MINISO Group Holding Limited

I'd like to refer you to the Steve Harper statement in our earnings press release, which also applies to this call, because we are going to make a forward-looking statement. Please note that we're going to discuss non-IFRS financial measures today, which we have explained and reconciled to the most comparable measures reported under the International Financial Reporting Standard in the company's earnings release and filings with U.S. SEC and Hong Kong Stock Exchange. The currency units in Chinese yuan unless otherwise stated. In addition, we have prepared the slide presentation for today's call, which contains financials and operational information. If you are using Zoom meeting, you will be able to see it right now. You can also revisit it on our IR website. Now I'd like to welcome Mr. Ye to deliver the speech. Hello everyone. Welcome to Minnesot Group's earning conference call for September quarter of 2024. As of September 30th of 2024, the Group added 859 stores on that basis, including 324 new Minnesot stores in China, 449 in overseas stores. and 86 new top toy stores. Both Minnesota Overseas and Top Toys Net Store in addition, in the first three quarters, has exceeded their respective full-year number from last year, as Minnesota Global Store Net would continue to extend. In the first three quarters, the company's revenue increased by 23% worldwide to RMB 12.28 billion, with average store count increased by 90%, with theme store sales growing in a low single digit. The world is changing, and global retail industry experiencing major reshuffle. Consumerist perception continue to evolve. In this time of the Great Transformation, China retail sector is facing opportunities for breakthrough. Minister Group will firmly grasp the two trends in the future, maintaining a focus on quality retail and interest-based consumption. The future will be characterized by a consumption model that combines product innovation and consumer experience. And you can see, in September, the company announced the acquisition of a 29.4% stake of Yonghui. Through this ongoing transformation, we aim to excel the quality retail, change traditional supermarket approach and deliver superior product, service and consumer experience. Then investors associated transformed Yonghui Store during this period, which should help us better understand our investment rationale. Moving forward, we will decide to dedicate more assets to study consumers and understanding the changing consumption trends, maintaining a people-centric approach, and returning to retail fundamentals. In the completion of Yonghui's stake acquisition, Minnesotans were in-campus three brands, Minnesotans Top Toy and Yonghui. Those brands complement each other while differentiating in product categories, target consumers, and price points, gradually building a unique multi-brand matrix in the retail sector. Meanwhile, Leveraging many years of accumulated supply chain resources and product design capacity as a shared platform, we will be able to empower those brands to improve the synergy and operational efficiency. We remain focused on the consumer retail industry. We believe by a steady-fast implementation of our multi-brand and globalization strategy, we will not only strengthen our existing competitive advantage but also help consumer market to navigate instabilities and diversify operational risks. Minnesota core business maintain our growing commitment for the three major five-year plans from 24 to 28, maintaining a compound annual revenue growth rate of no less than 20%, with earnings per share grow faster than revenue. Second, 8,900 new stores globally each year are a net basis, achieving IP product sales contribution over 50% by 28%. The dividend policy of distributing no less than 50% of adjusted net profit annually continued the dynamic share repurchasement, delivering predictable returns to our shareholders. Coming next, I'm going to share with you Minnesota-China, Minnesota-Grover Seas and the Toktoy development in the first three quarters of this year. Minnesota-China revenue growth in the first three quarters met the expectation of our five-year plan, including both up-store and e-commerce revenue growth by 12.3%, with offline store growth by 11.8% and e-commerce growth by 90%. And 11.8% for online store was primarily driven by 40.7% increase in average store's count, where same-store sales slowed amid single-digit decline in first nine months of this year. Fitting the challenging micro-consumption environment, we actively developed our auto business, which grew by nearly 80% on worldwide basis, helping us to stabilize seems-to-performance to some extent. According to the National Bureau of Statistics, domestic retail sales of the consumer goods increased by 3.8% in the first nine months of 2024. As an industrial leader, we achieved the growth rate of 12.3%, demonstrating greater resilience of our business. So, we feel optimistic about the Minnesota's China housing growth in 2025. In the first three quarters, we aided 324 net new stores in China, maintaining a steady expansion pace towards our annual target of 350 to 450 net new stores, 60% of those new stores being in Tier 1 and Tier 2 cities, which tells us we still have significant untapped market for store expansion in China. simple self-declined by meeting with a good number because the three quarters with transaction value showing a slight increase while why where transaction volume decreased by a single a mid single digit high-tier city outperform lower-tier cities in the same store performance in the near future we're going to have refined management over IP-centric product making sure IP-centric interest-based consumption strategy of our business and continue to further improve the sales efficiency. The IP consumer goods market is a trading-level market with great potential for Minnesota's IP strategy. According to Global Licensing Report in 2023, the top 10 global IP licenses accounted for nearly 70% of the global IP retail sales, while the top 20 licenses represent more than 80% of that, demonstrating a very strong concentration effect. Over the past few years, Mijiso has achieved significant success in IP. We have collaborated with more than 150 IP globally. We have partnered with 6 of the world's top 10 IP licensors and 9 of the top 20. Moving forward, we will forge deep bonds with those leading global IP licensors. leveraging our global store network, design capacity, and supply chain advantage to launch new products. We have already began the deep collaboration with Disney and Xenreal on the important product innovation category. We also worked with Harry Potter IP, bringing new inspirations to Minisource's product design style, accumulating experience in developing new SKU categories, but also continue to stimulate Minisource's potential for future collaboration with more diversified IP still. We also improve product strength, striving to unlock the potential of the interest-based consumption through innovative store formats. The seven-layer store metric strategy announced at our brand-upgraded conference on October 29th has been implemented systematically. We're going to have the IP scenarioization and the capitalized scenarioization. The IP land store represents our IP scenarioization format. In August, our first Minnesota land opened in Binjiang Road, Tianjin, achieving nearly RMB 5 million in sales in its first month. Shanghai IP Land store opened in October, so IT products accounted for 70% of the sales during its first opening month. We hope we not only provide the experience, but also exclusive IT products, enhancing shopping uniqueness. For category, the novelizations, SIM store are our key format. Many stores were developed as sales for $800,000. to 600 categories in the stores, focusing on four major categories, plush toys, light boxes, pads, and ACG, challenging young consumers and emerging consumption trends. The plush themed store that opened in Times Square in Chongqing in December has become a landmark destination for the plush toy fans. And you can also see that our sales per scrubbing also continue to be improved. Going forward, Minnesota will combine product differentiation with store format differentiation, using different store formats to meet consumer variety needs, bring more joy to the global consumers. I mean, next, let's talk about overseas business. In the first three quarters of 2024, overseas revenue exceeds 4.5 billion RMB, representing worldwide growth of 41%, and especially for direct-operated markets, it's grown by 64%. Distributed market increased by 22%. GMV reached 9.7 billion RMB. in the first three quarters grew by 31%. The Directed Operated Markets, showing 56% growth. Distributed Markets grew by 22% on comparable basis. IP strategy continues to have a notable growth. The IP product accounted for over 40% of the overseas market sales in first three quarters, sales revenue growing by nearly 85% on worldwide basis. In the first three quarters, we see very good growth. The result is quite impressive, net addition of more than 449 stores. Direct operated markets contributed to 67% of the net new stores, primarily from the United States or Indonesia. We see the total net new stores for this year will reach 650 to 700, exceeding our previous forecast. Same-store growth in overseas markets shows a high single-digit growth number. We were going to keep a flexible store operation model, introducing franchise stores in direct operated markets for leverage expansion. We are deepening involvement in the distributor markets to better guide the store openings and operations. Italy ranked among the top 20 overseas markets in Europe in 2023. By 2024, we have four major European markets, UK, Italy, France, and Spain, showing rapid development. Those are all because of our deep guidance to the distributors to adjust the inventories and store operations, improving the efficiency and profits. In the near future, we aim to increase consumer stickiness in overseas market through continuous optimization membership system, in-depth consumer research. Take Indonesia and US market as an example, member consumption contribution grow by 97% and 244% respectively, significantly outweighs the membership growth in both regions. We will further develop localized product and adapt store operation strategy to local market. realizing Minnesotan from China's joy to the world. Regarding the potential U.S. tariff increase risks, we primarily view this as an industrial-wide impact. Compared to other retailers who mainly rely on buyer-sourced merchandise, our products are predominantly Minnesotan private brands, and through our IP collective store model, we maintain differentiation from other retailers. giving us stronger pricing power to offset potential cost increase. Nevertheless, we take the following measures to mitigate potential risks. Increasing local sourcing ratio. In U.S. market, now about 30% of the products being sourced from overseas supply chain. Establishing our backup overseas supply chain. We actively identify alternatives in South Asia, Japan, Korea, and within the U.S., expecting to cover an additional 50% of the US product category. We have the capacity to source over 80% of the products for US market through oversource supply chain. We optimize overseas inventory management strategies. Internally, we have a dedicated workforce to regularly assess global trade policy impact on our supply chain and be able to formulate responsive measures. By having a diversified supply chain, we will be able to further improve inventory management, continue to strengthen our global competitiveness. Let me also talk about Toptoy. In the first three quarters, Toptoy revenue grew by 43% on worldwide, theme store sales grew by 5%. Toptoy added 86 new stores, steadily progressing the annual target of 100 stores. In Q3 of 2024, Toptoy's self-advisor products continued to increase. For example, the pilot of Toptoy, shop-in-shop in the New Society Land Store in Indonesia opened the first overseas store in Thailand. And because I'm young, demographic structure, rapid economic development, young people become the target consumer of top toys. We believe by deep dive into the Southeast Asia market, top toy can achieve rapid growth, establish a solid foundation for its global expansion. We always believe AirFly retail has unlimited potential. Chinese brands have great opportunity ahead. The keys for innovation and retaining to the retail fundamentals focusing on consumer bring the good service and product of consumer. When more Chinese brands started to showcase its great advantage, all the brands are running forward, breaking through and advancing. Vinasol adhered to the long-term strategy. We are committed to steadily improve our product and service, contributing to the rise of the Chinese brands. That concludes my remarks. Coming next, I will have Ethan to present you the financial piece.

Thank you, Mr. Ye.

Welcome everyone to our meeting. Coming next, Let me just go through Minister Group's financial data in the first nine months of 2024. Please note, unless otherwise stated, all figures are in RMB. I will also mention some non-RMB figures. IFRS financial metrics that exclude stock-based compensation expenses. In the first nine months of 2024, our total revenue reached 12.28 billion RMB, growth by 23% on a worldwide basis. According to the forecast of the year, we are progressing towards our target. Average stock count increased by 90%, with comparable theme store sales growth by a low single-digit number. Revenue from China region reached 7.4 billion, grow by 40% on worldwide basis. Within days, municipal brand China revenue was 7.03 billion, grow by 12%. Pop toy brand revenue was 700 million, grow by 43% on worldwide basis. Overseas revenue reached 4.54 billion, grow by 41%. Within days, revenue from direct operated overseas market was 2.45 billion, up by 64%. Distributed market was 2.1 billion, up by 22%. Take a look at the revenue structure. In the first nine months, overseas revenue accounted for 37% of our total group revenue, where in the same period of 2023, the number used to be 32%. The contribution from direct operated overseas market used to be 50% last year, but now it's already 20%. The change in the revenue structure is the key driver why we have a record high GP margin, which has also resulted in the operating profits being more concentrated to the second half of this year. Regarding the GP margin, in the first nine months of this year, GP margin grew by 3.7 percentage point, reaching 44.1%. Besides the adjustment in our revenue structure, the improvement also benefited from the IP strategy, which improved the GP margin for all business segments, especially the overseas operations and the top toy GP margin. They all improved by a high single-digit increase. Looking in the near future, with more overseas revenue and IP sales, our GP margin will continue to trend up. However, as been mentioned by Mr. Ye, we will continue to uphold our value for the price-to-performance product. In the first nine months of 2024, Combining selling and administrative expenses increased by 54% and selling expenses up by 63%. Administrative expenses up by 28%. Selling and administrative expenses accounted for 25% of the revenue, 5% higher than the same period of last year. Over 60% of those expenses increased was related to the newly opened directly operated stores. As privately communicated, our current investment in directly operated stores aimed at capturing more sales opportunities to ensure our future business success, particularly in strategic overseas markets like the US. At the end of September, we had 422 direct operated stores in overseas markets, double the number from the same period of last year. In the first nine months of 2024, Revenue from directed operated stores grow by 104%. Related selling and distribution expenses, for example like rent, depreciation and amortization, and personnel cost. grow by 75%. We are implementing effective measures to improve the operational efficiency of those directed operated stores and control the cost. We believe with refined operation and strict expenses management, we believe the operating expenses ratio will be stabilized or trending down, and we also expect those new open directly operated stores will unlock great sales potential in the near future. In the first nine months of Dacia, advertising and promotion expenses grow by 38%. There'll be 3% of the total revenue the same as last year. Licensing fee grow by 38%.