with Chi Chi and TT from Disney and in responding to our consumer demand, we initiated innovative live event of Flow Parade celebrating the Barbie 65th anniversary in new collections to draw attention. Moreover, the launch of Chicaba at the end of March sparked a phenomenal consumer growth. This divestment partnership has further solidified our undisputed status as leader in IP collaborations.

Operator

These collaborations can be summarized with 5 unprecedented unprecedented sales performance, unprecedented product launch speed, unprecedented efficiency, unprecedented coverage and the unprecedented enthusiasm of Chicaba fans. This collaboration is a milestone for our products team in which they have improved capabilities in identifying trends, IPs, R and D, supply chain, management and the products we built and enable a rapid product launch and high quality standards. It also set a very successful benchmark for future IP co branding and marketing. I strongly believe that the brands that bring joints to consumers and put consumer first will finally be favored by customers. Minnesota have created multiple phenomenal IP collaboration events.

Operator

Thanks to our strong IP conversion capabilities, are pleased to see that more and more young consumers on social media platforms such as Weibo and Xiaohongshu are tagging minisource and request us to collaborate with more IPs. In this quarter, IP products accounted for 26% of total sales. In Mainland China, IP accounted for about 25%, increased slightly year over year In overseas, IP product shipment increased by over 100% and contributed over 40% of total shipment We are state of fleet moving forward to our targets of 50% IP sales by 2028. Let's move on to Top Toy. We believe that turning point for the Top Toy business has arrived.

Operator

After 3 years since inception, Top Toys have grown into a leading players in pop toy industry with an annual sales of 1,000,000,000 and with 160 stores across nearly 70 cities around mainland China. With the business moving on track, we have stronger confidence in Top Toy's rapid expansion and have therefore raised its store opening targets from this year from 50 to 100, which means that we will have 250 store or so Top toy store by the end of 2024. During this quarter, TopToge revenue increased by 55% year over year, driven by a very high quality of 26% same store sales growth and a net addition of 44 store year over year. With the rapid growth in scale, Toptoy is set to unlock profit potential gradually and has achieved positive profitability for 2 consecutive quarters. On one hand, through the optimization of product mix, its gross margin improved by around 8% points year over year.

Operator

On the other hand, as operational leverage took effect and with more targeted investment in marketing, its expense ratios have been further reduced. The year of 2024 is a new starting point for 5 years development plans of MINISO Group. Beginning with the ending target in mind, it's a philosophy I uphold as always. To realize our long term goals, we need to pursue excellence, detailed orientation and continuously develop high quality work. Therefore, this year, I have spent a lot of time encouraging the developments of corporate culture that is simple, efficient and straightforward, one that simplifies complexities and maintains strategic focus.

Operator

We want to embrace a professional focused and simple culture at Minnesota. We process the necessary patience and persistence with remains committed to a long term approach, taking each step with cares and diligence to accomplish our 5 years development plan. Will now turn the call over to Yixin for a review of our financial performance.

Speaker 3

Thank you, Jack, and thanks everyone for joining us today. Let me walk you through our financials for this March quarter. Please note that all numbers are in renminbi unless otherwise noted. And I also refer to some non IFRS measures, which have excluded share based compensation expenses. Revenue saw a robust increase of 26%.

Speaker 3

As highlighted by Jack, we are particularly encouraged by strong same store sales growth or SSSG of 9%, achieved concurrently with a rapid expansion of our global store network. In Mainland China, Minstor same store sales surpassed 98% of previous figure, a high benchmark set up the release of pent up demand following the COVID lockdown. The overseas market seems to SSG reached 21%, surpassing the peak seasons SSG of 20% observed in the last December quarter with a particular notable 32% same store sales growth in overseas directly operating markets and 18% growth in distributor markets. Additionally, top targets as SSG was remarkably at 26%. Regarding our channel mix, we have noted a significant surge in the contribution from our overseas markets.

Speaker 3

The share has grown from 23% in CY2021 to 33% in the current quarter. This increase is particularly pronounced in our overseas directly operated markets, which have seen their contribution to total revenue more than doubled, climbing from 8% in CY21 to 19% in this quarter. Additionally, Top Boy has been consistently gaining traction with its revenue share escalating from 3% in CY21 to 6% in current quarter, indicating its readiness to unlock even more significant potential moving forward. We are optimistic about this shift towards a more diversified revenue stream, which underscores the strength and resilience of our business model. Gross profit margin reached 43.4%, marking another historical high and representing a 4.1 percentage points increase year over year.

Speaker 3

This improvement is attributable primarily to 2 factors. First, there was a higher revenue contribution from overseas markets, particularly directly operating segments, which accounted for over 4.7 percentage points increase of condensed GP margin. 2nd, the optimization of Toptal's GP margin resulted from a strategic shift towards a product mix with greater profitability. SG and A expense amounted to CNY 856,000,000 in total, constituting 23% of our revenue, an increase from about 20% a year ago. Despite this shift, the structure of the major expenses remained stable indicating effective cost management amidst expansion.

Speaker 3

This area increase was attributable to number 1, increased personnel related expenses, logistics expenses and other expenses in relation to the growth of our business number 2, increased expenses in relation to directly operated stores, including payroll, rental expenses, D and A expenses as well as marketing expenditures for new store opening, all of which are essential investments for our new store openings and ongoing success of our directly operated business. Let me give you an example. By March quarter, we had 281 such stores in overseas market, up 131 stores or 87% and in Mainland China, we had 46 such stores for our 2 brands, up 21 stores or 84%. As we rapidly expand our overseas directly operating markets, there may be a temporary search in related expenses and we might observe fluctuations in this expense across different quarters in a year as we have been talking this for 2 quarters in our earnings conference call. However, we are confident that the high gross margin driven by the increased revenue contribution from our directly operated markets will more than offset the operating expenses and product margins in this March quarter.

Speaker 3

For example, revenue from our overseas directly operating markets lowered by 98% and 84% on comparable basis, which has outpaced the growth in expenses. The shift expansion of our overseas directly operated markets may also have a consequential impact on the distribution of our operating profits. Let's look at the distribution of CY23. Over 60% of our operating profit during that year from overseas markets were realized in the second half in contrast to over 50% of operations in Mainland China. So consequently, 55% of our total OP profit for that year were realized in the second half.

Speaker 3

So this trend is expected to continue in CY2024 with profits being even more geared towards the second half of the year. Turning to profitability, Operating profit was RMB 743,000,000, up 29% year over year. OP profit margin was 20%, up from 19.5% in the same quarter last year. Adjusted net profit was RMB 617,000,000, up 28% year over year. Adjusted net margin was 16.6%, up from 16.4% in same quarter last year.

Speaker 3

Adjusted EBITDA was CNY 965 1,000,000, increasing by 37 percent year over year. Adjusted EBITDA margin was 25.9% compared to 23.9% in the same period of 2023. Adjusted basic and diluted earnings per ADS were both RMB1.96 increasing by 29% year over year. Turning to cash position. As of end of March quarter, we maintained a strong cash position of RMB 7,300,000,000.

Speaker 3

In April, we distributed cash dividends of about RMB 650 1,000,000 more than 50% of our adjusted net profits generated during the second half of CY 2023. We are committed to a dividend payout ratio of at least 50% and bringing sustainable and foreseeable returns to our shareholders, turning to working capital. The channel inventory turnover remains efficient. By March quarter, 24% of Minasor Brands inventory were located in overseas compared to 18% a year ago. Inventory turnover days were 83 days on brand level, including 72 days for Minusoft Main in China and 153 days for Minusoft Overseas Directly Operated Markets.

Speaker 3

And for the top 20 markets in overseas distributed markets, inventory turnover days was comparable to the level of our DTC market. Structurally, inventory over 180 days accounted for about 9% on group level, flat year over year. Turning to capital allocation. Net cash flow generated by operation was RMB652,000,000 CapEx was about RMB122,000,000 and free cash flow was RMB 530,000,000. We repurchased RMB 71,000,000 worth of stock in the 1st quarter.

Speaker 3

If we included the dividend paid out in April, we have retained around RMB 720,000,000 back to our shareholders year to date. Since our U. S. IPO, we have retained RMB3.5 billion to our shareholders and we will continue to commit to a capital allocation strategy that balance growth and return. Our performance in March quarter once again demonstrates the strength and resilience of our business model and reflects our ability to execute on our IP and the globalization strategy.

Speaker 3

I'm very confident that we'll once again meet our full year target and deliver on our fun and value to our consumers worldwide. Thank you. And this concludes our prepared remarks. Operator, please, we are ready to take questions.

Operator

Thank you. Next, we are moving forward to Q and A section. The first question is coming from Ms. Xiao Chen from Goldman Sachs. Please go ahead.

Speaker 1

Central sales trend, can management share the recent central sales performance by TLCD and the store optimization is the key focus for this year. So is there any progress management has shared with us and how this will impact the traffic and ticket size? And second question is regarding the U. S. Expansion.

Speaker 1

So can you share with us the latest store economics and the sales trend? And we talk about exploring the new locations this year. So can management share with us any strategic development of U. S. Business?

Speaker 1

And thirdly is on GP margin. So in the slide, management shared the GP margin like a like trend, but it looks like the China business GP margin is down. So we have more color on the factors. Thank you.

Speaker 3

Thank you, Michelle. For your question on flagship strategy, so the basic idea is that we really want to open in as many flagship stores as we can in the vast commercial areas. So since CY23, we have opened a series of very good flagship stores such as Beijing Rail Store in Guangzhou, Baiher Rail Store in Shanghai and Hushong Whistlers in Beijing. We have accumulated a lot of operational and store expansion experience during this store opening and its operations. But still, I think it's early days.

Speaker 3

We are still optimizing the unique UEE and the model of flagship strategy. As I mentioned in prepared remarks, I hope we can share more in our earnings conference call in the near future. So for a question about the U. S, about its UEE and store expansion plan, so we have seen the uptrends continues in this year and in Q2. Actually, since the Q4 of CY21, under the very excellent operation of our local team there, the U.

Speaker 3

S. Business has been capped, you know, very high growth speed for a lot of quarters. According to our data, we have achieved like 130 CAGR for our sales in U. S. Between CY21 and CY23.

Speaker 3

In this March quarter, the same store sales of United States still maintain a very high growth of 30% to 40%. And that is one of our resource of our inner confidence about the United States market. Now at this moment we have around 150, 150, 150 stores in the United States and our annual target for store net opening is 8 to 100 stores. According to our experience and our internal data during the past 2 years in the United States, the December quarter, the peak season will account for more than 50% in terms of revenue and net profit and with a very obvious seasonality. And with the U.

Speaker 3

S. Revenue share getting bigger and bigger this year, it will definitely help us to achieve our annual target. And for your question about the SSG recovery rates in different tiers cities or in China, I'd say in this year we have seen Tier 1 and Tier 2 cities outperform lower tier cities, at least for Minaso. So we are 98% recovered in the Q1 and in Tier 1, Tier 2 I'd say it's new to 98% and in Tier 3 and low below cities, it's like mid single digits lower compared to last year. And for GP margin, please go back to the waterfall chart.

Speaker 3

Yes, for GP margin, if you look at this chart, you will see that the Min Sonme in China has a negative contribution of 1.7%, but this chart is calculated based on weighted average. So because our Minasota, Mainland China's gross margin is lower than the group level average. So it is a negative drag of the overall GP margin. So this is the case for last Q1 for Q1 in last year and this year. And in this year, we have seen the GP margin in Mainland China improved on a year over year basis.

Speaker 3

So with its revenue contribution decreased on a year over year basis, the drag was lower compared with 1 year ago. Thank you, Michelle, for question.

Operator

Thank you. The second question is coming from Bank of America Merrill Lynch, Ms. Lucy Yu. Please go ahead.

Speaker 4

So for the overseas market, same store sales has been expanding at 21% in the quarter. What are the major key drivers behind that and how should we think about the future same store sales for the overseas market? Secondly is our overseas direct to retail OP margin. What's the like for like expansion in the first quarter? And what is the optimal level for OP margin in the longer run?

Speaker 4

And thirdly is on the flash store of Chicago in the early this year. So it has contributed a lot to our store sales as well as helping us to test the popularity of some IP in China. So, can we comment that, are we going to do more about these kind of flash stores? Thank you.

Speaker 3

Okay. Thank you for questions on Chikawa and the pop up store strategy. So, Minaso's position is global IP collection store. Any single IP will not contribute a significant revenue contribution. So as investors need to diversify their portfolio, we do the same thing when choosing IP.

Speaker 3

We want to introduce more and more new IP and world class IP and fully diversify our IP portfolio. And the second point that is Minso is very, you know, very we are our style is very cautious and we are down to earth to deliver results. CY24 marks the 1st year of our 5 year development plan and we have high confidence to achieve this growth target. And for the pop up strategy, yes, there will be some small scale of testing in big cities, in cities where a lot of, you know, have a lot of young people, young customers such as Wuhan, Chengdu, Shenyang, Changsha and in North China, we're focused on, you know, these regional centers such as Xi'an. So we have about, you know, a dozen of, pop up stores on our pipeline at this stage.

Speaker 3

And for a question about the same store sales groups of overseas market, I would say, you know, the most significant, same store sales growth comes for our directly operated market, especially in markets like the United States and in Europe market, our important distributor market. So let's take U. S. Market and U. K.

Speaker 3

Market as two examples. We have seen, the drive comes from both traffic and average sales price or average order value during the past several quarters. And behind this, we think there are 2 reasons. The first is we are improving our brand awareness in both of these two markets and a lot of new people come to us. A lot of new So we have a lot of improvement on this side.

Speaker 3

And second is the product optimization. As Mr. Ye just mentioned, about 40% of our overseas shipment is IP products now increased by more than 100% during the March quarter. With this improvement, with this increase, we have high confidence to attract more customers come to us and buy more things. And yes, we have seen same store sales growth increased for a couple of quarters.

Speaker 3

And I would say in this June quarter, we still see the trend maintenance. But you're right, at the end of date, we'll get normalized. I think for this year, for the remaining quarters, the major driver will still come from store network expansion and same store sales growth, but the former will contribute more to our overall sales growth. And for the overseas DTC market margin profile, If you compare the operating margin of ungroup level, last year, OP margin is 20%. This is 19.5%.

Speaker 3

This year, it's 20%. So we have a very small improvement on this side. And if you look at China, China is very mature business, so you can assume that China's margin is stabilized. And if you look at overseas, it's improved. It's improved both in direct to operating markets and in our distributed market?

Speaker 3

Thank you.

Operator

Thank you. The first question is coming from JPMorgan, Mr. Calvin Ng. Please go ahead.

Speaker 2

Very quick translation. For the U. S, help us walk through the key assumptions for the GPOP net profit and potential margin expansion the driver for the potential margin expansion? China YIP percentage of 25, no change, AP flattish, but GP margin was up. And thirdly, license fee, why it was declining in the Q1?

Speaker 2

Thank you.

Speaker 3

Thank you, Kevin, for your question. We do not disclose too much detail on our U. S. U. E.

Speaker 3

At this moment because it's still at their early stage, but I assume your assumptions are fair enough to some to a certain extent. And as I answer Lucy's question, the driver of 30% to 40% same store sales growth come from both traffic and AOB. Now, U. S. Is beginning it's began to building to build its, CRM system from this year.

Speaker 3

So hopefully we can share with you more in the future. And about the synergy of the different U. S. Stores, you are right. At this moment, we have 150 stores.

Speaker 3

I would say, the biggest 3 States are California, Texas and Florida and next by, you know, New England area and so on. But, apparently, apparently our inner stores are, you know, quite in a separated, separated. So we have improved, we have a lot, a lot of improvement, a lot of room to improve on this cost saving in terms of logistic expenses or distribution expenses. For example, the related expense in the United States accounts for, you know, low single digit or even mid single digit of its sales, but compared to a more mature business of China is only less than 100% or 1% in China. So we have a lot of improve.

Speaker 3

And the GP margin of China increased because of the product optimization. As we say, like blind box increased by like 100%, travel related products increased by, in 200%. As we mentioned, these products have higher GP margin. So this is a product mix optimization and the IP license fees are about a cutoff. It's cutoff.

Speaker 3

So this is 1 quarter, right? If you look at a full year or even a longer term, the IP license fee should be a relative of a variable cost? Thank you.

Operator

The 4th question is coming from UBS, Mr. Samuel Wang. Please go ahead.

Speaker 5

My question is regarding TopToi, So when Mr. Ye commented on Top Toy's business, he mentioned that there's a change of timing, changing timing for the top toys business, a turnaround. So and also he revised up the store opening target this year. So my question is regarding what makes management believe that there's a turning point for this business? And also, what are the drivers for the same source sales growth in Q1 and going forward?

Speaker 5

Thank you.

Speaker 3

Thank you for question, Samuel. Yes, we have seen several changes. First of all is the change or we have seen a more rational competitive landscape in this pop toy market. 3 years ago, 4 years ago, 3 years, 3 and a half years ago when we launched, Top it was in a highly competitive market. A lot of new players, newcomers come in this sector.

Speaker 3

But after 3 years, a lot of small players has created competition and left a lot of white space, not only the prime locations, but also the better supply value chain and so on. The second is, you know, the supply chain side. Top toy with 160 stores has been a leader of its sector. So it has higher bargaining power with its suppliers. I mean, you know, with the toy brands, with ODM manufacturers or even with landlords.

Speaker 3

So these are the 2 sides we have seen, you know, it's getting better. And for Top Toy, we have mentioned it has been making money for 2 consecutive quarters. So last December quarter, I'd say it was just breakeven, has a little profit. But this quarter, since this quarter we have seen Top Boy has been making a decent profit margin because of, as we mentioned, 8 percentage points improvement in GP margin and a comparable decrease in its OpEx ratio. So that means a meetings or, loadings to meetings improvement in its OP margin.

Speaker 3

And we are also happy to see that its profit mix, its profit structure are getting more and more healthy. And Not only in its proprietary exclusive products but also in 3rd party products. For example, blind box is a major category within top toy. So third party blind box from 3rd party suppliers, its GP margin also has been improving during the past several quarters because it's higher bargaining power because it's larger scale and so on. So, thank you.

Operator

Thank you all again for joining us today. Now we shall conclude our call. See you in next quarter. Goodbye. Thank

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Earnings Conference Call
MINISO Group Q3 2024
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