MINISO Group Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 23, 2025

Key Takeaways

  • Miniso’s Q1 revenue soared 90% YoY to RMB 4.43 billion, driven by 9% growth in Mainland China and a 30% jump in overseas sales, while TopToy brand revenue rose 59%.
  • Domestic same‐store sales decline narrowed to mid single‐digits in Q1 and turned positive during May Day, supporting management’s target of 10% domestic same‐store growth for 2025.
  • Gross margin improved to 44.2% and adjusted EBITDA margin reached 23.4%, as higher‐margin overseas revenue and integrated IP strategy offset increased investment in directly operated stores.
  • International expansion continued with overseas revenue now 36% of total (up 3 pp), with a focus on cluster‐based U.S. store openings, local sourcing and tariff preparedness to capture global market potential.
  • Shareholder returns strengthened: the company paid a $740 million dividend in April and repurchased ≈$260 million of shares in 2025 to maximize investor value.
AI Generated. May Contain Errors.
Earnings Conference Call
MINISO Group Q1 2025
00:00 / 00:00

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Moderator

Good afternoon, everyone. Thank you for waiting, and welcome to join us for Minnesot twenty twenty five Q1 Earnings Conference Call. At this moment, all participants are in listen only mode. Following management's prepared remarks, we will have Q and A session. Before joining the Q and A session, please mark your name and institution.

Moderator

Please note this event will be recorded. English simultaneous interpretation is available for this conference call. Please click interpretation in Zoom meeting to select your preferred language. We released our Q1 results earlier today, which are now available at our Investor Relations website at ir. Miniso dot com.

Moderator

Joining us today are Mr. Ye Guo Fu, our Founder and CEO and Mr. Zhang Jingjing, our Chief Financial Officer. Before we continue, I'd like to refer you to the Safe Harbor statement in our earnings release, which also applied to this call as we will be making forward looking statements. Please note, we will discuss non IFRS financial measures today, which we have explained in our financials, earnings release and filing to the U.

Moderator

S. Securities and Exchange Commission and Hong Kong Stock Exchange, which have reconciled the most comparable measures reported under IFRS. All amounts are in RMB unless otherwise stated. Additionally, we have prepared a set of slides that include financial and operational information for this call. If you using Zoom, you should be able to see it now.

Moderator

You can also preview it later on our IR website. Now I'd like to welcome Mr. Ye Guo Fu to begin his remarks. Good afternoon, everyone. Welcome to Mideoso Group twenty twenty five Q1 Earnings Conference Call.

Moderator

Today, I will share with you our quarterly performance highlights and our future development plans. First of all, let me review our overall performance for this quarter. In Q1 that just concluded, Miniso Group's overall revenue exceed expectation with total revenue of RMB 4,430,000,000.00, grew by 90% on Y o Y basis. Minisaw China Mainland revenue was RMB2.49 billion, grew by 9%. Minisaw overseas revenue was RMB1.59 billion, grew by 3%.

Moderator

Coming next, please allow me to talk about our measures behind the steady growth and our future strategy for both domestic and international market. Let's talk about domestic market first. We have continued optimization of same store performance. Starting from the beginning of this year, domestic same store sales has shown significant Y o Y improvement. In Q1, the Y o Y decline in domestic same store sales narrowed significantly compared with Q4 last year.

Moderator

During May Day holiday, in particular, we reached a positive turning point in our operational performance. With same store performance shifted from negative to positive, we maintain our guidance on domestic same store growth of 10 positive for this year. Starting from last year, we have established the same store enhancement as our core strategy. We were broken down the vertical management model and continues to strengthen collaboration among operation, merchandise, channels and marketing department, building a flexible and very efficient integrated organizational framework with enhanced coordination, enabling faster and more agile decision making and execution. The company also set same store metrics as our core KPI across our entire business chain.

Moderator

This measure effectively breaks down departmental barriers, greatly motivating different departments to propose performance improvement solutions for their professional perspective and achieving cross departmental resources integration through coordinated mechanism, driving the entire team to effectively collaborate with the unified goal of same store enhancement. The company has also developed a systematic implementation in merchandise and the channel management, while more precisely categorized same store attribute for the channel stratification, complemented by deep data insights to accurately match the channel characteristics with inventory structure, making sure our sufficient product offering meet diversified consumer needs. Going forward, we will continue to deepen our refined operation, further unlock market potentials and work with our franchise to advance high quality development with high store efficiency and high profitability. Secondly, we strengthened our IT strategy and enhanced product development precision. High quality growth fundamentally depends on excellent product, A brand long lasting competitive edge is embedded in every item we create.

Moderator

Each product investment strengthen our market position. We significantly improve our resources at the forefront of the product innovation, building specialized team that track global trends and broadly explore new design concepts and functional application to keep our offerings at the industrial forefront. Our IT collaboration have delivered exceptional result in this year, the Chicava Lunar New Year collection, Chicava Cherry Blossom series and our recent Stitch collections launched along with a movie release, which all received outstanding market response and the sales performance. Our approach for deep key IP and creating sheet products around them continue proven to be successful. Moving forward, we are expanding our IP partnership.

Moderator

We will also focus on dips rather than just a braids, refining our product development procession to create truly distinctive merchandise. From a strategic category perspective, during the May Day holiday, travel accessory grow by 45% compared with 2024, especially on May 1. It's setting a new historical high for this category. For the disposable product, we created immersive specialty display Zoom and product end gaps. We're simultaneously showcasing professional third party testing report to build consumers' impression that the mini so disposable product are safe enough.

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We continue to search for the high quality and more environmental friendly material or to bring consumer a more exceptional and reassuring user experience. We firmly believe that continued innovation with high quality and value driven product that meet evolving consumer needs is essential to our market success. Miniso's journey to date have been built on exceptional merchandise. Going forward, we were further investing as a core competitive edge to gain greater consumer recognition globally and continue to establish Miniso as a truly household name worldwide. Thirdly, let's focus on channel upgrade with large stores driving growth.

Moderator

I'd like to share with my thoughts on our domestic store expansion strategy. The brand has evolved from rapid land grabbing into an upgraded phase of large store driven growth. This year, we are focusing on high quality channel development as our strategic goal, working on open larger, better performing stores. Since the beginning of this year, we opened five new Miniso land locations, bringing a total to eight with another 50 in preparation. We established 43 flagship stores with 150 more in pipeline.

Moderator

New store opened in Q1 have achieved a 27 higher average efficiency compared with new store from the same period of 2024. Since the grand opening of our first IP Land store in Tianjin Last August, IP Land store in Shanghai, Chengdu and other city has successfully opened with Nanjing and Guiyang location also making impressive debarts this year. Those stores not only enhance the new source brand image, but also offering consumer a wider product selection and a very unique shopping experience. We were delighted to see that after the store opening, all the store continue to break single school sales record through refined operation and marketing campaign closely integrated with our IP strategy. Moving forward, we will continue to emphasize our MP Land stores position as brand benchmark, prioritize IP and product resources to ensure priority product launches and customized limited additions.

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Currently, the performance contribution from the larger stores is gradually increasing. Single store model is showing positive development trends. We will continue advancing our larger store strategy by optimizing store layouts and improving operational efficiency to further enhance our brand influence and profitability. Beyond actively expanding new stores, we're equally focused on renovating and optimizing existing locations, small to large conversion and out to new renovation are key initiatives. By increasing store size, we were expanding discipline area and consumer interaction space through upgraded decor style and optimized lighting design.

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We refreshed store with better align with our brand positioning. We also proactively and systematically closed some smaller outdated stores, optimizing our store portfolio and further improving the overall operational efficiency, laying a very solid foundation for the brand long term development. Coming next, let's talk about international market. We have international market, a steady expansion. Our overseas revenue contribution continued to rise, increasing three percentage point on a Y o Y basis.

Moderator

We implemented a diversified strategy to address different market dynamics. In North America, improving store operational quality and controlling expenses ratio are our key priorities. We're going to focus on Pontiffuq state that represents 76% of The U. S. Population, implementing cluster based store openings and the leverage economics of scale, enabling rapid inventory transfer between warehouse and the stores, reducing logistics cost and improving inventory efficiency.

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We also enhanced merchandise operations through a specialized product development team at headquarter that create targeted product assortment based upon U. S. Store formats and positioning with emphasizing in developing core best sellers. We believe the market opportunity are not only in U. S, in Europe, in Latin America or even in Middle East.

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We were flexibly optimizing cooperation model and deepening partnership with our agents. We were strengthened control and headquarter coordination with our overseas partners on the ordering side. But at the same time, we also continue to explore new business models. For example, we continue to improve our store positioning, which can continue to further improve our opening potentials in The U. S.

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And continue to leverage greater store models. In terms of the tariff, we also made some good preparations. Last year, we continue to build inventories in U. S. Market for reserve despite some upfront cost.

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Ensuring sufficient stock availability amid the tariff uncertainty can allow us to fully capitalize on sales potential. Furthermore, we enhance our overall cost competitiveness in U. S. Market by increasing procurement from U. S.

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Local and other overseas supply chains to continue to improve our product competitive edge in U. S. This April, we held our twenty twenty five global new product Carniva at Qimlong in Guangzhou, featuring nearly 4,000 square meter of exhibition space with nine immersive themed special exhibitions showcasing over 6,000 new products. Through our headquarters strategic deployment of IP products and the best sellers, we enhance product differentiation and the competitiveness by creating more efficient innovative store model, we bring more engaging shopping experience to local consumers to further strengthen our brand image. We see tremendous potential in overseas market and we'll continue to driving high quality growth through increasingly refined and localized corporation.

Moderator

Well, Top Toy, let me just make the following statement. Toptoy business continued to maintain steady development through optimized product structure and improved operational efficiency. The proportion of self divided products exceed 40% for Q1 of this year, further enhance TOPTOY's market competitiveness and profitability. Going forward, we will continue to strengthen TOPTOY's brand building and in house product development, launching more product to meet consumer need, increasing brand market share and influence. Looking to the future, we are confident in our performance in both second quarter and the full year.

Moderator

We'll continue to advance our refined operational strategy, strengthen IP partnership, upgrade our channel, upgrade the store location, enhancing supply chain management, building brand influence to solid condition for our full year performance target. Meanwhile, we'll continue to implement our shareholder return policy, combining dividends and a share repurchase. We paid out $740,000,000 in dividend this April and completed nearly $260,000,000 in share repurchase since the beginning of this year. We'll continue such a strategy to maximize shareholder value. We maintain committed for customer centric innovation driven approach as we advance business upgrade and market expansion in IP collaboration space.

Moderator

We increasingly focus on the strategy of deepening existing partnership while developing new ones. Strengthening long term IP partnership, we're also exploring leading resources in niche market. Please believe in the power of our business trajectories. In the interest base and the culture consumption space, Miniso has built a difficult to replicate competitive edge through our unique IT advantage. I look forward to witness our continued growth and success with all of you.

Moderator

Thank you very much. That concludes my remarks. Now I will invite Yi Sun to present you our financials in Q1 of twenty twenty five, please. Thank you. Thanks for Mr. Ye. Coming next, I'd like to walk you through our financial result for Q1 of twenty twenty five. Please note, otherwise stated, all figures are in RMB. I will also refer to some non IFRS financial measures that exclude stock based compensation expenses as well as costs related to convertible bonds and acquisition loans. First of all, revenue.

Moderator

In Q1 of this year, the overall revenue was RMB4.43 billion, up by 90%, making steady progress towards our expectation. 90% revenue growth exceeding the upper limit of our 50 to 80 growth guidance. Looking at each brand, Miniso brand generated billion revenue, grew by 16.5%. Within days, Miniso China Mainland revenue was RMB2.49 billion, grew by 9%. Nine % growth is even accelerated compared with the previous quarter.

Moderator

Meaningful overseas revenue was RMB1.59 billion, grew by 30, also exceeding the upper limit of our 20% to 25% guidance to the market. Top Toy brand achieved million revenue, up by 59% continue its rapid growth. Well from the revenue structure, in Q1 of twenty twenty five, China Mainland revenue accounted for 56 percent of the total revenue. In same period of last year, the number used to be 61%. Overseas revenue was 36%, used to be 33% last year, increased by three percentage points for the same store performance.

Moderator

With the collective efforts of everyone from our CEO to store staff, domestic mini store same store sales has significantly improved in this year. The Q1 same store sales declined only by mid single digit number against the high baseline last year. The rate of the decline substantially narrowed down compared with Q4 last year. This improvement trend has continued since the Lunar New Year, particularly impressive is that in April, featuring the Chicago launch, which creates a very high baseline last year, but still in April of twenty twenty five, we will be able to continue a positive trend during the May holiday. We continue working towards our goal of achieving positive same store growth for the full year.

Moderator

Overseas Mini store same store sales faced some base pressure. Q1 performance is similar to the domestic trend. However, it is worth noting that in the same period of last year, our overseas same store growth was 20%. Looking at a two year compound rate, overseas same store sales still show solid growth in Q1. For overseas same store performance, we were replicating successful practice from China market and already seen improvement in major markets like U.

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S. And Mexico in Q2. Having proven our ability to enhance same store performance in China's intensively competitive market, we were even more confident in our overseas market performance. Well, in terms of the store network, in Q1 of this year, we aided 95 new overseas locations, steadily expanding our international network. In domestic China, we actively implement a strategic channel upgrade.

Moderator

Our approach is to close underperforming store will open better ones and replace small locations with larger ones. Notably speaking, most of the stores closed in Q1 were low productivity locations under 200 square kilometers with operating for over three years with average monthly sales lower than 200,000. In contrast, newly opened store this year average is 300 square kilometers with average monthly sales approaching 400,000. This explains why we have nearly double digit revenue growth in Mainland China despite no net increase in domestic store count during Q1. Regarding the gross margin, we saw an increase near one percentage point compared with same period last year, reaching 44.2%.

Moderator

Beyond GP margin improvement driven by increased of overseas revenue mentioned earlier, our effective IP strategy also contributed to the steady enhancement of our overseas market segment. Looking for the future, there might be some fluctuation from the seasonal factors. But the upward trend continue to have momentum and room for further growth. Let's also talk about expenses. I'd like to highlight our expense in this report.

Moderator

In Q1 of twenty twenty five, combined selling and administrative expenses grow by 45%. Sales expenses are by 51%, administrative expenses are by 22%. Selling and administrative expenses represent 28% of the revenue, five percentage higher than the same period of last year. Most of these Y o Y increase are due to the sales. Majority of those Y o Y increase relates to our newly opened direct operated stores, including labor cost, rental expenses, depreciation and amortization.

Moderator

In Q1 of twenty twenty five, directly operated store contributed 22% of our revenue, up from 40% in the same period of last year, with revenue growing 86% on Y o Y basis. The growth rate of direct retail revenue continued to outpace the growth of the related expenses. As I continue to talk to the market, our existing investment for the directly operated store are capturing more sales opportunity to ensure our future business success, especially our strategically important market like United States. Where at the same time, we will be effectively control headquarter related management expenses with the overall proportion decreasing. In Q1 of this year, it's been reduced by 1%.

Moderator

We firmly believe focusing our spending where it matters most. We believe with continued refined operation and strict expenses management, our operating expense ratio will continue to be improved. In the mid and long run, the newly opened directly operated store will unlock greater sales and profit potential. Regarding profitability, our adjusted EBITDA margin for Q1 of twenty twenty five was 23.4%, up by 7.5%. Adjusted operating profit margin was 60.6%, down by 4.2 percentage points compared with same period of last year.

Moderator

Let me just break down the reason behind this decline by business segment and explain to you why I'm still confident for margin improvement. The operating profit margin of Mini Sul Mainland China franchise business remained stable compared to the same period of last year. Well, the operating profit margin of our overseas agency business slightly improved. Those business are pretty stable. As you can see, these two business segments are performing very well.

Moderator

The decline in the group's overall operating profit margin is primarily due to the changes in the revenue structure. The proportion of the high margin franchise and agents business has decreased, while the rapidly growing direct operated business has increased, diluting the overall profit margin. Of course, we believe there is significant room to improve our profit margin of the directly operated business. Going forward, we aim to increase efficiency and refine operation to improve the operating margin of directly operated business. Additionally, investment in new business will surely cause some short term fluctuations in profit margin.

Moderator

In mid and long run, 20% profit margin would be a reasonable target. But during our growth phase, we need to build new business, space and the time to develop. In Q1, our adjusted net profit was RMB $590,000,000 with adjusted net profit margin 30.3%. Beyond operating expenses, the key factor affecting our profit margin in this quarter is increase in financial expenses, primarily coming from the three resources. First of all, the seven year convertible bonds of $550,000,000 with 0.5% coupon rate issued in January six of this year.

Moderator

Since these convertible bonds incorporate financial derivatives, it generate quarterly sale revenue fluctuation and accrued interest cost under the effective interest method, which accounting standard required to record as financial expenses. Secondly, the bank loans, expenses related to our investment in YH, which include borrowing interest expenses at an annualized rate below 3%. The third one is financial expenses related to store lease for our increased number of directly opened stores. As Mr. Ye just stated, we are committed for long term thinking.

Moderator

Even if we see short term pressure, but they lay solid foundation for long term revenue and profit growth. In Q1 this year, our effective rate tax rate was 26.6%, primarily because of the convertible bonds and wage related financial expenses reducing pretax profit without generating actual tax liabilities, resulting a higher effective tax rate. Excluding those impact, the actual operational tax rate was 21.2%, in line with what we saw last year. Going forward, we're going to maintain a very stable effective tax rate for our regular operation. Regarding capital allocation, in March of this year, million '20 '20 '4 final dividend has already been paid to the shareholders.

Moderator

Meanwhile, starting from the trading window opened in March, the company continued its share repurchase program. As of now, we have repurchased nearly 60,000,000 worth of the shares in 2025, totaling 8,000,000 shares, representing 0.7% of the total outstanding shares. In the near future, we're going to finance the rapid business growth and our commitment to providing shareholder with stable and predictable returns. Looking ahead to 2025, our expectation remained largely consistent with those at the beginning of this year. Due to the comparison base from 2024, the overall revenue pattern was slower in H1 and accelerated in H2.

Moderator

We believe our operating profit growth will be healthy in 2025 as we will be more focused on expenses control, But improvement in operating profit margin still depends on the profitability of our directly operated stores and also investment into the new stores. These stores are currently in rapid growth phase and are temporarily speaking lowest profit margin, but it has significant room for further improvement in the mid and long run. Looking into the future, we believe our reasonable operating profit margin should be around 20%. Our financial strategy will continue to maintain discipline in budgeting, cost control and capital allocation, committed to achieve stable and sustained profit growth and healthy cash flow. Thank you very much.

Moderator

This concludes our presentation. We are now ready for Q and A please. First question, let's welcome Michelle Chen from Goldman Sachs, please. Thank you. Thanks for Mr. Yan, and thanks for Ethan of giving me an opportunity to raise a question. I have three questions. My first question is regarding Minnesota domestic China business. There are some same store improvement recently. Could you be more elaborative on that?

Moderator

Why we have the same store improvement? Is it because the format of the store has been changed? Is it because of the metrics of the stores being changed in different tier cities? My second question, what would be the payback period for your franchisees? Another point you mentioned is the store adjustment strategy.

Moderator

So do you have any guidance regarding the store opening plan or strategy? This is my first question. My second question is targeting U. S. Market.

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Tariff is still with huge fluctuation as a market see. So with very different tariff potentials, do you have any strategies or plan? What about the supply chain adjustment, especially for The U. S. Market?

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My third question for YH. Starting from Q2 of this year, there will be some P and L impact from YH, right? Can you please elaborate on how YH going to impact the profit and loss of Miniso? YH has already rolled out some adjusted superhypers. Are there any update on the progress now?

Moderator

Thank you. Thanks, Michelle. Many questions. I wrote down five. Me just respond to your question one by one.

Moderator

The first three questions, I think you rather want to know more about our domestic business. Do you want me to elaborate on the specifics of the same store performance in China? And in Q1, in domestic market, we do have mid single digit decline. For those investors who follow us long enough, this is indeed a huge improvement compared with Q3 and Q4 last year. Internally, for Minaso, we were quite inspired by only have a decline to mid single digit number.

Moderator

Here yesterday, we have already narrowed this number to a low single digit number. In 2025, we still have every possibility of improving a positive growth. But let me just tell you, the micro consumption in China has not yet been fully restored. In such a challenging background, Minuso can guarantee a positive growth, which can surely showcase our business resilience. If you further break down the Q1 same store performance, especially for APS and to the customer flow.

Moderator

The value per order is still the same as what we saw last year. But for the same store decline because the traffic of the physical store continue to showcase low end single digit decline. But starting from Q2, value per order and the traffic continued to be improved. In terms of the regional, especially in East China and South China, in the Tier one and Tier two cities, the same store improvement show very nice progress or even some of them have a positive growth from beginning of this year to now. But in Northern Part of China, especially in Northeast and the Northwest Part Of China, we do see some pressure for same store improvement.

Moderator

We made some original specific plan and we have periodical product for those plan. So, overly speaking, we are very confident. Probably for our interim of this year, we are very close to breakeven. Well, let me just also share with you the franchisee business. Starting from 2025, their ROI has already seen nice improvement along with same store improvement.

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We do have five Miniso Land being operational and 43 flagship stores. All of them are mostly operated from franchisees. So franchisees, they still have a very deep emotional bond with Minuso. They are still positive on us. We also have IP land flagship stores in pipeline.

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Majority of them are still be owned by the franchisees. So we surely notice franchisees, they are quite interested in this new store format, and they have every confidence. Third question regarding the store opening guidelines in China. In Q1, the same store performance delivered a very ideal performance. Even we adjusted the number of the stores, but still we will be able to register a double digit growth by improving the same store improvement and the single store improvement, especially those stores being operational within twelve months, which showcase a very healthy store metrics.

Moderator

For this year, we are confident that we can achieve double digit growth. Besides that, we will also surely optimize our store network. The fourth question is regarding tariff. With existing tariff, let me see, compared with 02/1980, we do have some early preparations for the past one year. We are intentionally building up our stock in U.

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S, especially the inventory preparation. We do have more inventories in overseas market. In that way, it can help to be ready for the sales peak season in overseas market. In short run, it may bring some pressure on expenses. But now it can actually help to further play the potential of our overseas sales.

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U. S. Inventory can still support our sales for another three to six months. We have another countermeasure for U. S.

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Tariff fluctuation. We are adjusting our supply chain. We hope we can translate Miniso as Chinese supply chain going global to global supply chain integration. In other words, we are going to be less dependent on Mainland China as a single market for supply chain. In order to further improve our supply chain efficiency, we did a lot of job for direct sourcing from U.

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S. Market. We make sure we have a controllable cost and a stable delivery of The U. S. Product.

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We have a deep bond with our international supplier to adapt to the new landscape. In Q1 of this year, U. S. Direct sourcing accounted for 40% of the local product in 2025. We're also going to adjust the sourcing and making sure we improve the diversities and the qualities of the direct sourcing to improve the GP margin of The U.

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S. Business. At the same time, we also have the tax planning tools that can help us to effectively reduce our tariff burden in U. S, making sure our commodity to The U. S.

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Market can generate a higher profit. The final question is around YH. So starting from Q2 of twenty twenty five, YH is going to be consolidated into our overall performance. For YH, its overarching goal is to reduce financial losses with efficiency and the manpower and the GP margin improvement and also cost and expenses reduction. Why business has seasonality?

Moderator

Q1 is a peak time from Q2 to Q4. We're going to confirm the profit and losses of investment, especially starting from Q2. For YH adjustment, I think we do have a dedicated team to talk to the capital market. Over to speaking for YH retrofitted store, the performance is truly in line with our expectation. The team is also well performing.

Moderator

By May, '70 '8 stores has been adjusted. We're going to close another two fifty to three fifty stores for YH with an adjusted store of more than 200. The adjusted store showcased very good performance with nice profit. From January to May, around top 40 wide store after adjustment, the profit is already more than RMB100 million. The future profit growth will come from efficiency and management efficiency improvement.

Moderator

YH performance is truly in line with our expectation, but YH business is a huge one. It really takes time to make the business right. Thank you. Thank you. Thanks for Ethan.

Moderator

Very clear response. Thank you. Next question, let's welcome Samuel Wang from UBS. Please. Thank you.

Moderator

Samuel, thank you. Can I just make one suggestion in order to make sure everyone with the equal opportunity to raise questions, no more than two questions for each, shall we? Great. Okay. So I have a question regarding overseas market.

Moderator

Recently, especially in April and May, what will be the same store performance trend in overseas market, especially how's the performance in U. S? We noticed in 2024, you have a new management team for The U. S. Market.

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What would be the outlook of the same store's performance for U. S? What kind of strategy and the measures you take in order to improve the same store performance in U. S? My second question is on IP partnership.

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Started to become a Red Sea market with many players. There are some new entrants into the market that take a very unique ways. For example, they do have a celebrity ambassador promotion. So is there any differentiated strategies for IP? Are you going to incubate your own IP?

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Or did you ever consider acquire other IP and develop your own IP in house? Or are you still going to follow the third party IP licensing to build a partnership to advance the IP business? Those are the two questions I have. Thank you. You.

Moderator

Thanks, Samuel. For the same store performance in overseas market, as I have already mentioned, Q1 performance is very much like what we saw in China, but the baseline is very different. In Q1 last year, overseas same store growth was 21%, more than 10% for agent market, directly sales more than 30%. For offshore offline chain retail store, grows more than 20% for single months, lay a very solid high solid line. So if you take it as a two year compound growth rate, the international, especially overseas same store growth was quite good.

Moderator

Starting from April, in Mexico and The U. S. Market, we do see some turnaround improvement. So generally speaking, we're still very confident for the same store performance improvement in overseas market. But I have to notice there used to be a very fast growth for network of the stores.

Moderator

In overseas market, for example, directly operated store before 2024, we only have 900. But last year, all of a sudden, it jumped to 1,300. With 1,300 stores, half of them can be accumulated accounted with same store performance. Another half will not be taken with same store improvement. In U.

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S, we have more than 300 stores. But in Q1, the same store performance only accounted for 90% of that. In other words, 30% of The U. S. Store can be taken on the same store improvement baseline.

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So another growth driver would be the non same store inventory business, which has been operational within twelve to fifteen years. And the performance is going to be further improved. Its single store output is going to have a teens or should I say a low double digit growth for this year. I have already mentioned in the prepared remarks, we're going to adopt the successful experience from China for overseas market. In China, we have so many competitions.

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There are so many competitions, but still, we will be able to grow in China. We're still very confident of having successful story for overseas market. U. S. New management team is doing right.

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U. S. Is the world's largest consumer market. It's also going to be a key destination for Miniso's future global strategy. From 2021 to 2024, we have a 100% full year CAGR, which is truly impressive.

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Single score outperformance also make us world top too in a faster growing market. The short term individual season fluctuation may be impacted by different factors. We believe retail business is a long swap business. Wherefore, The U. S.

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Market, what we're going to focus on, including the following two. The first one is channel optimization. The second one is merchandise improvement. For channel last year, we opened 150 stores with more experience accumulated. In 2025, we're going to be more focused for store opening in the 24 states with 76% of The U.

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S. Population to leverage the clustering effect. In those areas, if we open new stores, we can really pay the scale effect, making sure we can have faster deliveries between warehouse and the stores, reducing the store shortage, improve customer satisfaction. And we're also going to optimize the route of our logistics, reducing logistic cost and improving efficiency, which has already proved to be right in Q1. Thirdly, we can also predict the demand, reducing the inventory backlog.

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Wherefore, merchandise, we're going to be more refined and precise. Our headquarter merchandise center have already established the tariff task force and high growth task force for U. S. We did some specific R and D to U. S.

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Market demand only. Especially, we're following our new store formats in U. S. And positioning of the stores we have in U. S.

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To have dedicated resources and R and D for U. S. Market R and D. And we also made some of best sellers. We will continue to further improve our membership system by enhancing our IT technology.

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Through the membership system, we'll be able to see the high demand and repeatedly purchased product, making those products into our best seller, just as was we did for the past one year, by improving the supply chain of those best seller, leveraging our trial card in the global supply chain and guarantee a stable delivery of those best sellers. So three was going to be very much targeted for customer profiling, getting more insights from the user. The question regarding IP is indeed a hot topic in the consumption market. There are three observations I can surely share with you. The global most well known top IP licensing resources are still a scarce resource.

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As we continue to further expand our market coverage, the way for us to work with top IP or the frequency for our IP partnership will continue to be forged. We will be able to get good resources, For example, exclusive licensing and that can help us to get more gallery image resources, which can help us to further expand our presence in IP market. Secondly, for IP product design and IP product quality would also be the key criteria to decide whether consumer come back to you or not. There are many interest based consumptions. People just rush to build, but many of those demands are non effective ones.

Moderator

Why should I say so? Because for Miniso, we have a very good expertise that is to convert of the IP. Our IP conversion capacity has been built based upon our 8,000 stores worldwide with seven to eight years experience for IP development. We have already paid the lessons. All those could become our expertise to protect our IP business.

Moderator

Secondly, we also have a more than 1,000 people product team, more than 1,500 global merchandise suppliers, pipelines with very effective supply chain management, which could be used for IP business. Thirdly, we're also working on our in house IP. For Miniso, our in house IP, right before 2025, we used to have some IP with a sales of more than 100,000,000, for example, like PanPen and the Dundunji chicken. But for this year, we also started to have the chip avail. This IP will generate a sales of more than hundred million to 500,000,000.

Moderator

As someone who started to do in house IP, the check valve indeed really surprised us. But for sure, it already takes time for us to build our in house IP. I surely believe in the next three years, we'll be able to generate good performance, which going to be very much inspiring for the whole team. Thank you. Next question.

Moderator

Let's welcome Justin. I have a question. I'd like to ask the management team. For Minnesot Mainland China business, if we just take a look at Minnesot Mainland China, whether your GP margins to 38% to 40%. If we only take a look at the Minnesotan Mainland China business, what is the GP margin now?

Moderator

We also clearly noticed many of your merchandise are being sourced from the third party, which can actually help to mobilize more customer base and also improving your same store sales. So how you're going to buy this the same store performance improvement and the GP margin enhancement for the commodities or the merchandise from the third party, how much it's contributed to your overall sales? You have any target? I see your store started to display drinkable waters or even some liquor products. I saw that in Minaso Qingdao store.

Moderator

How you're going to balance your GP margin if you source from the third party? For third party product, the GP margin would be low. But for sure, it's going to mobilize more customer base for same store improvement. Thank you. Thank you.

Moderator

A very good question. Thanks, Juan. I think what we are trying to do is that we shelf the many third party product, whether it's going to burden our GP margin. But let me reassure you, it won't. In Q1, for GP margin, especially in Mainland China business, it has a flat growth compared with last year.

Moderator

We indeed shoved many third party product in our store, but those are the product in specific category. From the nature perspective, many stores still a fly store. We'd like to provide consumer with a treasure hunting experience. In other words, you provide whatever the customer like in such a way when you convert organic traffic into your real customer, it doesn't mean the product have to be your self owned commodities. For example, let me give you an example like toys.

Moderator

In China, in the shopping malls, the traffic structure has been fundamentally changed. The household consumer, especially children become the key. Kids are indeed the consumer of the toys. In shopping malls, we don't have any very stable supply nationwide. If Minaso would be able to provide the household customer with diversified average of the toys, which is quite cost effective.

Moderator

That will be great. Toy development means we need to engage many toy producers, especially those professional one. We don't need to divide up our toy supply chain. We can leverage the existing toy suppliers, engage them in our channel and convert the organic traffic into actual sales. But at the same time, we will surely be able to build our own IP.

Moderator

For consumers who come to Miniso, some of them are organic traffic. Just come naturally to come to your store and they can be converted into actual sales. But there are also some other consumer who know our brands or some of them see your advertisement in the social media, they see the advertisement and come to your store to purchase certain product, for example, travel product, blind box and the doors. You have to make it right, but we don't give up organic traffic or conversion opportunities. That is the reason we shelf the third party merchandise.

Moderator

We're going to have a dynamic control, but still the GP margin is very stable. A follow-up question. Imagine if you have the third party product, but if some of them don't have a very good sales in your store, the matter is for toys or for drinking waters or something else, where you're going to refund the product to the third party or is it just a buyout? Thank you. We do have some of the piloting initiative now.

Moderator

But let me just tell you, for any of the single batch of the procurement, we have 4,000 stores in China. We have every capacity to digest those inventories. We don't have too much third party procurement. It's only in certain specific categories. We leverage our data insights and experience, make sure we make the right decision to derisk ourselves.

Moderator

Secondly, we have 4,000 stores. We are safely digested those inventories. Thirdly, we just make sure we have a faster turnover of the third party product. We're not going to build too much inventories. We always do it face by face.

Moderator

Thank you. Next question, Wei Xiaobo from Citi Securities. You. Mr. Wei from Citibank.

Moderator

I have one question regarding your stores. If we take a look at Q1 end of the quarter store, you have a net closure of 111 stores in China. By closing those underperforming store, it's going to improve your same store performance. I believe for your annual guidance, you're going to have 200 to 300 net openings. While you change the target of the net openings, if it remain the same, when you're going to have a net increase of the stores?

Moderator

What will be the time frame? Imagine in Q1, if you already have a net openings, then what would be the net closing and the net opening? Thank you. Thank you. Thanks for your question.

Moderator

Last quarter, I think I have already shared with many of you. We do channel upgrading in Mainland China. The reason is because if we rightly seek for the store number growth, it won't be a good fit for our long term development. So that's the reason we do the channel upgrading initiative. Along with our same store enhancement, there will be some net store opening in H2 of this year.

Moderator

But we're not going to indeed do 200 to 300 net openings. We just keep a dynamic adjustment. If it is 200 to 300 net opening, that means our same store performance is more than what we expected. But even if we don't make 200 to 300, still we will be able to maintain a double digit growth. One more comment I'd like to make for this question.

Moderator

Closing store doesn't help for same store enhancement because our definition over the same store performance means you have complete closure of the store. They were not accounted for the same store performance. For the operational stores, the store closing should be no more than one month. So that's the reason for this quarter, we do see same store performance improvement. It's because we did some merchandise strategy and operational strategies for those inventory stores.

Moderator

Is a follow-up question. No matter for same store or for the new openings, as long as your Mainland China sales reach the target, you don't bother whether it's being driven by same store or new openings, right? As long as you guarantee a good revenue size and high quality revenue growth. Yes, you are right. This is a promise we have.

Moderator

But for sure in 2025, we hope more growth from China are coming from same store performance improvement. Okay, great. Okay. Ladies and gentlemen, thanks for all the investors for your time. And thanks for supporting Miniso Group.

Moderator

Here comes to the end of the earnings conference call. See you next quarter. Thank you. Thank you. Thanks for everyone.

Analysts
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