MINISO Group Q4 2024 Earnings Call Transcript

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March 21, 2025
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Moderator

day, everyone. Thank you for your patience, and welcome to MINISO Full Year twenty twenty four Earnings Call. All participants are now in listen only mode. We will conduct a Q and A session following management prepared remarks. Before joining the Q and A session, please identify yourself by stating your names and the institution you represent.

Moderator

Please make sure the call will be recorded. English simultaneous interpretation will be provided for this call. You can select your preferred language by clicking interpretation in the top of Zoom. We published our Q4 and full year financial results earlier today. Those materials are now available on our Investor Relationships website.

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Joining us here today is our Founder and CEO, Mr. Yebo Fu and CFO, Yifeng Zhang. Before we proceed, I'd like to direct your attention to the Safe Harbor statement in our earnings release, which also apply to this conference call as we were making forward looking statements. Please note that we were discussing non IFRS financial measures today, which we have already explained in our company's earnings release and the filing with U. S.

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Securities and Exchange Commission and the Hong Kong Stock Exchange, where we have already reconciled those measures with the most comparable metrics reported on the International Financial Reporting Standards or monetary account of RMB unless otherwise specified. In addition, we have prepared a set of the presentation slides containing financial and operational information for this call. If you are using Zoom, you will see it now. The presentation will also be available for your review on our website. Coming next, let's welcome Mr.

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Yaguo Fu to begin his remarks. Hello, everyone. Welcome to join us for Miniso Group Full Year twenty twenty four Earnings Call. Look back to 2024, We not only continue to make progress in store expansion or revenue growth, but achieved a significant breakthrough in global market development and brand upgrading. By the December 2024, our global total account reached 7,780 with net increase of twelve ninety stores for the year.

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MINISO China added four sixty stores MINISO Overseas expanded six thirty one stores and PopToy grew by 128 stores, all exceeding our opening target set by the beginning of twenty twenty four. Our global expansion strategy began in 2015 while continuing to serve as a key growth engine in 2024. We now operate 3,100 stores in overseas market, contributing nearly 40% of the group's revenue and helping drive overall revenue growth of 23% to approximately RMB70 billion. So looking ahead, our confidence and documentation remain unwavering both for our accelerated growth in 2025 and our next five year target from 'twenty four to 'twenty eight. I will give you a detailed brief of our business development in 2024 and 2025 growth strategy, including MINISO China, MINISO Overseas and the Top Toy.

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In 2024, our domestic business achieved a double digit growth. On top of the higher growth rate of 36% in 2023, overall revenue growth will be 11%, offline growth by 10%, e commerce growth by 25%. By the December, our store count in China reached 4,386 with a net increase of four sixty stores throughout the year. We feel confident about accelerating our growth in 2025. Let me share with you a few growth driver.

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The first one is channel and retail partner structure upgrading. Even the same store sales faced slight pressure in 2024, but average daily sales per store for newly opened store in 2024 were low double digit higher than those operating in 2023, indicating high store quality and healthy retail partner profitability. We have identified improvement opportunity among those longer established stores with suboptimal location. In response, we optimized our channel and the retail partner structure. On one side, we provide more product and operational support to partners with substantial market experience and strong resources.

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On the other side, we're also phasing out some long tail retail partners who can't meet our recurrent management requirements. In the near future, we'll continue to improve our retail partner structure and quality. At the same time, we implement a more precise product matching based upon the characteristics of the differentiated channel and consumer profile, which have become another powerful lever for improving same store revenue. For example, we have certain featured IP and limited edition product exclusively at the MINISO IP land store and the flagship store, creating immersive playground experience and become a master visit destination For standard stores and O2O platform, by ensuring adequate stock of the best selling IT products, we were also expanding our selection of everyday items to meet customer daily needs. Thirdly, we will leverage our platform advantage to extend our IT collaboration metrics, both on depths and the dips.

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Over the past few years, we have created iconic IP events, sub like Chicago China co branded depart. And we also have the global recognized culture sample and the Chinese trend. This year, we have planned more than 90 IP launches covering the evergreen to potential to strongly characterize IP, our very strong platform advantage. We can smoothen trend circles through an IP metrics, reducing dependence on single characters and creating a relay race for growth opportunities. Finally, we enhanced member loyalty and repurchase rate.

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In 2024, our global registered membership has already surpassed 100,000,000. Member spending has accounted for more than 60 of the total sales, representing a low single digit growth. Our average members spend 2.2x more than non members and shop with us approximately 4x annually. We're going to use large language and the data analytics to deliver more personalized product recommendation and market initiatives, further driving customer satisfaction and repeat purchase behavior. Coming next, let me discuss overseas business performance.

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In 2024, our overseas revenue reached RMB6.68 billion, representing 42% growth. Our JFV reached RMB40.16 billion, grew by 27%. We added a net total of six thirty one overseas stores. The majority of the expansion occurring in The United States and Indonesia, same store of our overseas operation are in a mid single digit number. The U.

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S. Market has emerged as a strategic stronghold for our international operations, delivering triple digit compound growth from 'twenty one to 'twenty four. While maintaining this rapid expansion, we implement more targeted site selections and enhance store quality. In 2024, we added 154 stores in U. S, bringing our total to two seventy five locations across 47 states.

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We have already concentrated our expansion efforts on 24 states that represent 76% of The U. S. Population. This will help us to further improve the warehouse efficiency, reducing logistic cost. We have also strengthened our merchandise operations through a greater recession.

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Our headquarters established a dedicated product development team that tailor made merchandise assortment based upon The U. S. Store formats, CityTeers. We see that the overseas growth opportunity extends well beyond The U. S.

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With Europe showing tremendous potential in 2024. U. K. Market leverage our IP strategy to drive the channel upgrade. And our GMA has registered a triple digit growth.

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More significantly, our U. K. Experience has yielded replicable growth in formulas for other European market. First of all, we provide a comprehensive support to our retail partners, strengthening coordination with headquarter cross bordering distribution, merchandising and marketing functions. We collaborated with retail partners to secure premier commercial locations.

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Over the past year, we have our flagship store in key retail locations, for example, Oxford Street of London, creating high performing locations, generating monthly sales exceeding RMB 2,000,000. The upgraded store enhanced our visibility and also helped municipal secure additional premier retail real estate overseas. Our global strategy go beyond simply open stores and the selling product. We have a global strategy. And in 2024, we have our localized product design center in South Korea.

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Moving forward, our network design hub across China, U. S, Japan and South Korea will establish recognize the product development to address local needs. And then we also focus on localizing Thailand and operation as our global strategy continue to advance. Thailand localization has become a critical success factor in our overseas market. In 2024, we achieved 100% localization of the store managers in directly operated markets.

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In 2025, we will continue to further deepen our global localization strategy for Highlands to improve our operational efficiency. As global economy uncertainty increase, particularly the policy changes from The U. S. Tariff, MINISO as a globally operated enterprise system, we must respond with extraordinary resilience and agility. The world is constantly evolving.

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When there is a change, there are opportunities. Significant change always brings significant opportunities. First of all, we will further diversify our global supply chain. We'll reduce our dependence on Mainland China as a single sourcing market through strategic global procurement initiative. To date, our U.

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S. Team has achieved nearly 40% of the local direct sourcing, rapidly increasing procurement from Southeast Asia, Japan, South Korea. This can help to stable the supply chain and reduce the cost. Secondly, we remain committed to our interest based consumption strategy. IP co branded products such as SpriteBox and plush toys carry unique emotional value where consumers demonstrate low price sensitivity.

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We will continue to work with IP partners to introduce more limited edition exclusive product to enhance aesthetic value and emotional resonance. We explore opportunities for local IP resource market divided by localized IP production and development capacities. Let's then go for Top Toy. In 2024, Top Toy delivered 45% to our growth, net increase of 128 stores. And we have already made a good profitability of the year.

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The result stands from effective implementation of our product differentiation strategy. The gross margin improvement was 7.3%. Key categories, including building blocks and blind box, saw significant margin improvement. Self divided product increased the share by 3.5 percentage points. Regarding store expansion, followed in the second store pilot of the Toptoy shopping shop IP land store in Indonesia, Because of the very young democratic profiles, rapid development, we will be able to continue to grow ourselves.

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2024 marks Top Toy's first year of full year profitability. We reached a reflection point through enhanced product competitiveness, optimized operational efficiency. We believe in the near future, Octoy will secure a more important position in the Transitway segment, bring more excitement and joy to the consumer worldwide. Finally, I'd like to touch upon the progress of YH. Acquisition of a 29.4% equity stake of the YH has already been completed.

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And at this week, YH extraordinary shareholder meeting, a resolution was passed approving municipal nomination of the three directors to YH board. Looking ahead, we'd like to take YH to allow us to capitalize on the quality retail opportunity. The essence of the quality retail is product accidents. Good product is a foundation for the business. Only superior product can build very strong brands.

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Moving forward, YH and MINISO will pursue deep synergies to continue to have the product competitiveness improvement. 2024 represent a typical chapter for MINISO's global strategy and a very important milestone in our journey towards becoming a superbrand. We were committed for interest based consumption, IP driven product innovation and the global extension strategy. We have a very clear target to become the world leading IP design retail group. As consumer demand shifted towards interest based and quality consumption, China supply chain and consumer market advantage in its position continue to favor us.

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We will capitalize on those opportunities by continuing to strengthen our IP collaboration, product innovation and taking prominent positions in global retail landscape. MINISO achieved ESG rating upgrades for three consecutive years with our MSCI rating elevated to AA. This advancement truly recognized the international authority of institution regarding municipal long term development value and the competitive strength. In looking into the future, we will continue to strengthen sustainable development, stick to long term development, create more value to the shareholders. For the foreseeable future, we will remain committed to distributing 50% of the adjusted annual net profit as dividends.

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We'll continue to implement dynamic share repurchase, delivering predictable returns to our shareholders. Coming next, I will welcome Yi San to walk you through the financials of 2024, please. Thank you. Thanks, Mr. Yen.

Moderator

Welcome to join us for the call. Coming next, please allow me to help you to work you through our financials of 2024. Please note, all figures are in RMB unless otherwise stated. And I will also refer to certain non IFRS financial measures that exclude share based compensation expenses. Let's first go for revenue.

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In 2024, for the full year, our total revenue reached RMB70 billion, grew by 23%, in line with our expectations set by the beginning of the year. The growth was driven by 80% growth average store count, where our comparable same store sales declined by a low single digit number compared with the previous year. And I can also see, therefore, that RMB70 billion, minisor brand revenue totaled RMB60 billion, up by 22%, within which MINISO Mainland China revenue was RMB9.3 billion, grew by 11%, while MINISO overseas revenue reached RMB6.7 billion, increased by 42%. Among our overseas markets, directly operated revenue was RMB3.8 billion, grew by 66%. Dealer market contributed RMB2.9 billion, grew by 90%.

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From the our revenue composition, overseas revenue accounted for 39% of our total revenue. This number used to be 34% in the previous year. Specifically, directly, accredited overseas market increased their contribution from 60% in 2023 to 22% in 2024. The evolution of our revenue structure represent a key driver behind our RevPAR high gross margin, where also result in a great concentration of the operating profit in H2 of last year. Regarding GP margin, we achieved a 3.7 percentage improvement in 2024, reaching 44.9%.

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Besides revenue structure adjustment I mentioned earlier, our effective IP strategy also contributed to margin improvement across all business segments, particularly strong mid to high single digit increase in our overseas and the top toy business. Notably speaking, our GP margin has been climbed for eight consecutive quarters, repeatedly setting new records. Looking to the future, the quarterly margin may fluctuate due to seasonality reason. As our overseas revenue and IP product continue to go up, we still have huge room to continue to grow our GP margin. Recently, you may notice the tariff policy.

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We have the following countermeasures. First of all, we will accelerate the supply chain globalization. The proportion of the Chinese sourcing of our overseas directly operated market has already increased from 25% to 30%, this fleet then approaching 40% in The U. S. Secondly, working backward from our property target, we were considering price and adjustment while maintaining certain GP margin objective.

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Thirdly, one of our largest retailer in our segment, we maintain strong negotiation leverage with the suppliers. Even if the entire industry facing tariff impacts and raising cost, our product remained highly competitive in terms of the value and the differentiation, helping us continue to gain market share amid challenges as we are facing very complicated geopolitical landscape. We've accumulated substantial experience navigating involving tariff policies. Okay. Let's also talk about the fees.

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In 2024, our combined sales and administrative expenses increased by 52%. With sales expenses grew by 59%, administrative expenses raised by 29%. Sales and administrative expenses accounted for 26% of the revenue, five percentage higher than the same period of last year. Majority of those expense growth are related to the newly opened directed operated stores, especially in overseas market. As been discussed before, our existing investment in directed operated stores are aimed at capturing more sales opportunities to ensure our future business success, particularly the strategically important overseas market like U.

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S. By the end of fiscal year twenty twenty four, we operated more than 500 redirected upgraded stores in U. S. Market, representing double the amount from the previous year. 2024, the revenue from the direct upgraded store also doubled, where the related sales and the distribution expenses, for example, rent, depreciation, amortization, personnel cost, increased by 72%.

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When we entered into Q4, our cost control measures and operational efficiency improvement began to show good result. The growth rate of the directly operated store related expenses was 75% in the first nine months but moderated to 66% in the fourth quarter. We believe through continued refined operation and the stricter expense management, our operating expenses ratio will continue to be improved. In the mid- and the long term, those newly opened and directed open stores will unlock significant sales and profit potential. Additionally, marketing and promotion expenses grew by 38% but remained stable at around 3% of the revenue.

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License fee increased by 29%, slightly faster than the first half growth rate, primarily due to significant higher proportion of IP product sales in H2, especially in overseas market. Logistics expenses rose by 51%, similar to the gross rate sent in H1 and first nine months of '20 '20 '4, mainly driven by the increase in overseas stores and the rising international freight cost. Let's also talk about profitability. Our adjusted operating profit increased by 70% in 2024 with an adjusted operating profit margin stabilized around 20%. Adjusted net profit reached RMB2.72 billion, grew by 15%.

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The adjusted net profit margin was 16%, maintaining healthy profitability level despite rapid overseas expansion. Our adjusted EBITDA grew by 21% with an adjusted EBITDA margin of 25.5%, which is essentially flat compared with 2023. The both adjusted basic and diluted earnings per ADS increased by 16%, outpacing the growth of adjusted net profit. This was primarily due to our share repurchase program through which we canceled more than 11,000,000 ordinary shares in 2024 accounted for around 9% of our total shares further enhancing shareholder value. Regarding the working capital, our channel inventory turnover remain robust and efficient.

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At the end of twenty twenty four, '30 '3 percent of the millions of brand inventories are located overseas compared to 24% a year ago. Our inventory turnover days was ninety one days. Specifically, in Mainland China, this was 75, up from seventy days in same period of last year, with increased primarily due to the earlier stocking for the Loo Chinese Spring Festival. MINISO overseas directly operated market recorded one hundred and eighty seven days, up by one hundred and thirty one days in the previous year. Is because we have nearly a net age of four fifty directly operated stores worldwide.

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From the structural perspective, inventory age over one hundred and eighty days accounted for approximately 11% of our total inventory, around one percentage lower than the first nine months of twenty twenty four. Looking ahead, we will continue to optimize our overseas inventory management strategy, flexibly responding to tariff risks and reducing inventory risks by improving our store operational efficiency. Regarding the capital allocation, today, we announced a final dividend of the fiscal year 2024 for approximately RMB740 million, representing 50% of our adjusted net profit for the H2 of twenty twenty four. The dividend expected to be paid in our shareholder in April. For the full year 2024, the company has distributed approximately RMB 1,240,000,000.00 in cash dividends, representing 50% of the corresponding adjusted net profit.

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Combined with the Shell purchase, we returned a total of RMB 1,570,000,000.00 to shareholders. Looking ahead, we will remain a dividend payout ratio of 50% in the near future. Our capital allocation strategy will also finance rapid business growth and our commitment to deliver stable and predictable returns to our shareholders. For the full year 2024, our company generated a net operating cash flow of RMB2.17 billion. Free cash flow was around RMB1.4 billion.

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At the end of the fiscal year twenty twenty four, we still maintained a very healthy cash reserve of nearly RMB6.7 billion, including RMB6.33 billion cash and cash equivalents, approximately RMB100 million financial product recorded under other investment and the restricted cash on the balance sheet and approximately RMB270 million in terms of the deposit. Our interest bearing liability ratio was 3.15, indicating our balance sheet remained very healthy. In January six of this year, we issued a seven year convertible bonds with a value of USD550 million. The convertible bond carried a coupon rate of just 0.5%, payable semiannually, representing relatively low financing cost. The conversion period began after the sixth year from the insurance and through a core spread nearly structured, the conversion price has been set at 102.1, which significantly minimized the risks of the equity dilution.

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The insurance mix, the company's first convertible bonds financing, helping our broaden our investor base, increase coverage from the long term capital and further enhance our cash reserve and financial flexibility. 50% of that will be used for overseas market expansion, 50% will be used for shareholder returns. By so doing, we aim to support rapid development of our overseas business while enhancing shareholder returns through share repurchases. Finally, I'd like to show the latest progress of YH transaction. The five prerequisite of the YH acquisition has been fully met.

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The deal has been successfully completed. In YH transaction, our external borrowing accounted for approximately 55% of the investment amount with average interest rate less than 3%. We will use equity method of accounting for this transaction, calculating our share of YH net profit based on our 29.4% ownership state. We expect YH will begin impact our financial statement from Q2 of twenty twenty five. Looking to 2024, our full year performance reflect on the strength and resilience of our business model and the effective execution and development potential of our IT strategy and global initiative.

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Our steady development strategy and Tempo F. Reserve have maintained our flexibility and quickly cease market opportunities to respond to the macroeconomic uncertainties. Looking to 2025, we will continue our due prolonged approach. On one side, we drive high quality growth in China by enhancing same store sales, and we also continue to improve the member repurchase rate, channel structural upgrades. On the other side, we will maintain our focus on overseas market development, implementing a more disciplined cost control while sustaining rapid performance growth.

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Regarding the store expansion, we are progressing according to our five year strategy with plans to double our store count by the end of twenty twenty eight compared to the end of twenty twenty three. The number of the new stores in 2025 is expected to be slightly less than what we have achieved in 2024 due to our own operational pacing. We believe it's important to focus on the store quality rather than just the quantity. We hope in the near future, more growth will come in from our same store sales. Based upon the assessment of the current market environment and execution of our growth strategy, we are optimistic about the accelerated revenue growth in 2025.

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However, considering the base effect from the 2024, the pace of the revenue growth will likely be lower in H1 and higher in H2. We expect healthy growth in operating profit in 2025 as we focus more on expenses control. But improvement in operating profit margin still depend on the profitability of our directly operated stores. The directly operated stores are still in high growth period. The related revenue is going to have a triple digit growth in 2025.

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The store currently have the lowest GP margin, but significantly optimization potential in the mid- and the longer run. Look ahead, we believe our reasonable operating profit should return to be around 20%. Our financing strategy will continue to maintain discipline in budgeting, cost control and capital allocation committed to achieve stable and sustainable profit growth and healthy cash flow. Thank you very much. Here concludes our presentation.

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We can now start the Q and A. The first question coming from Michelle Chen from Goldman Sachs. Congratulate on the company for your robust performance in such a volatile market environment. I have two questions. The first question is the same store performance in China.

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I do see huge pressure in H2 of twenty twenty four, but I do see that in Q3 and Q4, there are some great contribution from the Famous IP. How you're going to comment on the same store performance in China? Is there any clear growth driver to improve your performance for the same store sales? Another question that you also mentioned a different format of the stores. Do you have any specific target?

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That is regarding the domestic business. I have the second question regarding your business in U. S. I noticed that there are some pressure for the same store sales last year in a few quarters. What about the profit per store in U.

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S? And how you're going to comment on the same store sales in U. S. In 2025? You also mentioned in the overseas market, Ethan, the directly operated market is still going to face huge pressure on the expenses.

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How are we going to comment on the JP margin improvement in overseas market? Thank you very much. From January to February, the revenue growth of the Afra store was high and also we see some good improvement. There are few data for your reference in improving our same store performance. First of all, we can see the larger GFA store is, the better the recovery the business would be, especially for store covers 300 square meters.

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The recovery was pretty nice. For small stores, they do have some pressure. So in the near future, we may consider rectify those small stores into larger stores. For some stores, small stores, even they are under pressure, but they have some good performance, we are going to make a comprehensive adjustment. We are starting from this year.

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You can see that our same store performance improved compared with Q4 last year and especially, we see the loss continued in Erudan. We will keep an eye on the same store performance in the near future. Then at the same time, you can see that in 2024 in August, we already have the IP land. We now have three in operation. And here now, the performance of the IP land is exceeding our expectation.

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Compared with traditional stores, the IP land store actually have very nice designs while working with internationally renowned architecture design companies. It actually building a very immersive environment with a wide portfolio of IP. With a space of more than thousands of square meters, we do have different zoomings regarding the atmosphere of these and the blind box and also the global limited edition. And we also continue to improve its presence. We have already take the IP land as our key strategy in the near future.

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And we're also going to launch the signature stores along with the IP land in the premier cities and the best locations. We have already have it in Shanghai, Nanjing. And those stores will be located in the primary locations in the top tier cities, for example, in Beijing, Guangzhou, Chengdu and Hangzhou. And then we will also consider of having those stores in Jinan, Kunming, Huiyang, Shijiazhuang, Harbin with more than 10 net adds. But at the same time, we're also going to divide with the flagship stores with a focus of double the normal stores and continue to focus on the well performed cities for side selection.

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And we're also going to continue to improve the existing stores. We can see that we're going to have a foreseeable 100 to 200 flagship stores. Well, regarding the margin of the overseas directly operated stores, they are now in rapid growth stage. In 2025, we foresee a triple digit growth. The GP margin of the directly operated stores has the lowest margin, but it has huge room for further progress in the near future.

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In mid and longer run, operating profit would be around 20%. There are some fluctuations due to seasonality and utilization rate, but still, it's going to continue to be improved. Globalization means a lot for the company. We have to be patient with long term and sustainable growth strategies. Globally speaking, we have 8,000,000,000 people.

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And in China, the number was just more than 1,000,000,000. The global market is a huge market. I know that for investors, we pay much attention on the returns. But for me as an entrepreneur, I don't want to see the short term immediate effect. We have to be forward looking.

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If you do any business, you have to invest and then you're going to harvest. In the early days, we make investment in the market, continue to improve our brand awareness. We build our sales network and operating mechanism, lay a solid foundation for the future, profit growth. U. S.

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Market has always been a very important part of the global strategy. From 'twenty one to 'twenty four, The U. S. Market was growing with a triple digit per pound rate, one of the highest output countries in our overseas market. In 2025, we hope that we can have a more precise and targeted store opening strategies to improve the quality of the stores.

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In 2024, we have a net eight store of 154 in U. S. And states covered around 54 states in The U. S. Starting from this year, we're going to have the refined strategy and we're going to focus our new stores in the key state covering 76% of the population.

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Leveraging the stores were going to play the scale effect, making sure we best utilize the resources to continue to take care of the product shortage, improve the customer satisfaction, optimize logistics and distribution routes, reducing transportation cost, improve the logistics efficiency. Through the concentrated management, we can foresee the demand, reducing the backlog, improve the turnover. And we also have the following measures to improve the efficiency. We're going to have a special product R and D task force dividing the product according to the market preference of The U. S.

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All those products we're targeting in The U. S. Market where, globally speaking, we're going to leverage the dealer and the retail partner cooperation model to continue to optimize our cooperation model. We know market may have diversified the needs. We take a diversified strategy to guarantee the successful execution of our strategy and business growth for long term growth.

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We will continue with four major initiatives in U. S, especially our membership system. Especially, we identify those product with a high purchase rate built into the best selling product. We're going to have the targeted customer profiling analysis, improving our service to the customer. And that's all for my answer.

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Thank you. Thank you. Next question comes from Wei Zha Bo from Citi. Please. Thank you.

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Thanks for giving me the chance to raise a question. Mr. Yan, Ethan, good afternoon. I have two questions. My first question is targeting your prepared remarks.

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Yisan, you mentioned about the outlook of the margin in 2025. It seems that your margin performance is truly dependent on your directly operated stores. Yisan, you have already mentioned, in 2025, revenue growth would be accelerated. But this means that the uncertainties of the profit growth is not as confirmed as what you stated in November. I have the second question.

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And Mr. Ye, congratulate on completing the transaction with YH. I see you were entering to the YH reform task force and be the team leader, do you have any business indicator you can share with us? I know YH is an Asia listed company. If you can't share the statistics, is it possible for you to give us some color to see how the business progress of YH?

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Thank you. Thanks for Mr. Yen. I'm Ethan. Let me just repeat the guidance I provide to the market.

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We have every confidence that no matter for revenue or profit growth in 2025, we'll still remain healthy and especially the revenue growth would be accelerated. The source of our confidence is because we see that almost every of our BU and every business will have the possibility of outperforming the performance in 2024, especially in China. In 2025, we see the online business in China is going to boom. So it's going to continue to drive the overall sales. And even if you see that our offline business grow by a little bit number, but I do believe we're going to register a double digit growth for Airfly business in 2025.

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For overseas business, from 'twenty one to 'twenty four, the compound growth rate was 43%, which is pretty significant. But considering our business model and a huge addressable market in overseas market, we maintain our forecast of the growth in overseas market of 35% to 40%. We'll talk about the profit growth. In my prepared remarks, I have already mentioned our adjusted operating profit grew by 70% compared with last year. Net profit rate was up 20%.

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So excluding YH business, at least for MINISO core business, our operating profit will continue to grow. But for sure, as I have already mentioned, net profit or the profit margin is truly dependent on the profit of the directly operated stores. The number of the directly operated stores being improved a lot. We have many newly aided directly operated stores. The profit of the existing directly operated stores would be significantly improved in 2025.

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At least for me, they are going to have a low single digit to the mid single digit profit improvement for the existing stores. Let me just give you an example. In 2024, we have the direct to upgraded store, for example, IP Lending Shanghai. Even if the cost is pretty high, but still in the past four to five months, the store can still keep a high double digit profit rate and continue to be optimized. In 2025, we will continue to invest in those new directly operated stores.

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In the first year, because of the early stage investment, net profit or margin might be low because they are in the high growth period. But let me just draw your attention. You see that for the three formats of the stores, the direct operating stores, even if it has a lower margin or longer run, we hope that the margin of the directly operating stores can reach 20%. I do believe our long term operating margin can reach 20% for the directly operated stores. The second question regarding YH.

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Let me have Mr. Yair to respond to it. Well, for YH, they have three increase and two reduction. The first increase is to improve the manpower efficiency. We are optimizing the team in improving the productivity and efficiency.

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And the second increase is that performance and efficiency of the stores need to be doubled, even tripled. And the third increase is that for YH, we hope that the triple performance or efficiency would at least be the upper line of or the bottom line for any stores to achieve. Where at the same time, we are also initiating the reduction initiative for YH. YH, for the past two years, its revenue was around JPY 80,000,000,000 to JPY 90,000,000,000, but around one fourth are the daily necessities, which enjoy a very low margin. So we're going to support YH further improving the margin.

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Where at the same time, the YH will also continue to develop its cell phone brand product, which can also help to further improve the competitiveness of YH. The second reduction initiative is cost reduction, for example, reducing all the possible sourcing cost. And the third reduction is regarding reducing the labor cost. YH is going to optimize its team in 2025. So we do have the initiative to continue to help YH to further reduce its financial losses by the end of twenty twenty six.

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For the existing store of YH, we even closed those underperformed ones, only reserved those well performed ones. So by the end of twenty twenty six, we're going to make sure that all YH stores would be retrofitted into the new ones, improving the GP margin, the business efficiency, the performance. Then in 2026, you see 1H starting to register a good performance by then. Next question, Ann Lin from Jefferies. I have a few questions.

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I'm not sure I missed the information or not. Did you actually talk about your store opening target in 2025? I heard you may have less new store open compared with 2024. Do you have any data or quantitative ones you can share with us? How many new store you are going to have in China?

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How much are for directly operated stores? The same as overseas market. For example, the new store target in U. S, Mr. Ye, you also mentioned.

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In Europe, you're also going to open new stores. So how many you're going to open? This is my first question. Let me also bring my second question up. If we take a look at the stores in China, I find out there are some now self upgraded product, for example, the blind box or the PopToys.

Moderator

I find out in your store, you also have a product from other brands, the same as a beauty product. So it seems that for MINISO, in the past, you have all the products produced by your own brand, but now it seems you also introduced brands and product from other brands. Will it help your same store sales? Whether it's going to have any impact on the GP margin or profitability? Let me have Mr.

Moderator

Yih to answer the first question regarding new store opening plan. Do you have any quantitative data? The, in 2025, the new store number would be flat compared with 2024. But for directly operated stores, we hope we can operate more in U. S.

Moderator

And Indonesia. If we blindly seek for the store quantity growth, it won't help to serve our long term growth of the brands because consumer needs being further diversified and also need to improve the customer experience. So we are handpicking the right resources, having the right handpick of the locations, designers to the right product selection and the service optimization, hope that we will be able to make sure each new store would become a model in its own region to continue to lay a solid corner store for its future development. Thank you. So how many directly upgraded stores are going to open in 2025?

Moderator

Hello. I'm Ethan. Let me help you answer this question. In the, you can actually refer to the new store number in 2024 to see how we're going to have in 2025. From 'twenty three to 'twenty four, the net adds of the store is around two fifty to 300.

Moderator

Majority of those net adds of the stores are in the following markets. For example, some are in China market, not many. In China, we have some satellite model, for example, like IP LAND. Now we have three IP LANDs in operation. The model proved to be very successful by Mardic's success.

Moderator

We're going to continue to roll out more IP LAND. We're going to have, alternatively speaking, 10 IP lands in China. Where for U. S, I think for our store expansion plan, we're still very positive and optimistic. We foresee in U.

Moderator

S, we will have around three fifty to 400 stores in total. Then in U. S, in the next one year, we're going to have a few dozen stores being newly added. We're also going to have a new store expansion plan in other countries, including in Canada, in Southeast Asia countries or in European countries. Those are all the emerging market with very significant growth for the past one year.

Moderator

That's our new store plans. The question is regarding the third party product. So starting from H2 of twenty twenty four, you probably notice in miniso store, we do have some beauty product or cosmetic product at our store entrance, shelving the third party product. We have two reason for that because their target consumer is highly aligned with ours. We are also targeting those young ladies.

Moderator

So that's the reason we place on third party brand cosmetics products and it can also help to further improve the diversity of our portfolios and offerings. So for those products, no matter from profitability or from the attachment rate, can help to further improve the same store sales or not. Next question, Sami Wong from UBS. My first question. Is it possible for you to share with me if you have any new IP plan in 2025?

Moderator

I see that last year in Q2, you have Chicago, which lay a very high baseline in Q2 last year. Do you have any new plan for new IP? My second question, I also would like to ask you. You mentioned you have a deep bond with Sanrio and as well as Disney, especially on the Vinyl product and the Flash product. So how's the progress now with Sanrio and Disney?

Moderator

The company was kept emphasizing on the high turnover. If you really want to have a differentiated design, how you're going to buy dance the high turnover and the differentiated design? My third question, as you're talking about the dealer integration, then I have a follow-up question on that. You do have a reform over your dealers. So how the reform has been progressed?

Moderator

Are you going to complete the data integration within 2025? Thank you very much. Thanks, for, Samuel, for the question. The first two questions are all related to IP. Let me hope to respond to the first two questions.

Moderator

Yes, indeed, in 2025, we have already planned more than 90 IP related events and product covering IP of different styles and different attributes. Starting from the Golden Week in May to the summer vacation or even to the national holidays, we're going to have the S level project in our pipeline. The IP is truly worth of high expectations. So every year, we're going to roll out our products, for example, ACG. And every month, we're also going to develop a MINISO product.

Moderator

We're also going to focus on the co branding. For example, we're going to be working with Bandai of releasing more the Mango related product. You also mentioned about the Vinyl product. It is indeed a very good feed to IP. So that's the reason on this category, we have deep bond with IP.

Moderator

For example, we're working with Disney for that vinyl and Flash products, for example, on thirtieth March, we need a poorly Wino and Flash blind box being approved in U. S. For launch, and which actually helped to set record high sales in our new book, I'm sure, store. Through such events, we will help to build the customer awareness of our product, lay a solid foundation for the future vinyl product development and continue to improve our brand influence and consumption and penetration in the market. We upgraded IP for many years.

Moderator

Every year, we continue to iterate our IP product, improving the customer wellness. So let me just share with you what is our interpretation of the life cycle of IP. And we do believe there are different IPs. For example, for Evergreen IP, the life cycle of the IP should be further extended much longer than other product. IP product from the Essence perspective, it showcased different product design style.

Moderator

But indeed, they have the same carriers. So in the mid and the longer run, especially in a product life cycle, I believe the IP or not IP product sales won't be truly decisive by IP sales. I think the fundamentals still rest with IP design. So that's the reason you asked about the balance between the high turnover and the design. I think let me just respond to you in this way.

Moderator

You have to consider your product need to take the customer's functional needs and emotional needs at the same time. This is indeed something we would like to address. You also have a question regarding the integration of the retail partners. I have already mentioned, we continue to optimize the structure of our retail partners. In 2024, we have 80 commercial systems with a total sales of more than 50,000,000, where at the same time, in the top tier commercial shopping malls.

Moderator

And we continue to grow this house with significant number, especially the South with the China Resources shopping malls and the hypers. In the near future, we're just going to continue followed in two ways. First of all, for those retail partners who have extensive experience, more resources and deep cooperation bonds, we're going to supply them with more product and operational support, continue to improve our brand awareness in the South in the higher tier cities and the key and primary locations. Those retail partners can understand and execute our brand strategy, improve the peerings to the customer. Our product and resources would be invested to those highly potential retail partners who are willing to work with us.

Moderator

This is also an initiative of resources allocation optimization. This not only improved our resources utilization rate but also further improved our brand presence in the market. Second mention, we are also going to have some pre article visit to the non retail retailers who want to catch up with our high quality development need in the near future. In our daily operation, there are indeed going to have some short term small store number reductions or regional retail partner with store. But looking to the future, I think we're doing the right things to achieve the high quality growth.

Moderator

We're going to continue to optimize our product portfolio and improve operational efficiency to mitigate the negative impact from the integrated retail partners. After one year integration, our existing structure is more streamlined and efficient, be able to be more agile in response to the changes in China market, but adjusting our portfolios and offerings and marketing events to continue to improve our competitive edge. We're still going to continue this integration strategy over the retail product. Next question from Lucy from Bank of America. Please.

Moderator

Thank you. Thanks for the opportunity. I have a question regarding the online business in China. Ethan, just now in your prepared remarks, you mentioned in 2025, you hope the online sales in China could be further accelerated. Can you briefly tell me what is the online sales contribution to your total revenue in 2025 or 2024?

Moderator

How you're going to plan it in 2025? And how you're going to achieve it? The second question is regarding the China Airfly business. You hope you can register a double digit positive growth. But you mentioned the total new store number would be lower than that of 2024.

Moderator

Then I believe the growth rate, naturally speaking, should be lower than 2024. But I do see you may have some plan of having more IP land being available. The revenue contribution from IP land would be higher than normal stores. So how should I how can I make sure you will be able to continue to have a good growth? For our online business in China, it's been divided in two parts.

Moderator

The first one is traditional e commerce business and the second one is auto business. Both business being developing very fast in 2024. E commerce grew by 25% to 30%, auto close to 50% to 60% growth. Those business together accounted for around 15% of the total China business, where in 2025, we believe we will continue to accelerate the business growth. The reason is because we identify new opportunities in certain categories.

Moderator

For example, in 2024, the offline channel, we organized to cover branded product. And you can see that to cover the Dutch product also registered very good sales on the online channel. Only the Dutch toys, just one single category accounted for 20% to 25% of the total sales for the online channel in 2024, a significant contribution even compared with the AirFi channel. So I think for online channel, we will continue to make our product stand out, the highlighted product with core brand to further expand our sales for the online channel, while for the airline channel, the double digit growth. First of all, in my prepared remarks, I have already mentioned, in 2024, the China business growth is indeed not easy to be achieved because in 2023, the growth used to be 36%.

Moderator

But still in 2024, we made a double digit growth. So still, even against the high baseline from 2023, we still registered a very good growth. And we also need to make sure the competition of the stores could continue to be improved, especially on the same store sales improvement. Same store sales improvement will be the key priority we are going to go for, we do see some opportunities. Now let's review in 2024 for our same store sales.

Moderator

You see there are some good opportunities there. For example, we can leverage the positioning data to see that in 2024, besides the external environment changes, there are another factors, for example, site selection or some of the retail partners, they need to further improve themselves for the shelfings, for the product quality improvement and service. And certainly, we need to have a more refined product distribution. Those are all rooms for improvement. We have already identified those problems.

Moderator

So in 2025, we surely believe we're going to have the solution to those problems of continue to improving our same store sales. Structurally speaking, you see we do some nice big opportunities. Mr. Yan has already elaborated on that. For all different store size, especially the store at different locations.

Moderator

We clearly notice the higher the GFA the store has, the better the performance it would be. If a store covers more than 300 square meter GFA, its profit would be positive. If the store GFA is 100 or 200 or less than 100, its same store sales is still an active growth number, which is truly in line with what we will be noticed in China because people have a statement, if you're going to run the store well, you have to open large stores. So that's the reason we believe we still have further room to improve our performance. Okay.

Moderator

Thank you very much. Thanks for all the investors of joining us for twenty twenty four annual earnings call. Here comes to the end of this meeting. See you next quarter. Thank you.

Analysts
    • Moderator
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Earnings Conference Call
MINISO Group Q4 2024
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