MINISO Group Holding Ltd - ADR Stock

Hello, everyone. Thank you for your patience. Welcome to MINISO 2026 Interim Earnings Results Presentation. [Operator Instructions] Please note the event will be recorded. English simultaneous translation will be available for this call. [Operator Instructions]. We released our Q2 and interim results of 2026 earlier today, which is now available on our ir.miniso.com.

Joining us here today are Founder and CEO, Mr. YE Guofu; and our CFO, Mr. Jingjing Zhang. Right before we continue, please refer to your safe harbor statement in our earnings press release, which also apply to this call as we will be making forward-looking statements. Please also note, we will discuss non-IFRS financial measures today, which has been explained in our earnings release and our filings to SEC and Hong Kong Stock Exchange and reconciling to the most comparable measures reported under IFRS. Unless otherwise stated, all figures are in RMB.

In addition, we also prepared a PPT slides containing financial and operational information for today's call. If you are using Zoom, you can see the information. You can also preview it later on our IR website.

Now I would like to welcome Mr. Ye.

Hello, everyone. In H1, MINISO Group revenue reached RMB 11.5 billion, up 22.4%. EPS grew 8.2% and operating cash flow rose 46%. Our global store accounts accounted 8,674. MINISO today stands at a pivotal moment as we operate a larger and better store, building our own proprietary IP and develop our overseas organizational capacity. Opportunities and challenges coexist. I firmly believe the strategic direction and the stage-by-stage significance of those initiatives better than the near-term number.

I will walk you through our business performance this quarter across 3 segments, including MINISO China, MINISO Overseas and TOP TOY. Official data show that China total retail sales of consumer goods grew by 1.3% on a Y-o-Y basis in H1 of this year. Against this macro backdrop, MINISO China H1 revenue grew by 26.2%, not only far outpacing broad retail sales, but also exceeding our prior year guidance. This was our H1 growth rate in the past 3 years.

Importantly, the quality of the growth is truly high, driven primarily by the mid- and high single-digit growth number. On the channel side, as of the end of 2022, the Q2 and MINISO China store count reached 4,665 with a net addition of 97 stores in H1, among which land format store addition, net addition 59 flagship, format store 159, regular store recorded a net closure of 121. On August 22, MINISO Land [indiscernible] Eastern suburb memory store officially opened, marking our 100th store in China.

Store count number was very solid, but the quality is even more important. At the end of June, our China store count was up 8%, with the revenue grew by 26%, reflecting a substantial increase in per store output and healthy growth in the overall sales per square meter. I'd like to show you 3 sets of data. First of all, sales per square meter and the rental ratio valued each month. The format store delivered sales per square meter roughly twice that of the regular store. Compared with the existing stores, the store newly opened in 2026 are significantly larger, yet the sales per square meter held steadily with the rent to sales ratio improved.

To malls, our new format is no longer a new tenant, but also the engine for foot traffic. Secondly, our store renovation pace continued to accelerate. We completed 189 store renovation in H1. Post renovation store performance has been doubled Y-o-Y against a full year renovation target of 255. We have every confidence to exceed it by the end of this year.

Secondly, franchise return continue to improve, whether measured by the payback period, profit margin or promotion of the profit store, the profitability of the MINISO Land worldwide and MINISO store nationwide in H1 reached its best level since 2019. Franchisees are increasingly willing to open larger and better stores, which is the most direct endorsement for our channel strategy from swapping the page to bring better for large store driven growth. Our channel upgrade strategy has underway for 2 years and remains significantly for the future.

This assessment with 2 facts. First, the proportion of the MINISO store in China remained low. And second, we continue to innovate on the store format. This year, we introduced a new member to our store metrics that is Super MINISO, the most important innovation of 2026. Looking back to the evolution of our channel upgrades over the past 2 years. In 2024, MINISO Land validated IP immersive flagship store. In 2025, MINISO Friends entered into mid- and high-end shopping industry in the affordable luxury retail. In 2026, Super MINISO bring the IP experience to the broader mass consumer base.

Its product metrics was 50% IP merchandise plus 50 general lifestyle products. Since its launch, it has become one of the most popular store formats among the consumers. The aspect of our Super MINISO is that it's not over the consumer existing brand perception, rather it's built upon them. It retain consumers familiarity with MINISO, value for money merchandise. We're injecting [indiscernible] and trade-driven experience through IP.

Other formats like friends, land and state progressively deepen the IP merchandise and share, helping consumers move from lifestyle general merchandise to IP land as part of the brand upgrade. But I'd like to see the success of the large store is not merely channel innovation. It's a systematic innovation by having content space and operations. The store is a space. IP is a store to fuel it. The momentum of the store and the value of the IP reinforce each other, forming an ever accelerating flywheel.

In June last year, we launched [indiscernible], our first proprietary IP -- within just 1 year, [indiscernible] has entered into 53 countries worldwide, generating nearly RMB 500 million in related revenue in H1. The most iconic milestone was [indiscernible] Disney Toy Story 5 fashion, [indiscernible] version of Moody's [indiscernible] sold strongly across stores in multiple countries.

In just 1 year, [indiscernible] success has propelled its validated proprietary IP to a new stage where it can engage top-tier global IP as an equal. Beyond the MINISO flagship store and the brand, the TOP TOY has also built its own IP metrics. Its flagship IP [indiscernible] has surpassed RMB 300 million in cumulative GMV.

And you can see that while you validated the methodology within our flagship brand Omi, Y-o-Y and [indiscernible] has proven different style under the TOP TOY brand. Around the proprietary IP, we have accumulated [indiscernible] SOP expanding artist signing product definition, design to development and supply chains actually all the way to the prelaunch, spending [indiscernible] channel in-store events and fan operation. Our group-wide target of RMB 1 billion in proprietary IP sales set at the beginning of this year was achieved ahead of the schedule by the end of July.

This is all proven our multi-IP multi-category localization strategy is successful. We fully demonstrated MINISO's Unit resources investment in building proprietary IP. We have the full category coverage, all channel penetration, global footprint and food chain operation. Looking across the globe, MINISO only poses the greatest of flexibilities and expandabilities in product categories. The strong base controlling the innovation capacity in channel, the bodies and the highest quality global store network in terms of footprint.

On the operations front, MINISO leverages full chain advantage from signing sites to be line to development to marketing and selling product. We dip empower artists at every stage, maximize the potential of HIP. Those are precisely MINISO's highly differentiated and scared resources, and they are also the key to MINISO [indiscernible] and overtaking the proprietary IP. There are 4 clues that enable us to complete the entire process from IP concept to shelf more efficiently than the vast majority of the companies.

So everyone, yuyu is just at the beginning. On August 22, we newly launched Artist IP [indiscernible], sold out entirely on his day exceeding expectation. We have already signed not on designators. You can see on the evening of 26, 5,000 sets of [indiscernible] was sold live with 1 second. And at the same time, we have already signed month for designer orders, recruiting of recredits worldwide through our IP prodigy program, our ambition is going forward, leading 100 Chinese IP onto the global stage.

At the moment, local IP mortgages entered into unprecedented bond. The rise of the grid nation is inevitably accompanied by the best of the culture [indiscernible] and their global actors. MINISO were backed by our wood-trading channel product and IP operation to secure our top position in this history requirement. Our vision is to become the world's leading IP operating platform, measured by channel scale. We are already the world's largest retailer of the IP product and our proprietary IP business is using a new growth engine. That is at once distinctive, explosive and [indiscernible]. Our strategic per towards proprietary IP is a long-term choice rounded in the trend of our ingress.

We were sustain long-term investments. Even in the short term, the proprietary IP product line has delivered accident report part. We not only have yuyu proven to be success, same as chocho, our second IP. If H1 profit margin was above company average, inventory turnover was capitas in 30 to 40 days. Proprietary IP strategy has placed no pressure on overall profitability, laying a solid foundation to continue our IP ecosystem.

Coming next, I'm going to talk about membership strategy. Last year, I said membership would become another important engine for MINISO growth. The value of the strategic membership is steadily materialized. Member scale and contribution continue to reach new levels in H1. Our China membership grew by 31%, reaching 130 million, the all-time high. Member contribution sales rose to 57% in the same period of last year to 60% for the full year last year and 33% in Q1 and further 77% now, where at the same time, membership is the latest evidence of MINISO's growth shifting from the opportunity driven to the system driven, the value of the members should manifested in 2 sales sites.

The core engine of the lifting average transaction value. Average transaction value rose by 5%, working with [indiscernible] IP, for example, like some real Disney and Harry Potter, as well as Chihuahua combined with the blockbuster effect of our proprietary IP, large store has become the core stronghold of the high-value members. As a result, cost contribution of China member was 2x higher of the nonmembers. Average transaction value of IP member is more than 3x of the non-IP members.

Secondly, top-level engine to improve the retention through the process targeting and benefit-driven retention that can help to further expand the active lifetime. our precept identification of the member consumption preference and the category needs enable new products to which taught consumer efficiently will operate the benefits such as the cash paybacks credit and into the purchase into direct momentum for the next purchase. IP member newly acquired in 2025, the nation rate in H1 was 80% point higher than non-IP members. With purchase frequency, 2x higher than a non-IP members.

Members who use cash back credit repurchased 1.6x frequent and there's no numbers. IP-driven acquisition and the largest quality upgrade and repurchase extension is our underlying [indiscernible] sustainable membership value, but we have scale structure and the frequency driving together, they would be able to sustain the long-term success. Let's also take a look at the overseas market. In H1 of this year, overseas revenue grew by 40.9% to RMB 4.06 billion. Store number accounted for 3,644 frankly speaking, overseas performance fell short of our expectation. We did somewhat our group profit.

The overseas contribution to company profit declined from 35% to 20% in 2023 to 10% to 50% in H1 of this year. The impacts are coming from 2 factors. First of all, a decline in distributor business revenue. And secondly, our direct operated market outside North Europe. Americas still remain in early investment stage. The store model are still in the refinement and not yet profitable. We also made some internal review for those issues. Expanding our verses directly operated stores. We will be more focused and more prudent regulatory assessing ROI of the new stores, concentrating resources to deepen our presence in priority markets.

I ask them to slow down the pace of the store openings. Unless you have 100% confidence. In H2, we will first concentrate on operating our existing -800 existing overseas directly upgraded store and replicate at single-store model materials. Overseas market is our vast horizon. Short-term fluctuation won't change our long-term growth trend. We have corrected our past growth approach that overemphasize on scale and store comps so that the terminal sales growth, inventory turnover and headquarter shipment once again, would form a closed loop in a housing way.

You know that now. It is also the time for us to already improve the performance in overseas market. Our overseas business is now in the holding stage. We would like to make sure we refine our store model. And more importantly, we need to make sure the China transformation will be successfully validated in the international market. It's actually the time for another upgrade for the international market. So that's the reason. We have already made significant adjustment in the transformation for international business.

So I would like to take this opportunity to encourage our overseas teams. From 2015 to now, our overseas journey has been spent 11 years. The deeper we go overseas, more profound, I can realize how difficult it is for a Chinese company to truly gain a solid foothold out and earn sustainable profit broad. It was not a product strength in the supply chain. It also organizational capacity, management control model and the localization strategy. MINISO overseas business has been profitable from day 1 yet we must recognize overseas trains today are precisely assigned that MINISO globalization has entered into deepwater stage.

As a share of the direct operated business rise, we must settle in and pursue refined operation, localization, stronger organizational capacity and a globalized management control model, while solidifying our management fundamentals. We see many international consumer brands entered into China did well in the past 1 decade, but started incurring [indiscernible] in recent years.

So no matter international brands come to China or Chinese brands go for international market, we have to be adoptive. Otherwise, profit would be nothing to be talked about. This is also the so-called secondary upgrading and the transformation every company needs to have faced, if they go for internationalization. MINISO China transformation over the past few years achieved a great success. We have a preliminary realized brand upgrade and business model iteration, China business started to burst with fresh vitality. The challenge we're facing for overseas business today is essentially the same as China 3 years ago, shifting from the scale first to quality first.

Over the past 3 years, China delivered a transformation report card from a lending, grabbing expansion to [indiscernible] upgrade and then the refined operation. This methodology applies equity to overseas market were never short of the product supply chain or channel, what we lack of is more patience to fully refine the single store model. Going Global is Marathon. Every adjustment and every investment we made today lays a solid foundation for the long-term value, a real additional good store MINISO open overseas.

Every additional consumer well served. Every additional member cumulated brings us one step closer to our vision of becoming a world-leading IP operating platform. I have faced in my overseas team, give them time, give them patience, I believe that overseas market tomorrow was surely better than what we have today. Coming next, please allow me to talk about Top Toy. In H1, TOP TOY revenue was grown by 32.7%. Global store numbers 365, including 48 overseas. This quarter, TOP TOY U.S. stores being located in Hangar of New York making the first China designer to brand entered into the crossroads of the world. In H1, proprietary IP accounted for 10% of TOP TOY with proprietary IP metrics continue to expand, with some pop-up events that are quite popular, especially [indiscernible], especially in Hangzhou debut, single mask GMV is already more than 50 million.

I mean next I'm going to welcome Eason to walk you through the financials in H1 of this year, please?

Okay. Thanks for Mr. Ye. Now I will walk you through our key financial metrics. Today, rather than going through the financial lines [indiscernible], I will offer some explanation on seat points that are top of the mind for you. First of all, let's review how we performed against H1 2026 guidance we give to you in the May earnings call. H1 revenue which is in line with the Chinese same-store guidance, but not that for the North American market. H1 revenue grew by 22.4%, slightly ahead of our guidance. That is 20% to 22%.

On that, China revenue grew by 26.2% in H1 with Q2 in particular, grew by 23% versus our earlier expectation of only a low double-digit growth in China for Q2. This upside in China came from 2 factors. First of all, an accelerated channel upgrade. China saw a net addition of 25 stores in Q1 or 72% in Q2 [indiscernible] our projection of around 40 and secondary, the sales contribution from proprietary IP, especially [indiscernible]. China same-store cell also achieved the guided mid-single-digit growth. Well, for [indiscernible], the proprietary IP saw a very good growth.

As Mr. Ye has already mentioned, for the short run, our proprietary IP delivery excellent results. The profit of our proprietary IP product is higher than the company's average level and the inventory tag has been controlled within 30 to 40 days. But for sure, 30 and 40 days may still be sort of the supply now were improving. So in that way, proprietary IP is not pressure on our overall financial of the company. Overseas revenue grew 15% in H1 below our guidance of a high double-digit growth. The main reason was a 10% decline in distributor business revenue and both Asia and the North American markets experienced temporary revenue declines.

As I have already shared with you, North America met single-digit same-store sales growth came in below our private guidance of the high single to low double digits, largely because we see the weakening of the same-store performance in North America in June. I will walk you through the reasons later. Our adjusted operating profit, excluding the ForEx gains and loss, grew by 5% on a Y-o-Y basis, slightly below our earlier projection of the high single-digit growth, mainly due to the decline in distributor revenue, a high-margin part of our business. In H1, MINISO overseas GMV grew by 40% on a Y-o-Y basis to RMB 8.29 billion. The revenue grew by 50%, reaching RMB 4.06 billion.

Let me just break down by region. First of all, let's take a look at Asia. In H1, Asia terminal GMV grew by low single-digit Y-o-Y, while revenue declined low single digit Y-o-Y. Markets such as Indonesia, India and the Philippines were the main driver weakening on Asia overall performance. Objectly speaking, those markets are facing macro challenges, but it is undeniable that our localized operating capacity still have some further room to improve. Our localized understanding of the market shifts and the product channel managing are not taping off. Our merchandise planning, channel strategy and the terminal execution are not as efficient as what we have made in China business.

At the same time, we proactively cleaned up a bunch of underperforming low-efficiency stores. For example, in markets such as Philippines, we closed the stores with outdated formats and persistently [indiscernible], which had some short-term impact on the revenue. This cleanup of the low efficiency store in overseas distributor market will continue for another 2 quarters. But we can also see that for market like Vienna, following an earlier phase of the higher-end store closure and the product mix adjustment, it already started to show improvement. In H1 of this year, it's the efficiency has been continued to improve the best in the past 3 years.

So Vietnam same-store sale grew by 20% in Q2 with continued positive growth momentum. This shows our future direction is cracked. Going forward, we will continue to depend our understanding of the Asian market, enhancing our localized operating capacities in market-specific manner focusing on channel upgrades and product mix adjustment, activity explore the product assortment and the price brands adopting to the change of the local consumption market.

Let's talk about Latin America. In H1, Latin America terminal GMV grew by high single-digit Y-o-Y, but revenue declined by low double-digit Y-o-Y. These were several reasons for these [indiscernible]. For example, A number of the core markets, including Colombia faced multiple external challenges such as political volatilities, rising freight costs, natural disaster which had a [indiscernible] impact on the overseas orderings and the shipments. However, the terminal demand remained resilient. For example, the top 4 Latin American countries contribute 80% of our performance there, all delivering solid terminal GMV growth in H1, with Mexico also post high single-digit growth excluding the ForEx impact.

And actually, if you use a local currency, the Mexico local GMV was grown by nearly 20%, as external adjustment fading away, disruption fading away, we have our confidence for the long-term development. The third part would be the North American market. North American market, the H1 revenue grew by 37%, reaching close RMB 1.8 billion, broadly in line with our expectations with a mid-single-digit same-store growth -- quarter. Q2 revenue grew moderately slightly to 25% were 2-year [indiscernible] at around 50%. However, in Q2, the 2-year take was still around 50% 5 year ago, residing performance against the high banks.

The moderation was mainly due to 3 factors: First of all, a temporary gap in the cadence of the IP product launches. North America has a high share of the IP product and is, therefore, more sensitive to the IP launch cadence. In H1 of this year, we didn't maintain a sufficiently study on frequency, which affected the store traffic and conversion to a certain extent. This was providing valuable asset for optimizing our IP product patent spending going forward.

Secondly, the sale share of the locally directed sourced product in the U.S. market used to exceed 50%, but not fully in line with our plan at the very start up this beginning. Earlier this year, against the backdrop of the tariff policy changes, we set out to control and gradually reduce the share of overseas direct sourcing. But you can see the direct sourcing of focusing on the category that are not operated by the headquarter. However, it takes time to adjust the product metrics, which was not being reflected in H1. Going forward, we will further improve the advanced -- the planning of the overseas merchandise.

Thirdly, the upfront cost investment for the newly directly operated store. We have a net increase of 75 stores in H1, nearly double the same period of last year. The upfront investment will have some short-term impact on the profitability, but the good news is that the new stores opened for this year delivered significantly higher profit margin and the sales per square meter than older bonds outperforming inside selection quality channel matching. Into H2, we will shift our focus to deepen our store operation and running our already opened store deep and through.

For the full year, North America and [ Europe ] market will still maintain relatively high growth. As for North American store will continue to prove out the success rate. We expect that North America will reach close to RMB 4 billion in scale with 10% net margin for the full year. Europe is also a market where a positive arm, but is still in the early stage for direct operation development. So fluctuation is expected. In H1, Europe revenue growth moderated to 26% with the same-store down by mid- to single digits.

Our European team is building organizational capacity, refined store model, let's give them the confidence and the patience to allow the market to proven our strategy. In H1 2026, MINISO made in China achieved a mid-high -- mid-single-digit same-store growth, in line with our expectations, leaving ample room for our full year target of low single-digit same-store growth.

MINISO overseas same-store sales declined low single digits, with North America achieving a mid-single-digit same-store growth. North America same-store performance was quite strong in Q1 grew by 10%, but moderated in Q2, particularly because the stock out of the certain best seller, especially the best [indiscernible] IP product, we expect this stock out would be eased in September. Well, in H1 of 2026, the GP margin was 44.3%, flat versus same period of last year.

For the GP margin, it was including approximately 0.6 percentage points from the U.S. tariff refunds. For Q2, the GP margin was 45.3%, 1 percentage improvement compared with last year. This was due to the tariff refunds, which bring 1.2 percentage positive growth. Based upon the refund received to date, the company expects tariff refunds will also have 20 bps to 30 bps support to the overall GP margin for the next 2 quarters. Excluding the excellent investment and the convertible bond financing, the profitability of our core business in H1 was as follows. Adjusted operating profit was RMB 1.49 billion versus RMB 1.59 billion in H1 last year, down by 6%.

Excluding the ForEx factor, the figures was RMB 1.63 billion and RMB 1.55 billion grew by 5%. And -- excluding the ForEx effect, the adjusted net profit was RMB 1.22 billion and RMB 1.24 billion down by 1.7%. The corresponding adjusted net margin declined by 2.6 percentage on Y-o-Y basis. This was also proving that our selling expense ratio rose 2.7 percentage this period with last year, it was 23.1% to be specific rental and depreciation expenses related directly operating store rose from 7.1% of the revenue. to the same -- in the same period last year to 8.1% in H1 this year, grew by 1%.

Advertising promotion expenses grew by 2.8%, where regarding IP license fees rose from 2.6% in H1 last year to 3.1% in H1 of this year, grew by 0.5%. The increase in the 2 items largely reflect our strategic investment in proprietary IP. Selling-related labor cost rose from 6.8% last year to 7.2% this year, up by 0.4 percentage points. So the growth of the above full expenses altogether contribute to 2.6% of the expenses increase.

By business unit on this slide, it shows very clearly. The main reason for the Y-o-Y margin decline was a structural shift in the revenue. For example, in H1 of 2026, the revenue contribution from the high-margin franchise and the distributor business, the margin was -- net profit margin was more than 30%, but it's now fell 6 percentage points. While the contribution from the overseas directly operated business rose by 3 percentage points. However, last year, this number was a single-digit loss.

Let's also take a look at the Working capital. Inventory turnover in H1 was 102 days versus 97 days in the same period of last year. MINISO CHina event re turnover was 67 days, which was 73 days last year. MINISO overseas inventory tender for international market was 273 days, which was 240 days last year. Going forward, our overseas business must prioritize inventory health and take decisive measures to react to support the inventory. Besides that, in the peak seasons, we have to leverage on the IP launches and the holidays for those sells big time.

Coordinated membership promotion and city activities to use blockbuster products to drive the monetization of the slow moving inventory. At the end of June, our cash reserve was RMB 7.39 billion. Net cash inflow of operating activity in H1 was RMB 1.48 billion, grew by 45.5%. We constantly play high priority on cash flow management. This robust level can also provide solid support for the company's transformation.

On shareholder return in H1 of 2026, the company retained 1.31 billion to shareholders, including dividends and buybacks, of which the company repurchased 520 million combined with Mr. Ye's personal share purchase approximately 54 million in H1. Our buyback sales in H1 was already exceeded the full year total of 2025, which fully demonstrate the confidence into the future business. We did not declare an interim dividend this time because the company believes the current valuation is highly attractive.

We will conduct substantial buybacks over the coming period and make a reasonable dividend decision by the end of this year. Based upon the full year profit, the company's shareholder return policy for [indiscernible] is buybacks plus dividends of no less than 50% of adjusted net profit, excluding ForEx effect. Looking back on H1, our domestic business exceeded expectation once again validating our path for opening large store, building IP and pursue high-quality development works. Overseas market sustained a compound growth rate of nearly 40%. Now we are in a transition period from the scale expansion to quality operate, we still need time to build up organizational capacity.

Based upon the company's current projection, we expect the company's revenue to grow by high single-digit Y-o-Y in H2, mid-double digit for the full year. On this in H2, MINISO China revenue is expected to grow [Audio Gap] revenue to decline by low double digits. Overseas directly operated business will grow low double digit, Top Toy revenue is expected to flat in H2, with low double-digit growth for the full year. Compared with our full year outlook at the start of this year, both domestic revenue and profit are somewhat better with the differences mainly coming from overseas and the Top Toy in H2, will proactively slow down overseas, continue to close a bunch of the low-efficiency distributor store and also controlling the pace of the directly upgraded stores opening, we expect a negative reduction of 50 to 70 stores across overseas market in h2, a net addition of 40 to 50 directly operated stores and a net reduction of 100 to 110 distribution stores.

For the full year, our guidance for the low single-digit same-store growth for MINISO China and MINISO North America remained unchanged. Excluding ForEx, but adjusted operating profit is expected to decline by a high single-digit Y-o-Y. The adjusted operating profit margin is expected to decline 3 to 4 percentage points Y-o-Y. Our profit outlook is more cautious than the guidance we gave at the start of this year. While we expected accelerated full year profit growth versus last year, with an implied margin assumption, of a 1 to 2 percentage point decline. However, we now believe it's going to be down by 3 to 4 percentage points. Even the overseas distributor market revenue will decline over the next 2 quarters, there will be some impact on our margin.

This concludes my remarks. Now let's move to the Q&A session.

[Operator Instructions] Michel lefrom Goldman Sachs.

Mr. Ye and Eason, I have a question regarding your largest store format in Mainland China. Mr. Ye has already mentioned the large store was performing out of our expectation. We know that for many of the larger stores, when they first opened, the performance was pretty well. If the store opening dividend for the first store impact gradually digested. What would be the normal performance of those larger stores, especially the compelled was a normal store, what would be the difference on the sales, efficiencies and the sales per square meter, whether you have any target in your mind and you have any criteria in selecting the regions or the signs for those large stores. The question is mainly regarding the large store format, please?

Thank you. Let me just start with my overall view. The larger store model continues to outperform company expectation because our first large store has been opened for 2 years. It's not going to be a short-term action, but at the same time, we have multiple large stores at the same time. It's not just for 1 to 2 stores. From this perspective, were not [indiscernible] bus driven by the opening handles. It is a sustained growth trend. Our store metrics keep evolving and now we have the platform at flagship regular and pop-up.

Let me just break down the large store unit model with a few metrics. On our store performance, the Park format family is very healthy. MINISO, our earliest format in the family still deliver the store performance above 3 million baseline, while the super MINISO nearly launched in 2026 has already surprised us a lot, which came basically steady above 1 million baseline. The sales per premier, the park format was running twice as that of the regular stores. The rent-to-sell ratio, the performance running slightly higher than the regular store by a single-digit number, but the Y-o-Y trend was downward, thanks to the prime treatment after talking to the malls on the paybacks, The park Parfet store achieved a payback within 6 months in early stage and now average speaking 1 year faster than 60 to 80 months of the regular stores.

Franchisee profit margin and the share of the profit of MINISO store has risen in tandem. In H1, the profitability of the MINISO nationwide reach its best level since 2019. In H1, more than 30 land format store entered into the same-store base, with average daily sales per store up to 30% growth Y-o-Y, flagship format, 400 stores. So average day sales per to grow mid and double-digit Y-o-Y.

Well, let me just talk about how we choose a site. What will stick to the quality over speed. The [indiscernible] garage store and the flagship store will keep rising based upon our analysis. MINISO China total store number would reach 7,000 to 8,000. Land for [indiscernible] family would be 1,200 with 95 super MINISO and MINISO friends flagship format reached 2,000 regular format, 4,500. On [indiscernible], location value and traffic will always be our key criteria. We will take a look at the commercial district, prioritized on top traffic versus a prime commercial area. For example, we let look at the store structure priority rises the corner position, the street-facing front. Certainly, we take a look at the consumer circulation, making sure that a store is sit right on the main customer traffic corridor.

Now let's welcome Yang Runbo from CICC.

I'm Yang Runbo from CICC. I have a question. In H1 of Asia, MINISO China performance was truly idea. However, the domestic retail environment in China volatile in July to August, some of the retail companies said that they are pressured. Can you share the consumption trends you were seeing in the market? And how the company is going to respond to that with concrete measures?

This is a very good question. According to the data from the National Bureau of Statistics, as many of you can see. You can see that in June, it was declining. And in July, it was only grew by 0.6%, which is not ideal at all. But for MINISO China, we remained strong. Since July, MINISO China GMV has grown about 20% Y-o-Y, driven by those rising shares of the larger store and also the land format in our store mix and steady same-store development. You can see that in July, the same-store average daily sales has grown by mid-single digits. At this point, with MINISO China, we have a mid-double-digit revenue growth in H2. Those results are inseparable from our strategies being mentioned.

Let me just share with you people, product and the stores. First of all, even you see the social retail was going down. However, I see for traditional retail business will still need the consumer to work. However, you see that for emotional, sales was going up. For example, auto products, trendy toys, the sales was growing up, but traditional retail business was not growing that fast. That's the reason we have to continue to build our MINISO range because we're not building immersive IP thing, that is the future trend.

Let's also talk about people. Membership operations are a key growth lever for us, especially buildout. The cash -- the membership system, we showed some progress on membership program during the earnings call, including the growth in membership number, membership contribution to the cells. We need to have the refined operation of the store. And secondly, you need to talk about the product. Our product mix will not be truly aligned with IP. For example, our proprietary IP, which can actually provide most interest-driven product with many emotional value, those product sales was growing very fast.

Especially in H1 of this year, proprietary IP led by [indiscernible] become a notable incremental driver with the designer toy category, proprietary IP now has already had a mid-single-digit share of [indiscernible] sales and the double-digit show of the online sales growing very fast, especially in top-tier stores such as MINISO Land and MINISO Space. And in the GE collaboration, we have been deliberately pushing into higher price and to test more prime merchandise.

And also, we're going to have the first Lisa branded pop-up store, which would be available starting from the first of September. Many international celebrities and the superstars are happy to embrace and working with MINISO and hope they will be able to work with us to continue to work on the interest-driven consumption market in China. The economy was not good, but Chinese population is still huge. China has 1.4 billion people, Generation Z and people born after of the 1980s and 1990s are still going to be a big proportion. Those people are never short of the material consumption. They need emotional value and they need the interest consumption.

Our competitors are also growing very fast, which showcase in China has a huge potential to go further. In terms of the channel, I was talking about what we indicate to bringing the better bird strategy, which will provide ample room for sustainable environment of our domestic business in the upcoming years. Upholding the principle of quality over quantity, our domestic business is still a fairly ideal state. We will keep advancing the renovation of existing stores. I have already highlighted MINISO China, 4,665 stores spend a variety of the store formats.

We're going to go for the lower tier stores. And you can see young people in China, they all need the interest-driven consumption with emotional value. If we're going to build good store scenarios, immersive experience, our trendy toy product and IP products are more attractive that can actually help us to continue to improve the consumption and continue to draw the design to enthusiasm and move the price band further.

I was coming back from the Northeast part of China. I see many of the stores being well positioned. I was mentioning about our store efficiency is no less of our competitors. Some of our stores can even outperform pop margin. That is our internal goal. If you have time, I'd like to suggest you to take a look at our store at the [indiscernible] store. We have 2 stores there facing each other. You can see that our performance outperformed [indiscernible] Shopping Mall, which actually boost our great confidence for the larger stores.

We internally proposed we need to improve the sales per parameter over the competitors. That is indeed the internal target we have. We have every confidence to make this target happen because you know that for our product and our trendy toy product in the land was more than 35%. And we're going to make it more than 40. We already have to proprietary IP now, including [indiscernible] and [indiscernible]. [indiscernible] was just launched 2 days ago. If our proprietary [indiscernible] prove to be successful, then we're going to have 2 proprietary IPs with annual sales of more than RMB 1 billion. If we successfully hit this target, I believe our diversified format plus proprietary IP it's going to be a 50% performance from the 22 IP collaboration product for another half.

In that way, our business model will be more stable, more sustainable and more immersive and more experimental. Majority of our store are having more than 800 square meters, including 2 floors. So I have every confidence in our large store format, especially in the land format. Even if we are facing challenges now. However, I should be -- we are still in the pen stage of the transformation. The profit has been under pressure. However, we have a promising future, and I surely believe the business model we're running up still make us feel excited. That's for domestic mortgages. But for international market, we are facing many problems. I know that starting from C, I will spend more time working on the international market.

In H1, we are working for the store format refinement in China. In H2 of Asia. We're going to move to the rest of the China -- international market. In Mexico, from 5th of September, we're going to also have the MINISO land format in Mexico. Profits happened in China also being faced in international market. And in Mexico, we're going to celebrate the anniversary. The Latin American consumer preference are similar to that of China. Their income population structure and population density are very close to that of China. It's also the time for them to embrace the transformation and upgrading. And you see the macroeconomic picture as far as I believe, interest-driven consumption, emotional value would be the next driver for the future growth. And we probably don't need too much material value. Only in some African countries was still in need of the so-called material grave. However, some developing countries like China and Asia countries, we have been shifted from the material revenue to the emotional value for interest-based consumption.

Anne from Jefferies.

Mr. Ye and Eason and the IR team. I have a question. That was about our latest performance. What are the latest the same-store sales, SSS speaker for July and August? As well as being a factor, could you split same-store sale into average selling price, ASP and traffic? How much have a store upgrade renovation and the product mix shift contributed to the growth? Which product categories are performing best? Given the softer retail in the last year's high base, what's your outlook for the same-store sales in H2 of 2026. Are there any difference between the higher-tier and lower-tier cities?

In July and August, MINISO China seems to perform a very steady, which is beyond our expectation, especially where we have the super MINISO store. The performance was quite competitive. The product -- the store for manager breaking down order value of volume contributed 80%. Average transaction value grew by 20%. The volume and price are rising, which is very healthy. And we also mentioned we're going to have higher consumer unit price and higher gross margin, which is not being started yet. We actually opened more high-end stores in the [indiscernible] as well as the Taikoo shopping malls. And the product is still in the refining stage, need to be further improved.

I also would like to mention same-store growth is driven by multiple engines, including the store upgrades and the product upgrades along with the memberships, where for the upgrades are not the sole source within a single mid-single-digit same-store growth, store renovation contributed roughly low single digit. The rest are coming from the better refined operations, including the -- optimizing the product channel magic, making sure the right product in the direct channel and also tailoring the product mix to different store styles or types. I have already mentioned to you, we have more high-end stores, but we are still going to improve our product. Product adjustment takes time, but that's not for the store adjustment.

We were talking about the store adjustment, we're still building the infrastructure, building it right and then we're going to count on our product to continue to grow. We have our proprietary product along with the accelerated development of the product mix. As you can see in the matter for large store model or designer toy, they are now in the Tier 1 to Tier 2 cities. -- penetration ratio in the lower term cities are very low. This means later cities offer broad room for expansion and are a potential source of the future same-store growth.

Let's talk about the category performance. [indiscernible] is one of our best performing category with a share of the [indiscernible] to 1 percentage point on IP shares. IP products overall accounted for around 1/4 of the sales. The show from the proprietary IP and artist IP rose by 4%. Let me talk about H2 outlook. The high base lending coming from the Zootopia race in November and December last year. And we also have a decent IPO for the same period of this year. Overly speaking, with same-store sales growing mid-single digit year-to-date, we remain confident in delivering full year low single-digit same-store growth in China, and the mid-double-digit revenue growth in H2.

We also see several important levers. First of all, keep optimizing low-efficiency stores. Second, on the product front, back to school season is a key figure. We did not do particularly wide last year, and we will make sure we capture it this year. We're facing opportunities for culture creative categories, and we're going to work on that further. It's also going to be a good opportunity for us. Certainly, on holiday, we will capture the sale dsell search window around National Day and the mid-autumn day, most strengthening repurchase and the merger through the membership credit merchandise.

Next question. Let's welcome Shi Di from Huatai Securities.

My name is Shi Di from Huatai Securities. You know that -- thanks for providing us a very clear [indiscernible] In H1 of this year, the company has many new IP and many new products, for example, collaboration with Gene and generated a strong but in H1, your proprietary IP, [indiscernible] are also performing very well. What IP types and category expansion are planned going forward in H2, what are the levers for creating the broad boxes in H2. And the holiday season, you have in your pipeline?

Our IP strategy remains driven by 2 engines, licensed IP and proprietary IP. Each has it's own plans or the license IP, we have partnered with 180 global IP spending, EMEA full and TV and celebrated. Accumulating end-to-end experience from IP selection to product development to operations. You also talk about the [indiscernible] collaboration. Our product, for example, like accessories, [indiscernible] designing and producing, and also, you see from the 1st of September, those products would be available. And we also have more IPs in the pipeline, where at the same time, we also have a [indiscernible] total, which just to release its great potential, while at the same time, you can see for [indiscernible], the demand is far beyond than the need. And the wages actually be stocked a out.

We never expect this is going to be that popular from the rev beginning, which is -- another way to look forward to that. It was very, very popular on the red book, which enjoy very good progress. On top of September was going to officially launch collaboration with [indiscernible]. But at the same time, 9th of September, we're going to have the lease collaboration, IP excision. You all know how impactful this might be. We're going to be the IP collaborator and IP extrusion worldwide. We have already mentioned, we're going to have the product. For example, the blinded box as well as the [indiscernible] product or the patent and the price would also be quite friendly to the normal consumer.

So you can say the price would actually be further improved compared with what we had last year. The GP margin contribution is also reaching the best level. We'll actually continue to improve that, and continue to improve the product, the price and be more experienced for the global layout. Well, regarding the proprietary IP, that is our long-term strategy level. We're going to work with a large store format. As I have already mentioned, for [indiscernible], you in June and July, sales was more than RMB 100 million for 2 consecutive months. I was going to have a major IP collaboration later. That's going to go beyond the Disney collaboration.

As you can see, [indiscernible] also have the collaboration with McDonald's and also working with [indiscernible] coffee. All those advertisement could be identified on [indiscernible]. Yesterday, and we also noticed that [indiscernible] is indeed a very popular one. And all the consumer brands would like to work with us for that. So take a look at the [indiscernible], you will see how popular [indiscernible] would be? So you'll see that the success of [indiscernible] proved again our proprietary IP model is truly successful and feasible.

And we're also going to have a good design, the team is getting more confidence. Success could be -- but there are 2 success. It's not a lock at all. You need the methodology and the set of the strategy to be mature. And we're also working with different celebrities, especially our collaboration with Louis Vuitton, which is very, very well established, which is also the global leading strategy. As you can feel, that is already go beyond the dot. We're learning, but what is supporting that is a great strategy of my team. We're going to launch a better and good marketing innovation in the near future, go beyond our peers, really supplies industry society and the consumers.

So this can also help us to further clarify our commercial proprietary IP are actually going from stage to stage to a more mature phase. So to summarize my answer to question, I think we have a few levers. We continue to work with the top licensed IP, celebrated IP in sensor incubating our proprietary IP with our existing IP metrics. We're going to have the IP and the product working together, we're going to work with different categories and SKU, leveraging our large store and different formats to continue to convert the IP sales and continue to advance our proprietary IP.

You can even come to our store to take a look at that. You can see that for Disney and [indiscernible] now having the blind box been working together. And you can also say that for [indiscernible], the blind box was also being well created, very much professional as far as I believe our blind box is making huge progress regarding the collaborations, which is now in fees than our peers. This is also something we're progressing very fast. As long as we have a good use case, good IP, if the consumers come to our store, they believe we are professional, especially after working with [indiscernible] and we surely believe the MINISO trendy toy consumer measure is continue to progress. That could also help to build future collaboration, where at the same time, it's going to be a great driver for our future groups.

Next question, Samuel from UBS,

I have a question regarding the U.S. market has been shown and talked, and you have already proposed a target for USD 4 billion for revenue and USD 400 million for profit. But in Q2, we see the sales being somewhat slow down, and how you're going to complete this target? Is there any driver you have, but at the same time, regarding the profit, how you're going to improve the profit?

Well, thank you very much. Internally speaking, we actually make U.S. and Canada as a whole. I have already mentioned. And for North America, our performance target was RMB 4 billion, and we hope that it's going to be 10% of our net profit margin. Excluding the short-term data, if you take a look at the U.S. only, the MINISO was the fates growing retail in U.S. in 2025. It was being covered by 4%. However, it's not only just for that when we converted our sales from direct to the indirect U.S. business posted a CAGR of 120 from 2022 to 2025, where for same-store performance.

We're going to maintain a full year target of low single-digit growth, which is in line with our expectation. -- improving U.S. margin, still going to count on the operating leverage, even optimizing the store number. For the past 2 years, we actually opened some stores with large food traffic, while at the same time, as you have already mentioned, we're going to slow down a little bit. and also continue to work together and make profit and revenue as a whole.

next question coming from Citic.

I have a question. In H1 of this year, you have already mentioned that European stores in peak season and operating your business, and I was talking to you for Eason and for Mr. Ye, you're quite confident for that. What would be your expenses planning and look into H2 of this year, whether the interest are going to be accelerated.

I was recording a few numbers. You can say that in H1 of this year, in North America. The nonedition was 75%. So in other words, we really want to make sure the stores being opened before the peak season making sure that we accelerate the growth of the North America store. Well, for the full year, sales and profit, which is very typical to the retailer in North America. While not making money in H1 of this year. All the time, we count on H2 or even Q4 to help to drive the overall sales.

In my prepared remarks, I have already shown you a slide that is a [indiscernible] profit rate. You can also see that for 2025, you could take a look at the last year, as you can see that -- the number was around 30% for franchise and agents businesses, which already in line with what I have already mentioned, the sales peak season for the seasonality. Looking to H2 of this year, as you can see that our profit will continue to steadily increase. International agency remains stable. However, we'd like to split the direct sales into 2 parts, including the North America direct sales, which was 10%. But at the same time, we also have a direct sales business that are still in the growth stage, for example, Europe, Australia and ASEAN -- Asia market.

And we're going to continue to optimize North America back office expenses. In H1 of this year, the back end expenses ratio in the United States increased slightly. Profit margin will continue to grow, while at the same time, you can see that the adjusted profit margin will decline by 3 to 4 percentage points Y-o-Y. And we hope that 2027 would be the turning point of our profit margin.

Okay. Well taken, you see -- hope that in 2027, we're going to have a good performance and improvement on net profit.

coming from [indiscernible] from Changjiang Securities.

My name is [indiscernible] from Changjiang Securities. I have a question regarding your U.S. business. Some investors has already asked the question. I'd like to ask you for U.S. merchandise strategy, you know that as well as adjusting our product metrics. So I would like to ask for the management team. What would be our key focus next year in the United States in H2 of this year? How you're going to comment on the balance between the domestic, direct and indirect sales.

For U.S., refining the product mix is something we do continuously, particularly amid the macro policy change. We have constantly adjusting our overseas profit product mix. In terms of the sales contribution, the [indiscernible] remain our largest category in the U.S., contributing over 1/3 of the sales, especially performing especially well. And you can see that majority of that in the U.S. are built on the licensed IP, we plan to launch proprietary IP next, which should contribute incremental growth going forward. But at the same time, in Q2 some best-selling IP products were out of stock due to merchandise spending. We bridged the sales gap through rapid direct sourcing.

As a result, due to the product planning, some of these products are out of the stock. But that is not going to be our key. We're going to continue to differentiate the product, where you can see that in U.S., the sales was declining from 60 to 70 in early 2024 to close 40 in H1, while the share of the [indiscernible] sourced product rose considerably Among those directly sourced stacks have significantly improved conversion and attachment rates in store, where while U.S. is actually under pressure while still adjusting our product metrics and even we slowed down the store openings in the United States.

So for U.S., our headquarter is now actually making a huge investment on the merchandise center. Regarding the GP margin, the U.S. market GP margin was around 65% to 70% part due to the tariff rebate, which will also give us some positive contribution in H2 of this year. But at the same time, the asset ratio is well under control with the launch of the blockbuster IP and increase in the proportion of and we believe the GP made in U.S. would be in place in nature of this year.

The next question [indiscernible]

My name is [indiscernible] thanks for the chance to raise the question. As you have already mentioned about the distributor corporation are still facing some residence, I'd like to ask you was the company's outlook and plan for the distributor market growth.

I'm Eason. In H1 as, distributor slowed their restocking, however, is being slowed down. So the revenue was growing. Looking to H2 of Asia. And you see that distributor revenue was still going to be down by 10%. I think the negative growth in revenue won't necessarily remain the end demand was programmatic, what's the situation of the distributor market. For the full year of 2025, overall sales of the distributor business was more than RMB 10 billion, the CAGR was more than 10%, which was always robust.

Excluding the ForEx reason, you can also see that the GMV still maintained a high single-digit in H1, we see the gap which you can see some of the channel after adjusting the inventory. In that way, the distributor restocking next behind their own sell-through, a normal phenomenon in inventory digestion process. Secondly, behind the negative growth, there were also external factors and own issues. Actually, some markets in Middle East and Asia were affected by geopolitical conflict, currencies, warnings and other macro factors, the inventory turnover in those markets came under pressure in H1.

Latin American market also faced micro-currency and the natural disaster headwinds but it's eventually kind of improved we operated in a distributor market overseas with top [indiscernible] at accounted for 80% of the overall business. In H1, inventory turnover in the top 8 market was roughly flat versus last year and somewhat better than the directly operated market overly speaking. Internally, as we have already candidly acknowledged, so you can say that internally, we have the candid knowledge process communication, and we just want to maintain long-term health of the channel rather than pushing inventory into short-term results.

Terminal sales will be normalized today. And at the same time, we also further reduced the store number, for example, in New Zealand, in Philippines, but at the same time, in the mid of this year, and also due to the healthy channel issue, we actually made the strategic investment closing down some of the low-efficiency stores. We look forward for international market, and we're going to have another 100 in to 110 H2 net closure. While this decision makes short-term pressure on distributor revenue. However, in the long run, it can also help to ensure healthy and sustainable development of the entire business ecosystem.

As you can see that Latin American market is our key places. The local distributors are actually having very strong background and operation capacity. The retail allocation of those markets are actually seeing a low single digit in H1. Terminal performance was steady. In North America, likewise, we will not treat short-term revenue for channel health. You can see that Mexico market in Q3 and Q4 is going to celebrate the tenth anniversary. The market will also continue to roll out the improved format. And we are going to have a MINISO Land and super MINISO in those [indiscernible] in peak cities.

In terms of the product and operations, for distributor agents with established still, we will deploy localized products. On IP product, we fully recognize the launch cadence, need stronger planning. We have now built a more complete launch calendar that clearly marks the key local holidays and the launch timing for different staged IP. And through this way, we will be able to maximize the incentivized the sales momentum. For category-wise growth potential, we will help distributor markets literate their marketing plans offering better brands, iteration and empowerment in scenario-based content, closing the content gap moving the sell-through of the high momentum categories.

For the overall product mix, we will phase out low efficiency, low-margin SKUs. So adding value for -- value for money everyday product to make up the volume and also bringing high value for money in local [indiscernible] to drive the cells.

Thanks for all the investors being interested in Miniso. See you next time. Here comes to the end of today's call.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, everyone, and thank you for standing by. Welcome to MINISO March Quarter 2026 Earnings Results Presentation.

[Operator Instructions]

Please also be reminded the event will be recorded. We provide you English simultaneous translation for this call. Please select your preferred language by clicking interpretation in the Zoom meeting. We released our Q1 2026 results earlier this [ year ]. Please help to refer to our IR website. Joining us here today are Mr. Jack Ye, our Founder and CEO; and Mr. Eason Zhang.

Right before we begin, please refer to the safe harbor statement in our earnings press release, which also apply for this call as we will be making forward-looking statements. Please also note that we are discussing non-IFRS financial measures. Those measures are explained and reconciled to the most comparable measures reported under IFRS and also in our filings with SEC and Hong Kong Stock Exchange.

Unless otherwise stated, all figures are in RMB. We have already prepared a slide deck for financial and operating highlights for today's call. If you are joining through Zoom, you will see the slide now. You can also refer to our IR website after the call.

Now let me just turn the call to Mr. Jack Ye.

Hello, everyone, welcome to MINISO March Quarter 2026 Earnings Call. In March quarter, the revenue reached close to RMB 5.7 billion, grew by 28.5%, exceeding the high end of our previous guidance. Adjusted net profit, excluding ForEx gain and loss comes at RMB 630 million, grew by 8%. Operating cash flow grew by 40%. Free cash flow was up by 36%. I'm not going to read through the financial items one by one. Eason will take you through the detailed numbers and outlook in CFO remarks.

I'd like to focus on 3 areas: First of all, execution of our strategy, I may spend more time here because the details of execution can really tell you where our company is heading to. Secondly, an update on 2 overseas markets that are of your most concern, Indonesia and the U.S. And thirdly, my view on H2 of this year. Let me just start with strategic execution. Last year, I introduced store upgrade strategy. We are right on that. MINISO Brand store number grew by 318 in China, less than 10% growth, but offline store GMV grew by 25%. The 2 data tell the story best. First of all, the share of the profit for franchisees this quarter reached the highest level in recent quarters.

Franchisees are putting their own money on the line, so their P&L is most honest signal that you can get. The fact that the profitability hit a new height tells you that large format store is not asking franchisees to take the risks but helping them to make money.

Secondly, we received thousands of new store applications, half of that requesting for large format or flagship stores. In the past, we have to convince franchisees to open large stores. Today, they are competing for these trends. Such shift is the market's most direct vote for the confidence in our large store format. On April 18, MINISO SPACE and MINISO LAND opened simultaneously at CDF Mall in Sanya. Duty Free Mall has been traditionally taken for luxury and beauty brands with highest foot traffic density and spending power among the top-tier retail store.

The fact that we can move in speak for the brand equity. Most importantly, we bring something that people won't be able to get. An immersive IP-driven experience, a pop culture to duty free malls and translate into incremental foot traffic and time for venue. The real barrier for running large store isn't capital, it is content density. In 1,000 square meter space, can you really make the customer want to stay without leaving? This comes to 3 things, we accumulated for 1 decade, licensing right over 150 global IPs, a network of 2,000 global suppliers and the supply chain that fast enough to refresh assortment every week. These are the 3 that can really make us stand out, but at the same time, with systematically closing underperforming stores, those open for many years with under 200 square meters. But at the same time, we upgrade our franchisee base, removing weaker partners to bring new strong ones. This is what our store and the channel strategy is really about. Many people want to know how we have our IP strategy done. This is quite important.

In Q1 of this year, we launched an IP operation training program out of our Guangzhou headquarters, bringing together regional managers, store representatives from South China and functional teams. This isn't a classroom-style training. We use our MINISO LAND store as a live training ground breaking down operation in real store environment. The program covers our IP understanding, storytelling, operational execution and data capacity working through everything from underlying logic to hands-on experience.

Why it is so important? Because IP operation is an organizational capacity. It is not a set of the SOP. No matter how well a menu is written, if franchisees and your staff just follow it mechanically, the result won't be good.

Only when people genuinely understand where IP resonates consumer most that can help our right half the strategy. This can turn IP operations from a headquarter story into a muscle memory across the entire network. On April 8, we concluded our overseas trade fair. The star of this event was YOYO, a proprietary IP that we built from scratch in-house. The fact that proprietary IP took center stage is a signal. Our own IPs are now capable of standing on their own commercially. And the strong order volume from the distributors and overseas customers is the most honest vote of the confidence to our IP and our product that's more telling than any market results. YOYO surpassed RMB 100 million in sales within 6 months of launch. In April, it appeared on Met Gala, the so-called Oscar of the fashion, a stage that has been traditionally for luxury brands and international celebrities.

A Chinese original TOP TOY IP appeared as accessory along with international stars and was featured as a gift at an event. This is not marketing. YOYO earned its place in the global fashion spotlight on its own merit. From CCTV Spring Gala to Paris Fashion Week, to Met Gala in New York, YOYO covered ground in 6 months that many IP won't be able to make in 10 years. It's a full stack of the IP capacity from incubation to design to operation and global rollout. YOYO's success is not a coincidence. It's a signal that proprietary IP strategy is going to get into the harvest stage.

In Q1 of this year, total overall revenue of MINISO Group exceeded RMB 2 billion, and we also have a great way to extend our business. The success is whether our organizational capacity can keep the pace. Building organizational capacity is what we made in the last investment with. It won't immediately show up in financials but by our long-term development. We have advanced a few things. First of all, standardization. The headquarter has developed operation and merchandising menus, delivering a video case study and on-site training to ensure consistent understanding and execution across markets.

Each market also set up regional management training with regular session for store managers and supervisors. Secondly, we build benchmark and rapid replication. When key pilot projects is selected, once they prove success, we roll out them quickly to other markets. Thirdly, a mentorship model, powering experienced operators who deliver results with newcomers and continue to have the generation pass on the information.

This system means our overseas capacity no longer depends on a single individual. It becomes something that organization can grow on its own. The more market and the store we have, the greater the compounding effect might be deep organizational capacity along with IP-driven products. Those 2 things give us strong confidence for our long-term overseas growth.

Indonesia and the U.S. are the 2 markets, many of you are focused on. Let me give you an update on both. Indonesia has been one of the markets we're most proud of in our international journey. It has to remain so going forward. When Indonesia isn't about market. It's young demographic and vibrant consumer environment is a market we're going to have a long investment. It also made a demonstration effect for confidence of our global team. We must make it right. However, the business reached a certain scale hitting some bumps is entirely normal. The most difficult time is already gone.

We have already have a clear path forward. On channel, headquarter has set up dedicated negotiation team to proactively pursue primary location and select relocated stores. On assortment, we have the one-size fits all approach, school segmented. On the product operation, headquarter is providing direct support to strengthen local IP execution and the tailored merchandising plan. On the organizational side, we clearly define responsibility. Headquarters lead strategic development with a local team focusing on daily operation.

And in terms of the membership, we noticed that we need to truly make the business from a traffic driven to repeat purchase driven. I'd like to spend a few words on membership piece. We noticed Indonesia consumers show a clear spike in-store visit at the end of each month, which [ climb ] with local payday circle. We made a payday wave membership benefits program. The result was clear. Membership participants was 80.5 percentage higher than during the normal member days. The repeat purchase rate and frequency are all improved.

During the Ramadan, we saw participation climb even further, which tell us this has become a real habit for the consumer. Well, for the full year, Indonesia delivered a solid profit contribution. I believe with our adjustment to event, profitability in this year would be much better than last year. More importantly, when membership and repeat purchase become the primary engine for growth, and the growth would be even higher. I'm truly confident on Indonesia.

Let's also talk about North America, which is another heat. I have already walked you through the store model and the strategic updates, but today, I'd like to address 2 questions, including tariff and consumer behavior under inflationary pressure.

I believe those are opportunities for MINISO. First of all, our price brand give us the structural advantages. Our core price range in U.S. was around USD 5 to USD 25. In that range, what drives purchase emotional connection is IP, I love this so I buy it, while at the same time, USD 5 to USD 25 is quite alluring, while at the same time, a consumer looking for merchandise of specific IP won't walk away because of the small price increase. And the tariff and inflation translate directly into price elasticity.

However, for us, we don't apply that the same way. Secondly, MINISO supply chain capacity has been further upgraded from building a localized and specialized merchandising team while improving the entire supply chain, including product, strategy and supplier development. With strong cross functional and supply chain collaboration, we have launched our first sell program, which can help to improve our supply capacity.

Thirdly, our goal can really support the U.S. business development. We operate in 120 countries and regions worldwide. Any successful store model from one market, proven IP playbook could be quickly adopted worldwide but at the same time, the stable cash flow and scale economy can also give us the confidence and the resources to invest in the U.S. The global complementary framework is not there for our competitors. Thirdly, tariff and inflation are cyclical and short-term variable. They come and they go, where consumer demand over emotional IP experience is structural. It doesn't appear with micro volatility for strong companies. Steering core pressure is also the growth opportunity. This growth is going to accelerate industrial shakeout and let truly differentiated brands stand out. In U.S., we are that differentiated brand.

Let me just turn to TOP TOY now. In first quarter of 2026, TOP TOY revenue grew by 51%. Net store grew by 21, reaching 355, 316 in China and 39 overseas. In Q1 of this year, we launched a new proprietary IP [indiscernible] along with proprietary IP themed stores, with Nommi, TOP TOY portfolio of proprietary IP stand out. The portfolio product become more mature. Our proprietary IP is being validated by the market. By the end of this month, we announced Zhao Lusi as TOP TOY's global brand ambassador for influence and recognition among young consumers will help us to accelerate and reach more young consumer.

Coming next, let me just walk you through my H2 outlook. There are 4 drivers First of all, membership is the most important lever for our same-store sales growth. The data tells a clear story. For full year 2026, member contributed 60% of the total sales. In Q1 of 2026, this number rose to 73%. In other words, nearly 3/4 of MINISO China business are coming from our members. There are 2 structural shifts behind that. And I see that consumer accounted for 79% of the total sales for us. Two highlights. First of all, contribution from repeated purchase continued to grow. In Q1 of this year, repurchase has already accounted for 60% of the member sales. New member acquisition is also accelerating. In the first -- first purchase contribution from the new members rose from 6% to 11% in Q1 which tells us when we convert new consumers into members, the quality of those new members are also improving.

When more than 70% of our business revenue are coming from the consumers, you can directly reach and engage. The growth shift from being opportunity-driven to system driven. That's the underlying logic behind our confidence why we are there for repeat purchase and [indiscernible] expansion in H2.

Secondly, benefit of our channel upgrades only started to come through. For the full year, we plan to open a closed 500 large store -- open close to 500 large format stores with MINISO LAND and flagship store making up increasing share. Thirdly, North America and Europe is set to enter into harvest space in H2. The new store we opened in U.S. and Canada was of high quality. This cohort will reach maturity and deliver high-quality same-store sales growth and margin improvement. Fourthly, 2026 is a year with highest density of IP. As we move into summer peak season, we have a very strong pipeline of major IP production launched lined up. Finally, while, we did see some return this quarter from our earlier investment in the AI space. I firmly believe that bigger prize lies in the efficiency gain AI can bring to our core business. Strong management capacity get amplified by AI.

And the technology dividend from AI will flow first to organizations that already have high execution discipline and a very strong learning capacity, and I surely believe we're going to continue to leverage AI to really support organizations who already have a very strong learning capacity. So for me and for my team, we are improving our understanding over AI and also continue to develop AI.

What is MINISO? MINISO is a high-density operating organization launched thousands of new SKUs every year, manage over 8,000 stores and spans more than 100 markets and regions. For an organization like us, the drive for efficiency is our DNA. On the product development side, AI supporting the trend forecasting and assortment decision. Our marketing AI can improve our efficiency in content production and customer stratification.

On operations side, our smart floor system are helping us managing foot traffic by time and day. We approach change with a sense of humility. We see AI as an amplifier, amplifying the supply chain advantage, product development speed and operational precision that MINISO already has. Recently, we also would like to leverage AI to forecast the product needs. In that way, we will be able to improve the customer loyalty.

Those are the 2 prepared remarks I have for you. Now I'm going to welcome Eason to walk you through the financials.

Thanks, Jack. Welcome, everyone, to today's call. Please allow me to walk you through our financial results of this quarter. Unless otherwise noted, all figures are in RMB. First of all, let's take a look at the completion of guidance. Let me just start by reviewing how we performed against the guidance we provided on March earnings call. We delivered on every metric we guided for this quarter. First of all, revenue. Group revenue was grown by 28.5%, which is higher than 25% we made for the previous call.

I will break down the growth driver by business unit later in my remarks. Next, on same-store sales. In Q1, MINISO China Mainland delivered high single-digit same-store sales growth, while North America delivered mid-double-digit same-store growth.

The 2 strategic priority market maintained a very strong momentum we saw in Q4 of 2025, driving group same-store growth to a mid-single-digit number. It is worth mentioning Europe and Latin America also delivered positive same-store sales growth in Q1. The trend would be continued in Q2. Let's also take a look at the top line. In Q1 of 2026, group GMV reached RMB 10.1 billion, grew by 26%. Total revenue grew by 28.5%, reaching RMB 5.7 billion.

Let's break down by brand. MINISO brand revenue was RMB 5.17 billion in Q1, up by 26.6%. MINISO China Mainland was RMB 3.23 billion, up by 29.6%. MINISO China Mainland continued to perform exceptionally well. This was the [indiscernible] flat year-over-year growth rate in the past 9 quarters and the fifth consecutive quarter of accelerated growth following Q4 of 2025.

The success of our China business validates our strategic direction is right. Our operating playbook is solid. We will use China experience as our benchmark, users proven operating experience to drive breakthroughs in international business, turning China's success to a powerful engine for overseas growth.

MINISO overseas revenue was RMB 1.94 billion, grew by 22%. TOP TOY revenue was RMB 510 million, grew by 51.4%, continue a very strong growth trajectory. Let's take a look at same-store sales. In Q1 of this year, Mainland China delivered strong same-store sales growth with high single-digit growth number. MINISO overseas, including the third-party distributor, also delivered solid low single-digit growth.

Looking ahead, we will continue to strengthen our same-store across 3 dimensions: people, product and stores. First of all, people. We leverage in-store traffic data to capture peak hours, regularly run in-store engagement activities, capitalizing on gift occasions like Mother's Day, 520 and Children's Day and the Dragon Festival to drive traffic through online to offline activation.

On the other side, we use internal mechanisms such as inter-store competitions for the best-in-class mentoring to continue to improve our operation capacity. While at the same time, as Jack Ye has already mentioned, the value of our domestic membership system continued to be unlocked.

In Q1 of 2026, members' contribution to the sales rose from 60% to 73% this quarter. Empowered by our largest store and IP strategy, we continued to acquire new customers and use refined operations to close the loop from acquisition to retention and repeat purchasement. In the near future, we will leverage AI capacity plus membership data to make sure we continue to have the demand forecast, precision targeting and the channel iteration continue to rise the same-store growth number.

Second, let me talk about the product. We continue to align tightly with seasonal and holiday consumption trend, use hero [indiscernible] SKUs to drive a structural upgrade in the per-store sales mix.

In H1 of this year, our IP collaboration has broke through across diversified categories, covering high-value IP for K-pop superstar Jennie, the Setwear brand Glock and classic lifestyle aesthetic [indiscernible].

This fully validates the connectivities of our global IP platform. In H2 of this year, we're going to have launched the World Cup collections, [indiscernible] Sanrio collaborations and the Toy Story movie. The hero IP will help to drive the high attachment rate. Thirdly, on store, we continue to upgrade the store display and visual identity. In Q1 of this year, we completed renovation to around 80 stores. The average daily sales improved by more than 50% post renovation. The result validates the effectiveness of the model strategy.

We will continue to make it right. Let me also talk about our store network. At the end of this quarter, we have already more than 8,500 stores. MINISO, we have 8,210 stores worldwide, a net increase of 722 stores. MINISO China store number grew by 318, where overseas, we net added 404 stores, reaching 3,617 stores by the quarter end. TOP TOY have 75 stores with 355 stores by the quarter end, 39 are located outside China.

In Q1 of this year, we opened a high-quality themed-park, for example, MINISO LAND and MINISO SPACE in Sanya CDF Mall. MINISO LAND in Grandview in Guangzhou, MINISO LAND in Dongmen and Shenzhen as well as MINISO FRIEND in IAPM in Shanghai. By the end of this quarter, the SPACE, LAND, FRIEND store reached 44 in total.

In this quarter, we're going to have the Super MINISO, a new themed park lined up, bringing the total to 61 by the quarter end, covering 32 cities across China, Together, themed-park schools, flagship ones and the large store ones accounted for 12% of the total store count contributed 30% of the sales. We expect to roll out more better themed-park stores by the end of this year and the deliver a joyful and unique shopping experience to our user.

Let's talk about the GP margin. GP margin was 43.3% for Q1 compared with 44.2% in the same year last year. We have a 0.9 percentage point decline due to 3 reasons. First of all, high-margin overseas business represent a small share of the total group revenue. Secondly, the return of the value for money assortments in China, disciplined pricing has translated into higher volume. And thirdly, an increasing mix from our new domestic product like the quick commerce stores, which are still in a margin ramp-up stage.

Let's also take a look at expenses. The total operating expense, excluding SBC, grew by 34% in Q1. The total expense ratio was 29.2% compared with 28% in Q1 last year. Within that, selling expense grew by 37.7%. The selling expense ratio was 24.5%, up by 1.6 percentage points. G&A expenses grew by 17.4% slower than the revenue growth, representing 4.7% of the revenue, a decline of 0.4 percentage points. The growth of the selling expense was primarily driven by investment in operating store, licensing fees and advertising and promotion activities.

First of all, in Q1, the revenue from direct operated stores grew by 50% Y-o-Y, while related expense grew by 35% demonstrating an ongoing optimization in our DTC store level economics, direct-to-store-related investments include staffing, rent-related expenses, depreciation and amortization.

Secondly, advertising and promotional expenses grew by 74%, accounted for 3% of the revenue. That was mainly because of the brand upgrade initiative and proprietary IP marketing. We invest in brand awareness to reach a broader consumer base, reflecting our strategic investment in building brand equity.

Thirdly, logistics expense grew by 43.5%, stably representing between 1.5% to 2% of the revenue, and fourthly, licensing fee grew by 42% in this quarter, in line with our strategic investment in IP development, stably representing 2.4% to 2.6% of the revenue.

The growth of the G&A expense was primarily due to higher staffing costs aligned with our business expansion, G&A grows slower than revenue.

Let's also take a look at other net gains. As been talked with many of you for the previous quarter call, in Q1, we recorded a large investment gain with other net income related to our direct investment in an AI company. Following the company's recent IPO and meaningful share price appreciation, we recorded RMB 870 million in fair value gains. I'd like to remind all of you, the management doesn't view this type of gain as reflective of our profit and the core operating business. So it's been excluded from our adjusted operating profit and adjusted net profit. In addition, the line item also includes net foreign exchange gains and losses. With ForEx volatilities in Q1, we recorded a net ForEx loss of more than RMB 8 million in this quarter -- RMB 80 million in this quarter and -- which is going to impact our margin by 1.5%. Generally speaking, our ForEx exposure may coming from the holding foreign currency-denominated assets, for example, cash, cash equivalents or receivables, or carrying foreign currency-denominated liabilities such as our USD-denominated convertible bonds.

In Q1, the ForEx losses mainly come from the intercompany receivables from our subsidiaries in the U.S., Canada, Europe and Indonesia. The ForEx gains and losses don't reflect the true operational performance of our core business. As the share of our DTC business continued to grow, the impact of the ForEx were also increased. So the guidance we're going to provide you will exclude the ForEx impact. While for non-IFRS, there will be some items need to be adjusted. I listed it here for you, including 6.

The first one is equity settled share-based compensation, SBC. SBC expense in Q1 was RMB 110 million, an increase of RMB 84 million because of the TOP TOY. And the second one is gain from the indirect investment in our AI company. This is actually a non-IFRS with an investment of RMB 870 million, represents unrealized and mark-to-market gains arising from the change in the fair value. And the third one is losses from the fair value change in derivatives and the issuance of the costs related to convertible bonds.

By the beginning of last year, there will be a onetime issuance fees. It won't occur this quarter. And in Q1, the interest expense on convertible notes was RMB 50.4 million, of which RMB 45.7 million are noncash. The actual cash interest paid by the company for these convertible notes was only RMB 4.7 million. Interest expense on the loan used to acquire our stake in YH was RMB 23 million.

In Q1 for YH, the performance was truly good. The net profit was RMB 290 million as we hold a 29.4% of the equity stake in YH. Then we recognized approximately RMB 77 million in income from YH in Q1. And we also have the change in carrying value of the redemption liabilities arising from the preferred shares. All those items would be excluded from adjusted net profit. Effective tax rate was 24.9%, which was 20% last year.

Let's take a look at the profitability. I was talking about adjusted operating profit. Adjusted operating profit, excluding the net ForEx loss grew 14.3%, reaching RMB 840 million in this quarter. The adjusted operating margin, excluding the net ForEx loss was 14.7% compared with 16.6% in the same period of last year. Let me just walk you through the gap.

First of all, gross margin declined by 0.9% Y-o-Y. The total operating expense, excluding SBC, grew by 1.2 percentage Y-o-Y. The above, partially offset by other items, resulting in a total impact of 1.8 percentage points on the -- but adjusted operating margin has been declined from 16.6% to 14.7%. As you can see that for this quarter, the increase in our overall expense ratio was decreased significantly compared with the previous quarters. Well for the full year, we aim to well control the expense ratio and continue to stabilize the GP margin.

In other words, we are going to stabilize the operating profit margin of the company as a whole. So in H2 of this year, as the peak sales season of the overseas market continue to approach, we're going to honor our commitment for this goal.

Regarding working capital, by the end of Q1 of 2026, the inventory turnover was 101 compared with 102 days in the same period of last year. MINISO China Mainland inventory turnover was 67 compared with 83 last year. MINISO Overseas inventory was 254, that was 208 last year. The increase of the overseas inventory was primarily driven to the inventory buildup ahead of the store opening.

The second one is due to the logistics instabilities. In some strategic markets, we have a more flexible supply chain management strategies, increased safety stock in overseas market. Over the time, there will be significant room to optimize overseas inventory turnover.

Let's also take a look at the cash flow, liquidity and capital allocation. By the end of this quarter, our cash position stood at RMB 7.05 billion, remaining healthy in upper end of May of this year. We distributed dividends over USD 116 million, bringing our accumulated shareholder return to RMB 6.23 billion.

We believe our share price is currently significantly below its intrinsic value. Jack has already announced by the end of April, he intend to increase his shareholding. The company also plan to conduct share buybacks based upon the market condition. Going forward, we will continue to maintain disciplined cost control and prudent budget management, while balancing the growth within -- with a delivering stable and predictable returns to the shareholders.

Last but not least, let me just give you the outlook. Standing here by the end of May, we are highly confident in achieving the full year target. We expect for the full year of 2026, the revenue, we're going to have a high double-digit growth. 3-year compound growth rate would be no less than 22%.

Full year net store addition would be 450 to 500. Jack has already mentioned. We are going to pay more attention to the quality of the development. 450 to 500 net store increase would be adjusted as we continue to balance the quality of the store. However, overall speaking, and we are still very confident in hitting our target. Regarding the same-store performance. MINISO China and North America, we hope we can continue a positive same-store sales growth. Excluding ForEx gains and losses, we expect adjusted net profit growth to accelerate compared with 2025 on a full year basis. While the overseas macroenvironment present significant challenges, our expectation for the first half operating results remain unchanged.

And we believe the revenue will grow by 20% to 22%. Net store addition will be 210 to 230. The MINISO China same-store sales maintained a mid-single-digit positive growth. North America same-store sales maintained a high single-digit to low double-digit growth.

That concludes my prepared remarks. I'm happy to take your questions.

[Operator Instructions]

Let's, first of all, welcome Michelle from Goldman Sachs to raise the first question.

Congratulations for the company of having a good performance despite the challenges. So my question was regarding overseas market. They're being touched upon by Jack Ye. However, you see the crude oil price have risen and stay elevated. Could the management team share with us what is the demand from the key overseas market? What would be the distributor order, pricing, cost pass-through and transportation and the logistics?

What are the impacts on your business? And what would be your response strategies? If in the next few quarters, there are some key upside and downside risks, which are the market and factors that you are most associated with? Is there any market who's going to have a huge fluctuation? And what are the market you are confident on?

Thank you very much A very good question. Let me help to address this question. First of all, product mix was systematically lifting out the share of the high-margin categories. Proprietary IP product and IP collaboration limited addition are a key focus.

We also started to pursue narrowing, but deeper strategy, concentrating on the true hero product and proactively on the tailor and SKUs fewer categories, but a greater operating depth and efficiency in each.

This is in itself the most direct way to hedge against cost pressure. On the supply chain, we have extended the raw material stocking circle from the key SKU from 2 months to 3 to 4 months, looking the cost ahead of the time. End-to-end stocking price is still stable, give us sufficient buffer. For U.S. market over the past 2 weeks, we started the differentiated price test, taking price first on high frequency, high velocity items for example, [indiscernible] and T-shirts. On the data now, we see May gross margin already improved compared with April. The price increase roll out further, and we believe the U.S. GP margin would continue to stay stable or even go up.

Looking ahead into the next few quarters, the upside risks include successful execution of the pricing adjustment, structural margin improvement, the rising mix of proprietary IP as well as the logistics cost pressure from the sustained high crude oil and potential pressure on the ticket size, if the consumer sentiment is certain continue to go weaken. Overall speaking, we're still very proactive for cost management.

Next, let me just welcome Samuel from UBS.

I have a question regarding your Indonesia and Mexico market. I heard a few remarks from Jack Ye regarding the Indonesian market outlook. But let me just ask you a follow-up question. What are the same-store sales and overall sales trends in Indonesia and Mexico over the past 2 months in April and May? And what is your strategy for both markets, especially in Mexico? And how should you comment on the sales and profit growth outlook for both markets in 2026?

Thank you. I think I have already covered Indonesia market. Let me talk about Mexico. The Mexico trend was positive. Same-store sales already came positive. Latin America are also delivering positive growth. From April to May, same-store sales improved meaningfully. And strategically speaking, we're going to work on channel upgrade. Mexico used to be dominated by small stores under 300 square meters. This year, we're going to roll out Land store. Larger store not only means [ larger square footage ].

It represents a comprehensive upgrade on IP, density and dwell time to improve with the higher ticket size and repeat purchase. Our large store practice in China is truly validated. We're going to have it in Mexico now. Looking to the full year, Mexico, the same-store sales should maintain positive. New store benefit of the channel upgrade would be visible in H2. Latin America has substantial consumption power and the fragmented competitive landscape. As long as we open [ Land ] store and execute IP operation well, the market is still quite promising because for Mexico, we're going to have large stores starting from H2 of this year. We really look forward to its performance.

Thanks Samuel, and thanks Jack. Then let's hear from Anne from Jefferies.

I have a question regarding the Mainland China market. As you can see, that generally speaking, the social retail data is not looking right. However, as I was talking to the expert, we found out MINISO store, your performance is much better than other peers. Is it possible for you to share with us are there any strategic updates that you can share with us?

What are you going to do next? Just now, we have already mentioned some of our franchisees, they're happy to open the large stores. But can I just kindly ask you, are there any capital support we provide to our franchisees? Any strategies you have on the China market? Would be happy to hear.

Thank you very much. Let's talk about renovation progress. We renovated around 80 stores this quarter with clear results. Average daily sales increased by 50% post renovation, validating the effectiveness of our store upgrade strategy. For 2026, we plan to renovate more than 300 stores, and we need to do it in a phased paced and proactive intervention way. In other words, open big, close small, open good and close weak, and transferring those aging undersized stores into new store formats. We placed strong emphasis on evaluating the visual identities standard display, IP experience mix and to have an efficient renovation strategy.

Let's also talk about franchisee profitability and paybacks. From Q1 2025 to Q1 2026, the share of the profit franchisee store continued to go up. The GP margin continued to expand. On payback period, large stores are meaningfully higher than the store level profitability for some of the best-performing themed-park store can even achieve a payback within 6 months compared with around [indiscernible] months for the standardized stores.

In 2026, we continue to reinforce the franchisees, their understanding over the large stores. We received some positive feedback from many of our large store franchisees. Around 50% of the new store application received by the headquarter for large store format. The feedback indicates franchisees are increasingly willing to invest in large store renovation. It also reinforced the importance of our strategic shift towards improving per store quality.

Let's welcome Yang Runbo from CICC, please.

I have a question regarding Mainland China business. As we can see in April and May, the micro consumption data in China is still fluctuating. I'd like to ask the management team, in terms of the foot traffic and the willingness to spend, is there any change? What trends are you observing across different city tiers and consumer cohorts?

Same-store average daily order volume and average ticket size are both going up. The ticket size is approaching RMB 40. There is one driver that is becoming more important for our China growth, that is membership operation, its most important strategy we have, a high-quality, highly engaged membership system, provide more predictable growth with strong resilience going through the industrial cycle. The data tell us very clearly members spend at a meaningful higher than the nonmembers. The higher the share of the member sales, the higher the quality and the productivity of the overall business might be for the past few months. Our membership ratio increased from 60% to more than 70%, driven primarily by new consumer acquisition.

In H1 of this year, we'd like to work on the member acquisition. In H2, we will focus on repeated purchase. When the 2 are combining together, it can help to complete a membership growth flywheel. Taking a look at the city tiers, we observed some positive trend consumption potential being unlocked for all tiers. Same-store sales are all positive for all city levels.

Provincial capitals are driven by large stores as well as top-level IP, new tier cities are driven by potential penetration and customer acquisition. The growth was pretty healthy. During the Chinese New Year, we rolled out the trendy toys to the countryside strategy, bringing MINISO IP product and themed-park experience to country-level market, which can help us to have a same-store sales in country-level reach, double-digit number. This tells us emotional demand for IP and the trendy toys cover much broader audience. Young people in country, they also have the same demand. They simply don't have the [indiscernible] and adequate supply before. These can also see MINISO brand has already covered different consumer cohorts. The depth of the China market is far greater than what has been generally appreciated by the market.

Coming next, let's welcome Xu Xiaofang from Citic, please.

We may move to the next question first. Let's welcome Shi, Di from Huatai Securities first.

Can all of you hear me?

Yes, great. Loud and clear.

I'm Shi Di from Huatai Securities. I have a question regarding the same-store sales in China. We see in Q1 of this year, the company did a good performance on same-store sales. In the next few quarters, the baseline was being elevated. So how are you going to comment on the same-store base rising and the subsequential quarter performance? What strategies and tactics are in place for sustained same-store growth?

You're right. The baseline is indeed rising, but we have a clear and systematic strategy in place. Let me just share with you a few data during the May Labor festival. Domestic sales grew by a high double-digit number, outpacing major competitors. Average daily sales hit all-time holiday high, even higher than daily average during the Chinese New Year holidays earlier this year.

We see some third-party data show us. Foot traffic was under pressure during the May Labor holiday but our store, the entry level improved by 4.1 percentage. Average per store traffic also grew, means we drove traffic against the headwinds. By categories, toys, digital accessories and travel categories delivered 25% growth, which is hard earned result.

For sustaining same-store growth, we have the following strategy. For IP collaboration, we continue to deliver differentiated and high frequency launches. For example, with secure global exclusive license for F1 plus Disney collaboration and May through June, there will be a few gifting seasons with Mother's Day, Children's Day, Father's Day and 520, I Love You Day.

And we have already built a dedicated assortment and event plan according to the gifting data to improve the average ticket size. For operating, we also roll out the foot traffic contest at the store and to further empower our store. The supply chain also continued to improve. Even during the May Day holiday, we can unlock the sales window. So even if the baseline is going up, we have a diversified toolkit, and we are confident in continue to deliver strong same-store performance.

Thanks Jack. Madam Xu, are you there from Citic? Can you unmute yourself for questions?

Yes. I have to say sorry, there might be some technical issue with my line. I have a question regarding your proprietary IP. For the past few -- 6 months, we see that your proprietary IP started to show up in your store medium and lower-tier cities, the designs have been quite interesting. So is it possible for you to share with us your proprietary IP, for example, YOYO as well as [indiscernible] and Kumaru.

A rather good question. Let me elaborate on that. Third-party licensed IP and proprietary IP seems selling the same product, but the logic would be different. Let's talk about the GP margin. Proprietary IP products have a high margin compared with licensed IP, but the underlying logic matter the most. Proprietary IP is most exclusive and absolutely differentiated. If you want to sustain the GP margin, you need to have a proprietary IP. The pricing power operating authenticity and the entire value chain of the proprietary IP its fully in our hands.

It also provides long-term high-margin moat. However, you need to think about how to diversify the monetization model. A mature proprietary IP isn't sell product. You can sublicense it to the third party, you operate across multiple formats and it can also drive content production and upgrading the IP capacity.

Those are all extreme high-margin business model that compound over time. YOYO appearance on the Met Gala and entry into fashion week reflect [indiscernible] of the brand value rather than sell product only. We are building our proprietary IP. We're building a business model on an entirely differentiated scale. That is most important upgrade for MINISO long-term profit structure.

Thanks for Jack. Coming next, let's welcome [ Mr. Jin ] from Changjiang Securities.

I'm [indiscernible] from Changjiang Securities. I have a question regarding Europe business. It seems that the business growth in Europe is quite fast, and they are still in the investment phase. And Europe is a big market for you to explore. So can I ask Jack here. Can you share your view on the long-term opportunities in Europe and the specific strategy plan? And for the mid- and short run, what would be the pace of the store investment in Europe this year, the profit quality of the new stores? And what would be the change of the margin for the store?

Thank you. Europe has delivered continued positive same-store sales growth this year with the leading category being trendy toys categories, for example, like the [indiscernible]. This is also the reason for us to go for international expansion. We're not bringing in product others already selling, we'd rather bringing the consumption scenario of IP trendy toys, open new demand. Channel upgrades are progressing in parallel. The LAND store will roll out in H1 of this year. Regarding the profitability, Poland and Germany are strong proof points. Both directly operated stores have outperformed expectation and the store level and market level operating margin reached double digits.

The Germany overall operating margin across more than 10 stores has already stabilized with double digit. Other markets are ramping up. Q1 is traditionally [indiscernible] season for retail. It is also the best window to prepare for new store openings. And our long-term profitability target for Europe DTC is clear. Germany has already achieved that. Other markets will follow up. Europe is a market with a long-term cultivation. We have the patience and we have a clear pathway there.

Thanks for Jack Ye. Coming next, let's welcome [indiscernible] Guotai Haitong.

I have a question regarding U.S. It seems that you operate the largest format in U.S. for quite a while. Is it possible for you to walk us through the operational details as well as the operational results? And you can see that what would be the purchase frequency of your U.S. members? Is it improved as you roll out large stores?

Thank you, Ms. [ Wu ]. As I was emphasizing again and again, that is what we're doing now. For the past 2 to 3 years, MINISO continue to build up our non-U.S. consumer goods, the largest DTC network in the local area. So starting from January of 2024, we started to explore the last store. Before that, you see that we entered into U.S. market in 2017.

By then, majority of our stores are located in U.S. shopping malls. But from January of 2024, we started to have our garden roof stores being opened, and we started to build our understanding of [indiscernible]. By beginning of this year, Jack Ye went to U.S. to tour around our stores. We find out our [indiscernible] store has already moved into a 2.0 version time. What does 2.0 version means? And our 2.0 version store is not picky about the business district at all.

You can see that for our good and large [indiscernible] stores, even in an average business district, its store sales and efficiency per square meter is still been looking right. Compared with 1.0 version [indiscernible] store, the 2.0 version are actually showing better profitabilities. So we have already provided you a single store profit model in the U.S.

Generally speaking, for a single store, the payback takes around 1 year in the U.S. Well, for the 2.0 version store, the payback period has been controlled within 1 year. Well, for MINISO, we are committed for the long-term business, and we stick to the long-term investment.

So for the 2.0 version store, and it provides above expectation same-store performance, and it is also sustained and continued with improvement. In other words, in the near future, our U.S. 2.0 version store can be rolled out to more cities and more business districts. It's a proven success, which can help us to continue to unlock its potential in the U.S. market. The second question, you were talking about the sales data from our members. In China, we have a very mature and well-established CRM operation system. In that way, we will be able to extend our success China membership management to the U.S. For the past 1 year, the sales growth from our U.S. members has been quite significant. And China started to do membership in 2018. And in 2021, the membership sales exceed half of our total business.

And we made 5 years making the membership spending accounted for half of our revenue. Where in the U.S., we only spent 1 year to make that happen. And you can also see the repurchasement rate of the U.S. consumer is no less than that of the Chinese members. So that's the reason. And we believe we're going to have a very healthy store efficiency this year and we have every confidence for that.

Thanks for Jack Ye and thanks for Eason. Thanks for all the investors and analysts for your questions. Thanks to everyone to be a part of our earnings call. If you have any further questions, feel free to contact my team. Thanks for your attention and support for MINISO. See you next quarter.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Audio Gap] Earnings results presentation. [Operator Instructions] Please also be noted that the call will be recorded. Simultaneous English translation will be available for this call. [Operator Instructions]

Our December quarter and full year 2025 results are disclosed earlier today and now available on our Investor Relationship website at ir.miniso.com. Joining us here today are Mr. Ye Guofu, our Founder and CEO; and Mr. Jingjing Zhang, our CFO.

Before we proceed, I would like to refer everyone to the safe harbor statement in our earnings press release, which was also applied for this call as management will be making forward-looking statements. Please also note, we will also discussing certain non-IFRS financial measures today. Those measures are described and reconciled in their most directly comparable IFRS measures in our earnings release, in our filings to SEC and Hong Kong Stock Exchange.

Unless otherwise stated, all figures are in RMB. In addition, we have prepared a presentation featuring financial and operational highlights for today's call. If you're joining Zoom, you will be able to see the slides. They will also be available on our IR website.

Now I will turn the floor to Mr. Ye Guofu.

Good day, everyone. Welcome to MINISO 2025 December Quarter and Full Year Earnings Presentation. 2025 was a year for steady growth and a continued breakthrough for the group. Throughout the year, the revenue growth followed a strong and constantly acceleration trajectories rising from 18.9% Y-o-Y in Q1 to 32.7% in Q4, surpassing the upper end of our prior guidance and also reaching RMB 6.25 billion in quarterly revenue, making the first time we have crossed RMB 6 billion revenue quarterly milestone.

Looking at our core brands in details, the MINISO brand recorded its fastest growth rate in nearly 8 quarters in Q4 with revenue up by 28%, reaching RMB 5.65 billion. Meanwhile, TOP TOY delivered exceptional momentum, posting 112% Y-o-Y growth in Q4 with quarterly revenue approaching RMB 600 million, demonstrating the powerful dynamics of our multi-brand portfolio. This year, we achieved higher revenue growth with fewer net new store openings than 2025 with greater share of the growth driven by the same-store sales, reflecting a more efficient and highly quality growth model, reaffirming the resilience and the long-term growth potential of our multi-IP plus multi-category and globalization business model.

Today, against the backdrop of the group's full year operating performance, I will share with you the significant progress that we made in the past 1 year regarding MINISO strategy for the past 1 year, particularly focused on the breakthrough in brand elevation and store experience enhancements. First, let's take a look at MINISO China. In the fourth quarter, the MINISO brand generated a revenue of RMB 5.65 billion. Mainland China contributed RMB 2.87 billion, grew by 25%, representing 51% of the total. MINISO overseas revenue reached RMB 2.78 billion, up by 31%, accounted for 50% of the total, reflecting a robust balanced growth driven by both domestic and international operations.

Let's first talk about strategic initiative in MINISO Mainland China business. In Q4, MINISO domestic same-store sales grew by mid-teens in Q4, a record high for the year with average daily sales per store surpassing the level achieved in 2023. Even 2023 was largely driven by surge in post-pandemic pent-up demand. MINISO ability can exceed those peak levels. This can tell its genuine structure improvement rather than the cyclical tailwinds. And we have every confidence, assuming a more supportive macro environment and a gradual recovery in consumer sentiment in 2026.

With our stronger brand equity, superior store positioning, more agile supply chain and competitive standing, we will be able to outperform the industry by a wide margin, capturing more shares in the market. By the end of Q4, our domestic franchisee count reaching 1,157, reaching historical high. Franchises grown with their support. That is the most authentic market signal, and they partnered with us because they have witnessed the firsthand and the traffic momentum and the financial returns of our large-format stores. The trust has been earned store by store, IP activation by IP activation. And it is something that we hold in the highest regard.

At our 2024 Investor Day, we articulated our vision to make MINISO the go-to happy destination for international consumers worldwide. Today, the vision has been realized one MINISO Land store at a time. By the end of 2025, we have already opened 26 MINISO Land format stores in Mainland China, securing primary location in Tier 1 cities like Beijing, Shanghai, Guangzhou and Shenzhen and also distinctive retail destinations in Horbt, Haikou and Huangshan. In January, the MINISO Land opening in Grandview Mall in Guangzhou, attracting nearly 10,000 visitors on its opening day, generating rMB 450,000 in sales, a new record in South China region.

Equally impressive is the MINISO Land flagship opening in the lower-tier cities in Urumqi and Nanjing. The Nanjing store soft opening drove 80% Y-o-Y growth in overall mall footprint traffic. Urumqi store featuring a 3-story impressive space and the portfolio of 100 IP collaboration quickly established itself as a regional premier destination. Such high-quality offline experience stores are at their core, the engine for IP operations. Through the authentic spatial design and curated product presentation, match our consumer and such foreseeable and tangible offline experience bring IP value to life. And it can also help us to continue to improve our brand IP ecosystem.

MINISO Land store, combined with blockbuster IP activation has become go-to platform for creating citywide mainstream brand momentum. Tens of thousands of consumers sell their experience Xiaohongshu, Douyin and WeChat Moments. So that's the reason I always tell you our physical store are MINISO'S most powerful brand billboard and our most enduring source of the consumer traffic.

MINISO is not the first brand to pursue large-format store trajectory, but why others can't follow? The answer comes to just one thing. A successful large-format store must build on a foundation of strong proprietary product development capacity. Without in-house design and R&D capacity, a large format store is nothing but an empty show. Behind that, we have more than 1 decade supply chain deployment, a network of more than 1,500 global suppliers and a design team of over 1,000 professionals. In this process, no one will be able to copy the successful story unless they have to build the core capacities.

MINISO moved even further ahead. In support of our MINISO Land strategy, we established a 7-tier store format mix in 2024, continue to refine and evolve it through 2025. Our goal is to ensure every city, every trade area and every consumption scenario will be served by MINISO format precisely. In the past, I mentioned MINISO intention is to systematically upgrade its store portfolio. And I also would like to share with you the reason behind such initiative, while every new store we open must be large format, high-quality and MINISO land format store.

If we look at our journey, we navigated 2 distinctive strategic phase. First, rapid global store expansion to build scale, followed by strategic IP positioning, transitioning ourselves from a value priced variety store into interest-driven consumption destination. We achieved a milestone in both cases.

Now we move into the third phase, an immersive retail transformation centered on MINISO land. It's not only increasing store size. It is an integration of the store capacity built across the first 2 phase, leveraging larger space, creating immersive environment, forging junior emotional connections, driving repeated visitor. We are selling and translating from selling the product to selling experience from a traffic-driven business to loyalty-driven consumer-centered ones. And people never lack the good product. They are truly seeking for compelling destination, memorable experience and the moment with shopping. Our IP-driven land are designed precisely to meet those needs that we can inspire consumers to share and continue to come back for to generate purchase.

Regarding international market, our overseas revenue approached RMB 2.8 billion in Q4, all-time high, representing 31% Y-o-Y growth. Our overseas store net aid was 159 stores, bringing a full year net increase of 465 stores. Our largest overseas market, the United States delivered a full year growth of more than 60% and 57% in Q4. Same-store growth was more than 20%, all ahead of our prior year expectation.

At our Q1 2024 earnings call, I stated improving store operating quality in North America was our top priority in 2025. At year end, MINISO U.S. business delivered comprehensive improvement on store quality, operational efficiency and consumer engagement. For stores, with new store quality being further improved, sales of the new store in 2025 have all-time high, grew by a double-digit number and both average transaction value and transaction volume all improving, driving meaningful higher unit level profitability and conversion rates, while at the same time, our mature store demonstrated strong operating resilience, leveraging a refined same-store performance tracking model, establishing store to deliver [ revived ] growth, both the average daily sales and transaction improving alongside gains in foot traffic and purchase frequency, especially for our Plaza store format, we opened 48 Plaza locations in 2025. They generate higher attachment rate and average transaction value ASP. The average ASP outperforming our mall stores, establishing a more flexible and economically retained new store expansion channel.

Operationally speaking, we have cost-based expansion strategy, improving logistics efficiencies and warehouse costs. Employee retention improved. Revenue per headcount increased. Labor cost as a percentage to the sales declined, achieving a due optimization on cost and productivity. For consumer side, membership in U.S. market grew by 150% Y-o-Y. The member-driven sales exceeding 50% of the total revenue for the first time. Together, those results mark U.S. market transition from an investment phase into a phase of high-quality profitable growth, becoming our most resilient and dynamic engine for global expansion, which actually give us greater confidence for our global rollout strategy. The operational challenge we encountered in other markets are also encountered and navigated in both China and the U.S. We're going to leverage our experience from China and the U.S., continue to unlock in profit potential for our international operation.

Thirdly, let me talk about TOP TOY. TOP TOY sustained its strong compound growth momentum in Q4 with revenue up by 112%, reaching nearly RMB 600 million revenue in Q4. In terms of the store footprint, by the end of 2025, TOP TOY operated a total of 334 stores, including 30 international stores in Thailand, Malaysia, Indonesia and Japan. Brand global expansion continued to accelerate. Domestically speaking, TOP TOY growth strategy centered on high frequency of the proprietary product launch to drive same-store sales. The proprietary IP, Nommi actually rapidly gained momentum with a sales of more than RMB 200 million and likely to be doubled in 2026.

By the end of 2025, TOP TOY has built a proprietary IP portfolio of more than 20 brands. In 2020, I first introduced interest-driven consumption. The consumers' core need is rapidly shifting from the pure functional value to emotional and experimental value, which has been fully validated by the market. MINISO stands as one of the most significant beneficiary and pioneer of this consumption transformation with our immersive experience, multi-category proprietary development capacity. Those are our key and hardest to reflect competitive modes in IP-driven consumption era.

MINISO's strategic vision is to become the world's leading IP-driven retail platform. My strategy has been even clear. Along the way, we have demonstrated the execution of our strategic development. And we also witnessed the firsthand the genuine and sustainable enthusiasm we have from the consumers. For the past 1 year, we delivered strong results in both China and the U.S. The road ahead is long, but with each step forward, we -- our conviction and confidence only deepen.

And that's all for my remarks. Coming next, I'm going to hand over to Ethan to walk you through the financial highlights for Q4 and full year. Thank you.

Thank you. Thanks for Mr. Ye. Welcome to you all. Coming next, let me just walk you through MINISO Group financial results for Q4 and full year 2025. I will also provide you the outlook. I should also see that all the units would be RMB otherwise being stated.

Let me just start by reviewing financial performance against Q4 and full year. In Q4, revenue grew by 32.7%, supporting the upper end of our prior guidance between 20% to 30%, driven by the outperformance across all business segments. MINISO Chinese Mainland Q4 revenue grew by 25%, exceeding our prior guidance of high teens growth.

MINISO overseas Q4 revenue grew by close to 31% Y-o-Y, ahead of our guidance of a low to high 20s percentage growth. TOP TOY Q4 revenue grew by 112%, above our guidance on 80% to 90% growth. So Q4 momentum lifted full year group revenue growth by 26.2%, exceeding our prior full year guidance of approximately 25% in the interim result.

In Q4, MINISO Chinese Mainland same-store sales growth reached mid-teens. U.S. same-store sales exceed 20%, both supporting our prior year Q4 guidance of the lower double-digit same-store growth. Both markets delivered high single-digit same-store sales growth for the full year, in line with our formal guidance, but ahead of the internal expectation we had when we provided the guidance back in November.

Adjusted operating profit grew by 12% in Q4, in line with our prior guidance of the double-digit growth. Full year adjusted operating profit reaching RMB 3.67 billion, aligned with our guidance. In Q4, our adjusted operating profit margin was 17%, especially in H2 of 2025, and we have already narrowed down the margin compression.

Well let's take a look at the revenue. We have already created 3 revenue milestones in this quarter. First of all, single quarter GMV exceeding RMB 10 billion for the first time, quarterly revenue surpassed RMB 6 billion for the first time and full year revenue crossed more than RMB 20 billion for the first time, benefited from all the outstanding performance. We delivered across all of our business lines, an over expectation performance.

By brand, MINISO brand generated Q4 revenue RMB 5.65 billion, 27.7% increase. And MINISO China continued to demonstrate great growth. In Q4, its average growth is the highest one for the past 8 consecutive quarters. MINISO Overseas revenue was RMB 2.78 billion, up by 30.5%. TOP TOY revenue was RMB 600 million, up by 112% and also having a triple-digit Y-o-Y growth with very strong momentum that exceed our expectation.

Turning to the full year. Group revenue reached RMB 21.44 billion in 2025. A few highlights I'd like to share with you. MINISO Mainland China full year revenue crossed RMB 10 billion milestone for the first time in such a consumption background, grew by around 70%. MINISO overseas full year revenue was RMB 8.6 billion, up by close to 30%. TOP TOY full year revenue was RMB 1.9 billion, maintained a very strong growth. In terms of the geographic revenue mix, Mainland China revenue grew by 22%, accounted for 60% of the total revenue.

Overseas revenue grew by 33%, representing 40% of the total revenue. We'll take a look at the same-store sales performance. MINISO Mainland China Q4 same-store continued its sequential acceleration, reaching a mid-teens go beyond our expectation. Looking back to the full year trajectory of the MINISO Mainland China same-store sales from negative mid-single digit in Q1 to positive low single digit in Q2 to high single digit in Q3 and finally, mid-teens in Q4.

Sequential progression delivered mid-single-digit same-store growth for the full year, already exceeding our initial target in the mid of 2025. As I have already shared with you, delivering the improvement in the domestic same-store sales that we did many hard efforts. In terms of the internal management, the same-store performance has been built into the KPI. And we also have the digital infrastructure, making the business flow more digital and intelligent to improve the one team empowerment.

Thirdly, we have the operation improved, and we improved the store SOP with supply chain optimization and making sure that sustained contribution from the top selling SKUs and minimalizing the potential sales loss. Fourthly, the product development efficiency has been further improved. We actually have more contribution from new SKU and the speed to shelf of the new product launch.

Fifthly, the inventory kept healthy. Regarding the operations, we are also working at 3 fronts, including consumer product and channel. And for people and consumer, we improved the in-store conversion. Our extensive store network serves both large-scale testing ground and rich data pool. By deploying additional foot traffic content, we'll be able to capture high-frequency store level data that can help to further optimize our store and operation.

And we also have diversified marketing activations. For example, for DCF, we have the 1-day store manager program on red, artist street pop-ups as well as in-store meet-and-greet signing event and celebrity store visit, which can actually become the viral moment on the social media, driving organic brand amplification through fan engagement.

Regarding product, let me just give you another 2 points. We're capitalizing on seasonal and holiday product trends, while at the same time, we're also managing IP and non-IP merchandise with a profound understanding. We leverage the traffic-driven power of IP product to generate attachment, purchase and the basket contribution of the non-IP items.

Regarding the channel, we improved our existing store portfolio. We have upgraded and improved 300 stores with a tangible result. Regarding MINISO overseas, same-store sales performance are different from region to region. First of all, in Asia and in Latin America, the same-store performance is lagging behind than other international markets.

However, our strategic, direct operated market, United States and Europe delivered very good results, especially our key strategic direct operated market, U.S. delivered low 20s percentage same-store growth in Q4, supporting our previous guidance were driven by the strong end market performance and continued polish of our store. You can also see that we see a healthy improvement of the same-store profit margin through disciplined data-driven site selection and cluster-based store opening approach.

U.S. back-end overhead costs declined by low single digits, providing further tailwind to U.S. business profitability. It is also worth noticing that in 2025, U.S. business faced meaningful tariff headwinds against a backdrop of significant macroeconomic uncertainties. Our team responded with exceptional foresight, sharp market insights and agile execution, still be able to deliver stand out set of the results.

Such results validate our robustness and business model. Such strength in and out is actually the foundation for our confidence to navigate an economic circle, where domestic market at our strategic home base delivered sequential accelerating positive same-store sales growth in a highly competitive market, which demonstrate our strategic model and exceptional execution capacity of the team, creating a [indiscernible] for further growth. In 2026, successful survey and playbook from China and the United States will be exported to Southeast Asia. Respect to the challenges in Southeast Asia market, we believe the headwinds are already meeting the bottom.

And in 2026, through a comprehensive upgrade of our channel strategy, product assortment and organizational structure and Thailand base, we will be able to continue to improve the business in Southeast Asia regarding the store. And actually, the total store account approached 8,500 by the end of 2025. In Mainland China, the net add is 182 stores compared with 460 in 2024. Recall MINISO Mainland China revenue growth, that was around 10% in 2024. However, in 2025, it was close to 70%. In other words, and with a clear indication that we have transitioned towards a higher quality and more productive growth model with fewer net new stores. MINISO Overseas new adds was 465, bringing a year-end total to 3,583.

TOP TOY new adds was 58 stores. And TOP TOY started global expansion by Q4 of 2024. Just within 1 year, we have 30 stores international-wide, present in Malaysia, Indonesia, Thailand, Japan and Macau. By the end of 2025, our domestic land format store portfolio, including MINISO SPACE, MINISO LAND and MINISO FRIENDS has reached 26 destinations across 90 cities nationwide. That format and the flagship large store collectively accounted for 10% of our domestic store count. It contributed nearly 20% of our domestic GMV. And this number will continue to ramp up, which helped validate big store drives big results logic.

In 2026, we will accelerate the release of this momentum. And you can see, including CDF in Sanya, David City in Zhengzhou and Guanghui Plaza in Shanghai, we'll continue to see our new locations being operational. In Q4 of 2025, we opened our first overseas MINISO LAND at Siam Square in Thailand with very strong market reception, which help us to understand the potential of our overseas formats remains substantial.

In 2026, we'll continue to bring the immersive game experience to more retail destinations across the world. For our overseas directed operating market, led by United States, we plan to have a strategic new openings before Q4. In that way, Q4 would be fully concentrated on in-store operational excellence and experience optimization so that the peak shopping season arrives, we would be able to fully maximize the growth momentum.

Regarding the GP margin, that was 46.4% compared with 47% in the same period of last year. 2025, the GP margin was 45%, flat for the past 5 years. Our GP margin jumped from 28% to 45%, driven by our brand elevation, globalization and IP strategy. During the year, we made selective gross margin adjustment across product categories, which enable better sales performance and overall increase in GP margin. In the near future, we are going to continue to manage the balance between margin rate and sales volume, maintain a healthy high-quality growth.

Regarding operating expenses, the operating expenses in Q4 grew by 45.3%. Sales expense grew by 47.4% 3% higher than the same period of last year. Administrative expense grew by 36.3%, increased 5% -- accounted for 5% of the revenue, flat with last year. The increase in the sales expense was attributable to the growth in direct operated store costs, licensing fees and advertising and marketing expenses.

First of all, our international expansion is still in the early stage. Direct operated store are in mid of the rent and manpower, which was 1% higher than the previous year, accounted for 40% of the total revenue with the total cost to grow by 40%. However, it's already a deacceleration from 54.5% growth rate in the first 9 months of 2025. Secondly, licensing fee grew by 107% Y-o-Y, accounting for 3% of the revenue, up by 1 percentage point compared with 2024.

This also helped to reflect our proactive, upfront investment in IP strategy. Thirdly, advertising and marketing expense grew by 30%, slightly below the rate of the revenue growth in Q4 with the ratio to revenue remained flat compared with 2024. The increase in G&A, and you can see adjusted operating flow, the Q4 adjusted operating profit grew by 11.7% and adjusted operating profit margin reaching 70%.

Full year adjusted operating profit, no matter for M-o-M or Y-o-Y basis, you can also see our operating actually continue to be well managed. From the P&L perspective, in Q4, GP margin declined by 60 percentage basis points because Q4 2024 was our highest GP margin quarter on record. And also direct operated store cost ratio increased by 1 percentage point.

Licensing fee ratio increased by 1 percentage point with a further contribution from the [indiscernible] items of the [indiscernible] percentage points, resulting in a total adjusted operating margin impact by 3%. For the full year, GP margin flat versus with 2024 is mainly due to the direct operation store ratio increased by 2 percentage points. Licensing and other fees increased by 1 percentage point, resulting in a 3 percentage point improvement adjustment.

While at the same time, you can also see that in Mainland China, from the business unit perspective, the business unit part, China franchise business saw a margin decline by only 70 basis points against a backdrop of 70 percentage points of the revenue growth. This reflects our conservative approach for gross margin in exchange for healthy volume. But at the same time, the growth was also contributed by our super warehouse and e-commerce operation with a modest dilutive effect on margin.

The group level margin decline primarily attributable to the compression in overseas margin. For example, direct operated store revenue as a proportion to the total gross overseas revenue has been increased from 1/3 in 2024 to more than half in 2025. Outside the North America, other directly operated market remain in the early investment phase and carry low margin. By contrast, our overseas agent and franchise revenue, which carry high margin grow at a relatively slow pace.

In our financial statement, we also have some non-IFRS adjustment. There are 5 points. First one, share-based compensation, SBC. It was RMB 150 million in Q4 and full year, RMB 270 million, and that used to be RMB 85 million in 2024. The increase was mainly because of the equity incentive plan we made for the team. The second one is the loss from the derivative fair value changes and CB issuance cost. The third one is the interest expense on CB and YH investment related loans.

In Q4, convertible bonds interest expense was RMB 51 million, of which RMB 47 million are in noncash. Interest expense on acquisition loan related to YH was RMB 24 million. For 2025 full year, you can see the convertible bonds interest expense was RMB 190 million, among which RMB 170 million are on noncash interest on YH acquisition loan was [ RMB 87 million ]. And then the fourth point is share of the YH post-tax loss. In Q4, YH estimated net loss was RMB 1.84 billion. And fifthly, you can also see that we have the fair value changes of the redemption liability arising from the preferred shares.

The change was related to RMB 150 million to RMB 160 million related to the strategic financing completed last year. So in aggregate, the adjusted add-back approximately RMB 990 million in Q4 and RMB 1.69 billion for the full year to arrive at adjusted net profit. Excluding the items discussed above, the adjusted effective tax rate was 20.2% for Q4 and 20.1% for full year. Q4 adjusted net profit was growing 7.6 percentage reaching RMB 850 million. However, as a result of our active share repurchase and consolation program, our adjusted EPS slightly faster than growth.

The adjusted diluted EPS in Q4 grew by 9.4%. Full year reached 7.8%. Regarding working capital, by the end of 2025, inventory turnover was 100 days, 91 days, the same period of last year. In Mainland China, inventory turnover was 74 days. Internationally speaking, inventory turnover was 228 days. The increase in overseas inventory days reflect a strategic inventory ahead of the anticipated tariff impact, locking the cost of the favorable level. And we also have established local direct sourcing, which can actually help to balance inventory pressure and ensure continued new product replenishment.

In the near future, we were also going to adjust our overseas inventory and overall efficiency. By the end of 2025, our cash reserve was RMB 7.1 billion remained healthy. In 2025, full year net cash generated from operating activity was RMB 2.58 billion, accounted for 90% of the full year adjusted net profit, a reflection of our business resilience, high earning quality and strong cash generation.

Capital allocation means we're going to maintain our commitment for rapid business growth. In 2025, we obtained a waiver from Hong Kong Stock Exchange with repurchase up to HKD 1.8 billion. And you can also see that we continue to have the repurchase that can showcase our commitment and confidence for the full year.

Looking at the 2025 full year, the return to shareholders account for RMB 1.9 billion -- accounted for 66% of the full year adjusted net profit, including RMB 550 million in share purchase and RMB 1.36 billion in dividends. And you can also see the Board has already announced final dividend of RMB 810 million, representing 50% of the second half 2025 adjusted net profit, which will be expected to be paid in April this year.

Last but not least, closing remarks and outlook. Looking back at our financial performance over the past 5 years from '21 to '25, revenue CAGR reached 21% and adjusted net profit CAGR reached 44%. Looking to 2026, we expect group revenue will have a high teens rate. The 3-year CAGR from '23 to '26 would be no less than 22%. We expect the same-store sales continue to ramp up. In 2026, the same-store sales in key markets like China and North America maintain healthy low single-digit growth. We plan to have a new add store 510 to 550 for the full year.

We seek for quality rather than quantity. In 2026, we balance growth and efficiency, pursuing profitable growth and profit backed by strong cash flow. We expect both adjusted operating profit and adjusted net profit will accelerate the growth rate in 2026. In terms of the profit phasing, the peak retail season for offline retail in North America and Europe is in the second half of the year. For many Western offline brands, 60% to 70% of the annual revenue were generated in H2.

Our direct operated revenue from North America and Europe will continue to grow. Around 60% of the revenue are coming from H2 and H1 accounted for 40% of the total contribution. In Q1 of 2026, the revenue growth were no less than 25%. China same-store sales maintained high single-digit growth. North America same-store delivered strong mid- to high double-digit growth. It is worth noticing Q1 profit will include a significant investment gain from specific investment. It was generated from a test investment we made a few years ago. The company has been quite positive on AI company. We invested in an AI company. That company has been IPO-ed. The company's share price appreciated, generating a substantial fair value gain and it actually bring us RMB 850 million to RMB 900 million.

It is worth noticing that such actual gains will not showcase our primary business resilience. We plan to exclude this item from adjusted operating profit and adjusted net profit.

That's all for our prepared remarks. Let's open the floor for Q&A.

[Operator Instructions] First of all, let's welcome Michelle from Goldman Sachs, please.

Congratulate on the company achieving such a nice growth in the volatile market. I have 2 questions. The first question regarding domestic market. Last year, we drove solid same-store sales growth through refined store operation, stronger fast sales execution and store network upgrades. Looking ahead to 2026, as Eason has already provided guidance, is it possible for you to be more elaborate on the key lever to drive further same-store sales improvement? The second question is regarding the U.S. market. We do notice the sales was looking right in the United market. However, localized sourcing would somewhat pressure your GP margin. What are your priority for merchandise supply chain and store expansion this year? What is the expected impact on margin improvement? That's the 2 questions I have.

Thank you. Our core level for driving domestic same-store sales in 2026 are clear. There are 3: the right IP, for example, the Jennie co-branded product, which can actually help to further consolidate our revenue and the brand impact. The second one is right product. The third one is right experience. Well, regarding the right product, we attach great importance to the product quality same as ASP, and we also open large stores to provide a good customer experience.

And it can also see that Jennie collaboration was first launched exclusively at MINISO Land and themed pop-up locations, creating fully immersive IP experience. The limited time pop-up at Home Land Plaza in Shanghai generated RMB 2.2 million in sales on the opening day alone, setting a new single day record for any MINISO pop-up in 2025. This not only validates extraordinary pool of our land format store as a primary destination for IP launches, it also demonstrates a fundamental truth. Prime offline experience combined with top-tier IP content are the golden formula for unlocking global consumer demand and maximizing the IP value.

As many of you may know, the Hang Lung Plaza is actually a top shopping mall, which is quite influential and all these stores and brands are the super luxury brands. We will be able to move into such apartment stores to launch our IP product. This represent the recognition from the top shopping malls and recognition from the top valuable consumers. While at the same time, the breakout IP product expand our customer reach beyond the existing audience, elevating average transaction value ASP and strengthen repeated purchase behavior.

And together with our store upgrades, they form a powerful virtuous circle, enhanced store format to provide superior suitcase and conversion environment for IP. Our IP product intend provide a targeted and highly loyal customer base, jointly driving sustained high-quality same-store sales growth. For us, IP business is never purely about selling product. We aspire to leverage MINISO global supply chain capacity, category development as per the omnichannel reach to give every great IP and every talented creator a bigger stage and to build a more enduring IP that stand the test of the time and earning long trust consumer affection.

And the Jennie collaboration is actually a new area we tap in of working with international well-known celebrities. In the past, we have the image IP and the content co- IP. However, the collaboration with Jennie actually showcased a new co-brand IP with celebrities, which actually provide ample room for the future cooperation. You see that for one of our peers, they actually have a co-collaboration with Lisa, which bring a great and extraordinary global value. By working with celebrities, we will be able to continue to improve and maximize the IP value. They are all the world top artists and the KOL. But at the same time, I also would like to share with you based upon our latest operating data, we expect domestic same-store sales growth in Q1 would be quite aggressive.

And in 2026, we hope that we're going to deliver more supplies. We hope more investors will keep a look at that and working with more celebrities in the near future. The second question you asked about is the product and IP strategy. We will continue to deepen our dual-engine approach of top-tier IP collaboration plus local market adoption. On one side, we'll intensify our partnership with leading global IP. On the other side, we will further expand our assortment on high-margin categories like home goods, plush and blind box.

Just now you mentioned about the U.S. market. In terms of the local direct sourcing, we will optimize our SKU architecture to focus on high velocity and high-margin items, achieving a better balance between store expansion and the GP margin. I was just traveled from the United States back. In 2026, we're going to have a more precise analysis on what products need to be sourced locally and what needs to be shipped there from domestic China. sometimes sourcing from domestic China will present high margin. In 2025, due to the volatile tariff policy, we actually released more room for local sourcing. However, in 2026, we believe the tariff turmoil has already gone. We will be more certain and clear on what are going to be exported from China to U.S. and we are going to have the localized sourcing.

Regarding the margin, let me to be frank, at procurement asset and headquarter sourcing, we need to further improve our efficiency, optimize the merchandise mix and then to improve the GP margin structure as a whole. Our target was to further improve operating margin in 2026 with a more pronounced recovery expected in H2 of the year and we provide a 6-month buffer in H1 of this year. I believe H2 of 2026 would be great, including our land store format. Internally, we keep a look at increasing ASP and also the price per item, we are working very hard in order to further improve the ASP as well as the price of the per product, same as GP margin per product.

Coming next, let's welcome Samuel from UBS. The floor is yours.

I'm Samuel from UBS. I have a few small questions. The first question, Mr. Ye. In your prepared remarks, you mentioned something regarding IP. I'd like to ask you regarding your proprietary IP. What's the progress on proprietary IP? What are the sales target and the strategic plan for 2026? What are the key third-party IP priorities? Anything you can share with us? My second question was regarding overseas market, that is specifically talking about Mexico market. In 2025, Mexico market faced headwinds. What is the outlook for 2026? My final question, I also would like to ask Mr. Ye. You mentioned you invested in an AI company. Can you disclose the name of that company?

Thank you. Three good questions. Let me respond to the first one. First of all, let me talk about our IP. First, starting by UU. With less than 6 months of its launch in 2025, UU has already surpassed revenue of more than 100 million milestone. And from January to March of 2026, UU-related sales was already RMB 165 million, around RMB 50 million per year. So according to this trend in 2026, for UU only, our sales would be RMB 600 million. If we also combine international market, it's going to be RMB 800 million or even RMB 1 billion, likely to hit RMB 1 billion revenue milestone.

The revenue was beyond our expectation. UU is actually a Chinese proprietary IP. If you take a look at our IP portfolio and UU is the first one to have a revenue exceeding RMB 100 million. It takes less than 6 months. There's no other Chinese proprietary IP that could run such a revenue growth fast as UU, which can truly demonstrate our product and IP operation tactics and strategy and our robust confidence and operations of the IP management.

Once we are working on that, we will be able to deliver faster growth. In terms of the product approach, we will carry forward the successful logic. We will define the structural landscape for designer toy market, maintain the category innovation as a primary driver of the IP growth.

All 3 product generation of UU released outstanding commercial results. First generation remained most popular. Till now, the average transaction value is still about RMB 400 today. And the third-generation product, the demand is to go beyond our supply. While at the same time, we also be clear that product sales are not on one dimension of IP management. We place great emphasis on healthy sustainable development of our IP. We will not sacrifice an IP longevity for the sake of short-term sales revenue.

And I believe 2026 will be a great year for UU, and we are very likely to have more products working with international outstanding IPs. For example, IP from the Disney family, they're going to have a co-branded work with UU. And that is how our proprietary IP working with the international IP for co-branding. Till now, we have completed a full pipeline of 30 to 40 proprietary IPs. Among them, we have IPs from South Korea, from Japan and from Thailand or even all parts of the world, especially Kumaru, [ Zhibao and Zzuzzu ] and have completed the full proprietary process from creative design to the product readiness, and they will be introduced to global consumer in months ahead. Through those pipelines, we aim to fundamentally reshape the market perceptions of MINISO IP categories and the product potential, creating more blockbuster IPs that deeply resonate with consumer needs.

I also would like to tell you on 17th of May, we're going to have the MINISO photo gallery put into operation in Shanghai. That is going to be another key artist we're going to work with. That artist one painting masterpiece can sell tens of millions of RMB. When our MINISO Art gallery has been put into operation, we're going to engage more artists to work with us. If we reflect on why UU's great success, I think we do 3 things right. First of all, we constantly hold to our core conviction of category innovation to drive explosive IP growth. Product innovation is quite important. First generation of UU is outstanding. The success of UU can really allow us to recalibrate our direction for product innovation and how category innovation is going to be for IP business.

MINISO has been deeply dived in the industry for many years. We have built world-class capacity in multi-category product development and depth of the consumer insights, that can help us to rapidly convert a creative IP concept into best-selling product. Secondly, we work on IP narrative first, product commercialization second, ensuring that IP develop its own soul and emotional resonance with consumers before products are launched to crystallize the value, not the other way around.

Thirdly, we built a fully integrated end-to-end closed loop from the upstream creative ideation to the back-end supply chain to all the omnichannel distribution, enabling rapid response to consumer demand and efficient product iteration and launch. The IP incubation model is also the way underpins our future capacity of next-generation blockbuster IPs. This is also MINISO's 3-part competitive mode, world-class category development capacity, early-stage IP potential detection capacity and high momentum multichannel global distribution capacity.

Those are the 3 strengths that will continue to empower the growth of our own IPs. As you may have already noted, our flagship and new land format store are having many UU installation. That is quite important for IP promotion. You know that we do have a store in Causeway Bay, Hong Kong. When we don't have our proprietary IP, we can only shop the Disney IP.

And the next month, we're going to have the UU artist installations at the store. And for any IP, you have to make sure expose IP, especially your proprietary IP at the store. That is our unique advantage of [ 8,000 ] stores worldwide with the installations and the UU presence in the store, that will be the best way to promote the IP at our own store and make it visible and touchable by the consumer. The third point regarding the third-party IP and proprietary IP portfolio, I have 9 words. more IP, more portfolio globalization. In other words, we need to have the global licensed IP plus the proprietary IP. International IP, they have their advantage. Some of them already have the same movie well curated content and their own strength.

Proprietary IP also having the tribute of scarcity. If it is only a MINISO proprietary IP, it's going to protect our business strength. By having international IP plus proprietary IP, that will be the best business combination. As we are working together, we will be able to make sure we have a stable business and more work to be done. For example, recently, we have the Journey collaboration, and we saw the Instagram moment on WeChat and the Xiaohongshu. If we only do proprietary IP, I don't think the popularity will be that good.

So that's the reason I believe multi-IP, multi-category will, for sure, improve the consumer experience and also contribute to the business stability in long run. We need to be forward-looking rather than shortsighted. We multiply validated third-party IP plus proprietary IP would be the golden formula. We hope you can see after 2 to 3 years whether my word would be validated by the market or not. Till now, we also contracted some incubation of independent original artists and we're also incubating the IP projects. Starting from '26 and '27 or beyond '28, our proprietary IP development is going better.

From the financial performance standpoint, proprietary IP outperformed third-party IP on gross margin contribution, owing to the stronger consumer loyalty, creating pricing power and absence of the licensing cost. The third-party IP in other words, is powerful complementary benefits in new customer acquisition, audience expansion beyond our existing base. It also provide us very good content marketing advantage. The two are highly synergetic together driving sustained and high-quality growth of our IP-related business.

You know that for MINISO LAND, the brand impact continued to ramp up. Many international IP are proactively take approach us of working together, even Jennie, the international top artist to work with us. Jennie has a nickname as Ms. Chanel because Jennie is actually the brand ambassador for many luxury product. Jennie has been happy with MINISO because of our strong brand awareness and customer experience.

Well, let me just turn to the question regarding Mexico market. I was just coming back from Mexico. I'm fully confident on that market. I believe it's going to be better in the near future. Mexico market is going to be the top 3 in the global arena. And you can see that I went to Mexico and I have a face-to-face guidance to the GM of Mexico market. We need to do brand operating in Mexico market, develop the land store format. We need to have the MINISO Land and Friends stores in the top 100 shopping malls in Mexico with GFA more than 800 square meters. In that way, the Mexico market is going to see explosive growth. You know that I went to Mexico, and they have 100 stores have brand Zara.

All those stores are being taken as group shopping malls. Mexico landscape is very much like China. The GDP per capita and consumption structure is very much like China with lower manpower cost. Mexico is actually in the best time for the offline business development. We hope Mexico could actually become a benchmark market we have in Latin American country. When Mexico thrive, the Latin American market would be driven. So we are fully confident in the Mexico market. And we have a high expectation of Mexico market.

And now we define Mexico market as our benchmark market. We will sell more effort and resources to make this market right. We have a very clear strategy for Mexico market. Same-store sales growth and future growth will be quite promising. My fourth point, you can see in Q1 of 2026, Mexico also have a high single-digit growth. However, it's still before the excessive growth of Mexico market is still taking the old business model, old store format. If you follow my line of thinking, I believe all stores could be transformed into Land or Friends stores. There's one store with Hermes, Chanel and Dior as the neighborhood.

And this store is just buy something unique and rather than the value for money. So I ask them, please just close down that store, retrofit it and sell the popular IP and the premier product. Mexico is being taken at the back end of the United States. People come to Mexico really want to shop something unique. We find that Mexico is a market with great opportunities. We find out Mexico have a great area of high-quality shopping malls and with a very strong traffic flow. So we're not going to sell the daily necessities. We're going to translate them into the flagship stores and selling the IP and the trending toys along with the immersive experience and to drive the interest consumption to improve ASP.

I believe after Q2, Q3 and Q4 performance is truly expected in Mexico. We will be able to retrofit our store in updated ones in top 100 shopping malls in Mexico. I believe the performance of that 100 store in Mexico will be doubled. Your first question -- fourth question was asking about our investment. We've been quite lucky. We invested in a company named MiniMax that is an AI company. MiniMax being applied at our company very well. And I also would like to continue to work with MiniMax. So we invested MiniMax when they still have a very low evaluation. Now the return is still looking pretty good. So the name of that company is Minimax. That's all.

[Operator Instructions] Let's welcome Runbo from CICC.

My name is Yang Runbo from CICC. Just one question from me. In 2025, it seems YH is pressured your margin and financial statement. What would be your plan for YH business?

Thank you very much. First of all, I need to clarify to all MINISO shareholders. My primary focus has always been and will always be MINISO. It's our foundation and the core driver of our future growth going forward. And it is also the foundation to make MINISO great. So you can see it and be reassured. 90% of my energy and time would be on MINISO. MINISO would always be my highest priority. My investment in YH will not distract my attention from that. Regarding YH, we have completed the management team transition with Wang Shoucheng be appointed as YH CEO.

Under his leadership, YH has its own complete management team that are now independently responsible for the day-to-day operation and strategic execution of the business. Regarding YH future, and we still feel confident for MINISO and me myself, I still would like to see MINISO still be my highest priority, and it is also the cornerstone for the company to further expand and making MINISO truly great. And I always noticed the market development and momentum of MINISO is quite unique worldwide. We will seize the opportunity to continue to ramp up our business and making MINISO great.

Coming Next, let's welcome from Shi Di from Huatai Securities.

I'm Shi Di from Huatai Securities. Congratulate on the company delivering a satisfying scorecard to the market, which is truly in line of the refined operation. Mr. Ye, you have already introduced a proprietary IP strategy. We have already noticed in 2026, you take it as an operating year for proprietary IP or the dimensional elevation for proprietary IP. What is the organizational structure of the proprietary IP team now? What pipeline and marketing initiatives should we look forward in 2026?

Thank you. We define 2026 as the elevation year for our proprietary IP, the foundational first step in the comprehensive organizational restructuring and top-level design of our IP business. We established a dedicated IP business group with full accountabilities from the IP value chain from creative incubation to product development to omnichannel operation. And actually, our leader of merchandise has been placed into the IP business group. So we're just using the very experienced people to take the lead of the IP business group, the best and most capable people to run the IP business. So you can already notice how important IP business would be for MINISO.

You can see that Derek used to see -- many people are just using new manager run new business is going to be quite risky. We still remain confident in our new business. We're just using the most capable and most capable team and individuals to run the new business. That's what we do at MINISO. The most capable individual and capable team of running the new business, IP business, and that business is fully independent and it is a new business group business.

Regarding the team build-out, we have completed targeted headcount expansion regarding IP operation, product management, creative design. We also established 2 new back-end R&D department, including CMF, color material finish and ink and color development. And we are among a few companies that started to enter into material study. So for our 20 toys, we not only do IP, we also do product design and material study and the color study and finish study. We strengthened IP product manufacturing from supply chain, building the product quality, continue to consolidate the foundation for long-term IP growth.

That's what we did in H2 of 2025. We have the fabrics and the raw material expert. And we have CMF, color material finish unit that is established in Dongguan, very close to our headquarter. Regarding marketing and communication, we were going to build global IP influence through a diversified range of applications, for example, attending International Art Fair and Fashion Week. And on the 17th of May, we're going to have the MINISO photo gallery including operation in one of the best art center in Shanghai. That also helped to showcase. Our standing within the artist community will continue to elevate. We're going to have our own photo gallery, not only one in Shanghai, but also a new one in Hong Kong because Hong Kong is actually the hub for global artists.

We're going to build such photo galleries in Hong Kong, too. By leveraging those photo gallery, we're going to engage with artists worldwide, continue to ramp up the collaboration and we're also going to leverage the KOLs to continue to amplify our brand reach. Last year for [ Tadikide ] as well as other international artists started to work with us for the marketing event. Even some of the short videos and the secondary creation has been quite popular. There are many secondary creation content of UU.

And you can also see that even within the secondary incubation or content creation, UU is actually ranking #1 among all IPs. The fans are quite active. Thirdly, at MINISO, we actually have the IP specific zones, translating the brand impact into actual sales in Guangzhou, and we also have the Artist Street that is accounted for 50 square meters GFA. We're going to allow new artists and new products being shelved in those new Artist Street by having the interactions with the consumer.

So I believe by so doing, we will be able to continue to scale our investment in proprietary IP incubation, creator ecosystem and back-end R&D capacity, or investment working for long-term healthy development of IP, not short-term traffic speculation. We focus on building high-quality IP that accumulate enduring brand value and generate sustainable cash flow cementing a robust second growth curve for the company's long-term future. So that's what the strategy we have now. In the near future, as we continue to improve our business capacity, we're going to have new IP and new strategies to truly unlock the value of IP.

Coming next, let's welcome Anne from Jefferies, please.

Mr. Ye, I have a question for your SSSG and what is the current SSSG same-store sales performance? What about the store expansion or site selection and also the operating margin level in different markets, especially in the directly operated stores in overseas. In the past, you are still in the investment stage. And when we're going to expect on the operating return improvement?

Thank you. I'm Eason, let me help to respond to your question then. I think for the past 12 months, our growth philosophy is getting more clear. Same-store sales growth as a foundation and new store expansion, especially high-quality ones as incremental upside, both are working in tandem. For the SSSG, our 2026 is to deliver a positive SSSG globally. It's quite challenging. However, we have ways to make it happen because in international market, we still have some agents stores. It's not easy to make their growth positive. However, have good assortment, we have every confidence we will be able to have it happen.

And regarding store expansion, I have already mentioned a net increase of 510 to 550 high-quality store globally as China and international markets serving twin engine for growth. In China, we plan new add 120 stores. Majority of them will be the land format and the large format stores. And we're also going to close down underperforming small stores and continue to optimize existing portfolio. So in 2026, besides the same-store sales growth, high-quality new store opened in '25 and '26 will contribute to meaningful in sequential years as they mature.

In China, we're still going to harvest a good growth but net growth store only need 120. For international market, net store growth will be 250 stores, covering North America, Europe, Southeast Asia and Latin America, deploy a combination of land format flagship store plus high-quality standard stores in prime retail destinations. As Mr. Ye mentioned, we need to move into the world-class business street to improve the brand potential.

Regarding North America, the same-store growth is already exceed 20% in January and February of this year. We will accelerate store openings in 2026. OPM is expected to have a low single-digit improvement. In Europe, since the start of 2026, we see SSSG grow by double digits. Store expansion is progressing steadily. For example, in Poland, we opened 2 stores, which is quite efficient, working on [indiscernible] Toy's only that is making [indiscernible] profits. In Europe, we have another 4 direct operated market. Those are still in the early-stage investment. We hope it's OPM could be improved further.

In Mexico, since the start of 2026, we will see SSSG growth be a positive number. And we believe Mexico with agent model is still providing a stable operating profit margin. Southeast Asia, we see some challenge. However, for MINISO, our business model is globalization. No matter some markets being challenged, we will be able to have our global expansion to diversify our investment portfolio, made some challenge in Southeast Asia. However, we're going to retain the positive for SSSG, working on Indonesia, premier location to have new stores. So over speaking, that SSSG and OPM trajectory across all key markets still remain healthy, which can also help to showcase we are still in the fast expansion and growth period. So for the key driver, there are 4 optimizing store, product upgrading pure expansion. And fourthly, we should also widely maintain the cost and expenses.

Next question, let's welcome Madam Xu from Citic, please.

Mr Ye, and management team, I have a question regarding Southeast Asia market. Southeast Asia market is the first start for international expansion. In '25, I made a visit in Southeast Asia. The performance of Southeast Asia market has been a concern of investors. What would be the inventory of the Southeast Asia market? And are you going to adjust operation and the product strategy there in 2026?

Regarding the question for Southeast Asia market, I think in 2026, there will be a huge adjustment. MINISO started our global expansion for 10 years. We made major investment in Mainland China. 2026, we're going to adjust the 4 key markets, Thailand, Malaysia, Philippines and Indonesia. In Thailand, we will be quite successful and the land format stores being delivered tangible results. Indonesia is going to copy the Chinese model. Southeast Asia are quite close to China and the consumption pattern is very much impacted by China. The lesson and success we made from China can help guarantee success in Southeast Asia. Recently, we went to Malaysia to have a MINISO Land store with a very nice performance.

In 2026, we're going to continue to copy what we do in China to the key market in Southeast Asia. I believe after the 2026 adjustment in H1, then in H2, Southeast Asia is going to provide you a good turnaround. We have a very clear strategy and a very transparent strategy. We're going to make the execution right.

Okay. We're going to accommodate the final question from [indiscernible] from Yangtze River Securities.

Mr. Ye and the management team, I'm from [indiscernible] Yangtze River Securities. I have a question to you regarding store renovation and upgrade program. Is it possible for you to tell us what would be the strategy for 2026? How many stores do you expect to renovate in '26? What's the result from the completed renovation so far?

Thank you very much. In 2025, we completed renovation for 290 stores. The result was highly impressive. Renovated store average sales uplifted by 40% to 50%. The improvement is not attributable to a single factor rather than a simultaneous improvement of foot traffic, conversion rate and ASP. They are all being improved. But at the same time, rent as a percentage to the sales has declined meaningfully, staff productivity and the sales per square meter rising significantly. Single store profitability has improved, too.

And more importantly, you can see last year, MINISO Land has been getting popular. And we also get great support from the landowner. They're happy to provide better locations and larger locations to allow us to have the land stores and the larger format with primary location, cheaper rent has been provided.

And in 2026, with our proprietary IP development, some of the shopping malls and department stores are happy to present the best location for us to do aesthetic IP exposure and the IP presence that can really showcase how scale the resources we would be in 2026. We're going to accelerate renovation and adjustment underperformed stores would be upgraded and be changed to the primary location. 2026 is a year for accelerated renovation.

I have already mentioned in the near future, 80% of the stores need to be renovated and upgraded. And with our proprietary IP development, in the near future, our stores are going to be quite unique, quite differentiated and they are going to be more influential in the landowner mind and be able to get a good leasing term. In that way, I believe they're also going to contribute to our business growth and profitability in China.

Thank you. Thanks for all the investors and analysts for your time for this conference. If you have any further questions, please reach out to the IR team. Thanks for your attention and support to MINISO Group. See you next quarter. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thanks for your patience, and also, welcome to join us for MINISO Group 2025 September Quarter Earnings Results Presentation. [Operator Instructions] We have already announced the 2025 September quarter performance early today, and you can also check our slides on investor relationship website.

First of all, we are very happy to have Mr. Ye Guofu, the founder and the CEO, and also Mr. Zhang, our CFO, to join us for the webcast.

Before we proceed, please refer to the safe harbor statement in our earnings release, and we are also going to make forward-staking statements. Today, we're going to discuss non-IFRS financial indicators today. And we have already included that into and explained that in the filings we filed to the regulators.

And we also have already adjusted it with comparable indicators reported by IFRS. Otherwise noted, all the currencies in this presentation are in RMB. In addition, we also include financial and business slides for this presentation. [Operator Instructions] If you are using Zoom Meeting, you will be able to see the slides on the screen. And you can also check for the slides after the call on our IR website.

Now let's welcome Mr. Ye to start the presentation.

Good day, and welcome to MINISO Group 2025 September Quarter Earnings Results Presentation. This quarter, the group continued to deliver accelerated growth with revenue increased by 28.2%, supporting the high end of our guidance. And you can see multi-key indicators, including same-store sales and adjusted operating profit, either met to exceed our prior guidance, demonstrating the resilience and growth potential of our business model.

Today, I'm going to walk you through quarterly performance highlights and share with you some of our insights for strategic initiatives. In September quarter, the total GMV grew by 28%, revenue increased by 28%. Same-store sales being accelerated, reaching mid-single-digit growth. Our 2 flagship brands, MINISO and TOP TOY demonstrating accelerating revenue momentum in Q3. MINISO brand grew by 23%, while TOP TOY delivered exceptional revenue growth of 111%.

On the profitability front, the group maintained a stable GP margin of 44.7%, and the GP margin approached to RMB 2.6 billion, grew by 27.6%. This quarter marked a significant milestone as our adjusted operating profit crossed RMB 1 billion threshold for the first time, grew by 40.8%, reaching RMB 1.02 billion. Our adjusted operating margin stood at 17.6%, show sequential improvement from Q2.

Coming next, I'm going to walk you through our quarterly performance across MINISO China, MINISO International and TOP TOY. Starting with MINISO domestic operation, revenue grew by 19.3%. The performance is outstanding, whether compared with China's total retail sales of the consumer goods grew by 3.4%, while online retail sales of the physical goods grew by 7.5% of the same period or measured against our previous guidance.

What makes me particularly proud is the growth was coming from same-store sales growth, indicating high-quality growth that is more sustainable with lower operational risk, reflecting our continued enhancement of MINISO's core operational capacity. Entering into Q4, same-store growth still remained robust with strong National Day holiday performance, driving low double-digit same-store growth for the entire month of October.

This quarter, we achieved a net addition of 102 MINISO stores domestically. Year-to-date 2025, we have accumulated a net increase of 21 stores. Our franchise base has already surpassed 1,100 for the first time. Since the beginning of this year, our franchise network welcomed new partners with diverse breakthrough and resources, enhancing MINISO franchise system, not only in scale, but also in business ecosystem sophistication.

MINISO China business has significantly outperformed the broader consumer market, fundamentally driven our enhanced systematic operation capacity, take Q3 happy holiday shopping at MINISO campaign as an example. Based upon the comprehensive data analysis across multiple categories during holidays and also weekend, we forecasted that toy would be the category with greatest performance elasticities.

Consequently, from the early product development to inventory planning, we allocated sufficient resources and capacities for toy category, and we also leverage the summer scenarios. For China front, we secured a prime location in top-tier shopping district with peak summer periods in advance of the PoPark stores, where for our regular store, everything from creative display merchandising to visual presentation of the promotion materials was deeply aligned with seasonal atmosphere and the core product highlights, achieving end-to-end customized operations.

Compiled with the TNT brand endorsement announcement in August, we ultimately created powerful strategies of the right type channel, right timing, right product and the right marketing, maximizing the growth potential of our summer toy category.

Turning to our international markets. In Q3, revenue exceeds RMB 2.3 billion, grew by 28%. Our international MINISO store network expanded at a net 170 stores during the quarter with year-to-date net addition of 306 stores. Our largest international market, United States, delivered revenue growth more than 65%, with same-store sales growth in a low double digit, exceeding our expectation. Our operational initiative in U.S. continued to strengthen and stable our long-term growth and continued to improve new store success rate, brand recognition and also with consumer retention across multiple dimensions.

Starting from this year, we have a store expansion committee structure and a clustered store opening model, opening multiple stores at the same time in different locations. This can actually improve the management efficiency, and also, with great brand exposure, attracting great consumer attention.

Year-to-date 2025, new member acquisition in U.S. market have grown by 100%. By progressively building bidirectional communication channels with consumer, we enable the companies to more precisely understand the consumer preference. Our membership program not only driven our revenue growth, but also providing critical data insights and consumer touch points for further enhancing repeat purchase rate.

Regarding the product assortment, our IP product launch cadence operates like the release of the same, different season and monthly features, providing freshness to the consumer and encouraging the store activities. You can see that for beauty, consumer electronics, food and beverage, mainly served to drive the basket attachment and repeat purchase once consumers are in store.

MINISO is committed in creating balanced product portfolio to achieve a more stable store operating model to address diversified consumer needs across different shopping occasions. The stronger result of the MINISO in both China and the U.S. market are giving us tremendous confidence in both international markets. Our experience in both major markets has provided proven systematic insights across 4 disciplines: optimizing store site selection, creating differentiated store formats, achieving precise product channel alignment and orchestrating full funnel market synergies, all of which can help to consolidate operational stability and long-term growth.

International markets represent our key opportunities for MINISO's long-term expectation. We will systematically replicate and scale up our validated operational framework to more countries and regions. Every initiative is facing on the long-term sustained profitability, ultimately unlocking tremendous potentials of the global markets.

TOP TOY delivered outstanding revenue growth by 111% in Q3, store account expanding a net increase of 40 locations, reaching 307 in total, including 292 in China, 50 outside China. Benefiting from the enhanced product competitiveness, particularly the rapid scaling of our proprietary IP, and it's actually achieved a very good growth, especially our proprietary IP, [indiscernible]. TOP TOY achieved a middle single-digit same-store sales growth in Q3 with significant gross margin optimization.

TOP TOY also continued to elevate store presentation, transforming proprietary IP into more immersive experience, continue to contribute to our owned IP and proprietary IP and brands. This quarter, we achieved 2 significant milestones. First of all, our global network store number already surpassed 8,000 milestone. And our brand presence is actually in key global markets from Asia to Europe, from Americas, from established commercial districts to emerging neighborhoods. Our product and service are reaching an ever-expanding consumer base, marking a new chapter for our global expansion.

The second milestone was our quarterly revenue crossing RMB 5 billion threshold for the first time, while a single quarter adjusted operating profit also break through RMB 1 billion mark for the first time. Moving forward, we will transition from scale-driven growth to a new development paradigm, emphasizing on both quality and scale, taking confidence and measured steps along the pathway of high-quality development.

Achieving high-quality development need strategic directions and sustained execution excellence. For the past quarter, both our channel upgrades and IP metrics strategy have delivered significant breakthroughs. On the channel upgrade front, our inaugural MINISO FRIENDS store that has been inaugurated in high mall in Shenzhen.

The FRIENDS format represent a crucial innovation with MINISO's channel upgrades with the following features. First of all, store design and product curation emphasize on IP content presentation, creating unique shopping experience akin and movie release schedules based upon the synchronized IP launch reason.

Secondly, leveraging MINISO's comprehensive category coverage and multi-IP metrics product development, MINISO has already become an anchor tenant for selecting shopping malls so that we will be able to enjoy primary location with favorable lease terms and more marketing support from the mall operator.

Thirdly, MINISO FRIENDS store positioned at accessible luxury store, designed for mid- to primary shopping center represent a strategic channel segmentation initiative for MINISO Group. Regarding proprietary IP, by November 2025, we have already contracted 16 pop toy artist IPs, building a rich and diversified owned IP portfolio with enriching IP value of our core objective.

Our first artist at trendy district has already been launched at Beijing Road Play Grand store in Guangzhou. Through comprehensive scenario-based renovation of the designated area of the store on third floor, we precisely embedded the exclusive bird view of our TOP TOY IPs. The competitive island area generated a sales performance exceeding a typical store's entire monthly sales result in just 2 weeks.

Furthermore, we created atmospheric installations and interactive elements that align the IP character personas transforming every space into extension of the IP storytelling. When consumer enter this immersive store environment, they not only experience the characters appeal and narrative depths of our system, but also deepen their IP understanding and emotional connections through the experimental touch point, facilitating meaningful transmission from product purchase to IP affinity, strengthening the emotional bond between consumer and IPs.

I believe over the longer run, MINISO's core competitive advantage in category architecture and IP portfolio will become increasingly pronounced. Geopolitical macroeconomic uncertainties represent universal challenges to all companies. We are already well positioned for that. MINISO maintained the industry's most balanced and diversified IP portfolio with IP assets spanning international renowned licensed properties, primary domestic content, proprietary IP across multiple development tracks.

Our extensive category cover enable rapid product assortment and also merchandising adjustment based upon the seasonal needs. And more importantly, we also have precise capture emerging trends and end-to-end channel control capacity, allow our operation to be more adaptive to the market change.

Looking to the future, MINISO will capitalize on the expansive opportunities with lifestyle consumption sector, driving high-quality performance through continued strategic evolution.

That conclude my remarks. I mean, next, I will turn the floor to Eason, who will walk you through our first 3 quarters' financial performance, please.

Okay. Thank you. Hello, everyone. Welcome to join us for our September quarter earnings release. In front of you is a wonderful scorecard, which is actually showcasing how we leverage flexibilities and high-quality growth to navigate the future development. So first of all, let me help you to review our performance against our guidance.

There are 4 guidance we provide you from revenue to SSSG and adjusted operating profit. We hit our profits. And there you can see actually regarding the guidance of the revenue growth. Well, for SSSG, we gave the guidance of a lower single-digit growth, but we made it mid-single digit. But a few points I'd like to share with you. For MINISO China, we made it to a high single-digit growth for SSSG, while at the same time for MINISO International, and we also made a middle single-digit growth. For TOP TOY, it also registered a mid- to high single-digit growth number.

It is also worth mentioning that many of our stores in international market are franchised stores. The control is less than the direct operated stores. But even against such a backdrop, we will be able to have a low and positive growth among our 3,000 stores worldwide, while at the same time, you can also see adjusted operating profit also registered a double-digit growth, reaching 50%, where for the adjusted operating profit margin, our previous guidance was a minor improvement month by month. But actually, we made a net profit, 17.86%. And the decrease has already been narrowed down from 2.3 percentage to 2.1 percentage.

From a revenue perspective, there are a few things I'd like to draw your attention to. First of all, 28.2% of the growth with RMB 5.8 billion revenue already go beyond our expectation. It's also the first time for the group's revenue to exceed RMB 5 billion. Our Q1 revenue growth was 80.92%, and also Q2, 23.13%, where for Q3, that was 28.2%. And you can also see that we foresee for Q4, the revenue growth would be around 25% to 30%, continue to deliver our commitment for a full year revenue growth by 25%.

Well, let me also dive into our operating segments. MINISO Mainland China revenue grew by 90.3%. MINISO International growth was 27.7%, reaching RMB 2.3 billion. TOP TOY revenue surged by 111.4%, reaching RMB 570 million, significantly exceeding our expectation.

Breakdown into domestic versus international, group's Mainland China revenue grew by 25%, and international revenue grew by 32.9%. We'll break down to different brands. For MINISO, as a brand with GMV close to RMB 35 billion to RMB 40 billion, and we'll still be able to manage a revenue growth by 23%. While for TOP TOY, the growth was more than 111%, as I mentioned.

High-quality growth is inseparable from SSSG. In Q3, SSSG performed good, which can help to drive the same-store growth by a mid-single-digit number, among which in Q3, MINISO Mainland China same-store sales achieved high single-digit growth. Overall revenue growth was approaching 20%. October continued a strong same-store momentum, reaching a low double-digit growth, while for international same-store growth was a low single-digit number.

Strategic markets like North America, Europe showing outstanding same-store performance. U.S. and Canada achieved low double-digit same-store growth in Q3, too. While for TOP TOY, same-store sales grew by mid-single-digit number, in line with our expectation. The improvement is because we captured the strategic and high potential product category with multiple sales opportunities.

We also optimized the product assortment. We leveraged direct sourcing and international market, enhancing the merchandise dollar capacity, while at the same time, we always focus on product, coordinating with frontline operation, strengthening the refined product assortment management, conducting customized product development and also create some regular best sellers.

More importantly, we emphasize on seasonal and holiday opportunities. We organized holiday plus IP-themed pop-up stores to stimulate the sales performance. Our directly operated market are the closest one to our headquarters management radius and also the first place where our strategies and adjustments take effect.

The domestic market is our largest, most mature, but also most competitive intense market. Achieving positive same-store growth in such a fierce competition market in China not only validates our effectiveness of the measures we take, but also reflect our rapid market response capacity and strong execution.

Through channel and store format differentiation, we continue to explore the boundaries of the same-store efficiency, continue to open up long-term store expansion opportunities. Excellent same-store performance has also emerged in our strategic directly operated market like U.S. Stores are the smallest profit-generating units, just like the sales of the body. Pursuing high-quality growth requires refined optimization of the store model beyond the traditional mall stores.

We also actively explore plaza store. We leverage scientific decision-making to be selective for store opening, cluster openings and refined store staffing, continue to optimize profitabilities for the stores, allow the smallest profit unit can fully realize the potential in driving future high-quality growth.

We are very happy to see that for our international directed operating stores, including U.S. and Canada, show significant Y-o-Y improvement in operating profit margin in Q3. We plan to first extend our China-U.S. success experience to Southeast Asia market in 2026. We will be in Southeast Asia market for nearly 10 years.

Markets like Indonesia contribute substantial profits to company every year. However, alongside the local macroeconomic downturns and the social unrest, we faced certain operating challenges, especially the need for upgrading channel product assortment, organizational and Thailand improvement.

The market optimization, we bottomed out this year. It's going to be the key focus of our strategy in 2023, and we are very confident to achieve success in those markets similar to what we accomplished in China in 2025. This quarter, the GP margin was 44.7%, used to be 44.9% same period last year.

Looking at the first 9 months of 2025, GP margin was 44.4%, which was 44.1% last year. And I also mentioned our GP margin has climbed from 27% in 2021 to 44% today, increased by 70 percentage points over 4 years. This improvement stemmed from, first of all, continued increased contribution from our international revenue and also upgrades and solid execution of IP strategy. As international-directed operated business continued to expand along with category structured adjustment between quarters, seasonal fluctuations are inevitable.

Going forward, we will continue to focus on balancing product price and volume. For IP product, we will persist in product innovation and value for money. And for non-IP products, we will emphasize product profitability and quality to price ratio, achieving better sales performance while maintaining overall GP margin.

For this quarter, deducting the equity payment expenses and incentives, our SBC grew by 33.7%, representing 27.6% of the revenue. It is worth noticing SBC, share-based compensation, altogether totaled RMB 176 million, significantly increased compared with the previous period, primarily due to the TOP TOY equity incentives plan.

The selling expenses, excluding SBC, grew by 36.5%. The increase was because our international-directed operational store investment, including the labor cost, leasing, depreciation and optimization grew by 40.7% in Q3. Well, you can see in Q1, this number used to be 71.4%, and 56.3% in Q2. So you can see directly operated store, their selling expenses growth has been clearly slowed down, while at the same time, the directly operated store revenue growth was close to 70% higher than the growth rate of the related expenses with significant deceleration because of our continued refined operation and strict expenses management.

Well, coming next, let me also touch upon YH. Our investment in YH began to impact our financial statement last quarter. We accounted for these transactions using the equity method. The YH investment affect our net profit by RMB 146 million this quarter, which has been included from the non-IFRS financial metrics.

Well, let's also talk about effective tax rate. With IFRS categories, our effective tax rate was 33.9% compared with 24.8% same period last year. 33.9% of the tax rate sounds to be relatively high, but it's not the true tax burden. It's primarily due to the share-based compensation and YH losses, where those items can't be deducted pretax under the tax law, but they actually didn't generate income tax relief, resulting in a higher effective tax rate on our financial statements. These expenses totaled around RMB 320 million. If we're excluding those impacting the nonoperating related items, our adjusted effective tax rate was 22.8%, 1% lower than last year.

Let's also talk about profitability. Adjusted operating profit grew by 40.8% and reaching RMB 1.02 billion. Those were actually showcasing our operating quality. Adjusted operating margin was 7.6%, down by 2.1%, but a great improvement compared with Q1 and Q2. The decline in adjusted operating margin was due to the structural changes of the revenue composition.

Looking at each of our major business segments, operating profit margin were either flat or improved. For example, international directed operating business maintained a high operating profit margin by a low single-digit number. China franchise business and international agent business have a flat growth, but why we see a 2.1% decline, the key reason is because international-directed operating revenue proportion continued to go up.

The business profit margin still facing some gap compared with asset-light franchise and agents business model, causing dilution of the overall profit margin. But you can see as U.S. and Canada already have the directed operating model, the operating profit margin for international-operated -- directly operated business will continue to improve, especially we see low double-digit growth of the U.S. directly operated business going to bless the local profit margin, but we are operating in different countries and regions. We inevitably face profit fluctuations due to the regional economic and social environment.

Our team is still young. Capacity needs to be improved, but there is significant room for growth. Q3 adjusted net profit grew by 11.7%, and adjusted EPS grew by 12.7%, adjusted EBITDA grew by 90%. The Y-o-Y also accelerated by quarter-by-quarter, but adjusted EBITDA margin was 23.4%.

For the working capital, our inventory turnover remained robust and efficient. As of Q3, MINISO brand inventory turnover was 87 days compared with 104 and 94 days in Q1, Q2. You see our inventory efficiency improved in Q3. And at the same time, as of September 30, our cash reserve was RMB 7.77 billion, remained robust. And our net cash flow from operating activities reached RMB 1.3 billion with a net cash -- net profit to cash ratio 1.7. Capital expenditure was RMB 330 million. Free cash flow was RMB 970 million.

In first 9 months of this year, net cash flow from operating activity was RMB 2.01 billion, exceeding adjusted net profit for the same period. Capital expenditure was RMB 770 million. Free cash flow was RMB 1.55 billion, demonstrate our high-quality profitability, efficient working capital management and our stable business, providing fuel for our future high-quality development.

Last, but not least, I'd like to walk you through the outlook. Despite pressures and challenges in the micro consumption data, we remain confident achieving full-year guidance, having a 25% full-year revenue growth and RMB 3.65 billion to RMB 3.85 billion in operating profit. We see Q4 revenue grow by 25% to 30%, with China and U.S. same-store sales achieved double-digit growth.

For the full year, we expect the China and the U.S. same-store grow by a mid-single-digit number. We expect Q4 operating profit will register double-digit Y-o-Y growth. Operating profit margin will still decline due to the revenue structural changes, but the decline would be modest, close to Q3.

North America is about to enter into peak shopping season. China Q4 will maintain rapid growth. Even continued macro weakness in Southeast Asia may bring some impact, but our global business layout will diversify our operating risks. We will continue to talk to the capital market regarding the progress and the expectations.

Thank you very much. Thank you. Let's now move into Q&A session.

[Operator Instructions] First of all, let's welcome Michelle to raise a question, please.

Congratulations on the company's high-quality performance in September quarter. I have 2 questions. My first question is regarding domestic MINISO business. From the macro perspective, since Q2, despite consumption slowdown, we still see that MINISO's same-store sales and overall revenue growth continue to be accelerated. Particularly, we noticed the company seemed to have accelerated the rollout of the new store format. For example, Chairman Ye mentioned the MINISO FRIENDS as a new format. In your previous interview, Chairman Ye, you also mentioned you are going to renovate 80% of your domestic stores. Can you share with us the current progress of those store renovation, the targets? What about the unit economies? Anything you can share with us? This is actually my first question regarding domestic MINISO stores.

And I also have another question regarding international outlook. Just now, Eason walked us through the Q4 outlook. Is it possible for you to elaborate on that because Q4 is always a peak season. Last year, we saw some adjustment. While for this year, enter into Q4 peak season, is there something worth noticing regarding inventory preparations, marketing, store operations? Can you share your work on the next year international strategy planning? Those are the 2 questions I have.

We are extending the space. We upgrade from the small to large with greater frontage and better display space. The larger stores truly provide consumers with a better experience with more display space, larger, more attractive displays. We want to give more consumers a wonderful shopping experience. Moreover, opening large stores has a higher barrier to entry. Only MINISO's extensive IP portfolio and category place can truly support a large store format. If you don't have enough IP and product category, you won't be able to accommodate large stores.

Our 2025 channel optimization achieved initial success, and we have accumulated systematic methodologies and experience. However, the number of the optimized store isn't large yet. In the upcoming years, we will proactively plan and implement store optimization work, hoping that we can optimize more stores next year. The pace of the store renovation would be gradual. We are not going to rush for that.

Most importantly, we need to have the right location selection. Many existing stores already have a good profit margin. We will advance our strategy based upon the lease and the new store site selection.

Thank you, Michelle.

Let me just give a few updates. In the first 3 quarters, we've relocated and expanded and optimized more than 200 stores. The optimized sample store show significant store efficiency improvement, maintain healthy sales per square meter and the rent-to-sale ratio declined by a low single digit. This can help to driving high performance while achieving win-win for both companies and franchisees. Both parties have seen revenue and profit growth from the optimized stores. Store optimization will become a regular part of our channel expansion work.

Well, regarding the outlook of the Q4, a few points I'd like to share with you. I think the September ordering conference was very successful with record high ordering amounts. 5 categories each exceed RMB 100 million in orders, and all specialized sections broke historical records. Category were quite evidenced.

For IP merchandise, we have a strong creative outlook, where for value for money products, we continue to enhance cost and pricing competitiveness. Well, additionally speaking, our international, localized IP design and category implementation has already been improved. For example, the Mickey Merlion limited edition launched in Singapore in October, an airport store exclusive that perfectly match channel and merchandise. The product has extremely scarcities and differentiation. It actually created a new single store record.

Our executive bearer was even asked by tourists at the airport to borrow her passport so that they can purchase more Mickey Merlion product from initial market insights to creative design to logistics support to integrated marketing every step worked closely, demonstrating IP merchandise store operation and marketing capacity integration. This is a very good and replicable IP operation model.

This above demonstrated deeper collaborations between IP partners across entire value chain, including channel, product, operation, design. This month, Zootopia film would be released worldwide. And yesterday, Director of the Zotopia was also providing us very good comment on MINISO pop-up store by weaving ourself design product. We remain confident about long-term international opportunities.

MINISO's achievements in both China and the U.S. market over the past years give us strong confidence in international market growth potential. The practice in the 2 major markets have provided us with proven systematic insights, optimizing store opening decision mechanism, creating differentiated store model and to be precise to have the product channel matching and full funnel marketing synergy.

International markets are MINISO's core potential field for the long-term growth. Those proven, systematic, operational framework will gradually be replicated and extended to more countries and regions with every step centered on long-term sustainable profitability. And ultimately, we will be able to steadily release the tremendous global market opportunities.

Next question, let's welcome Lina from HSBC.

Can all of you hear me?

Yes, please.

Eason and Mr. Ye, congratulate on company's IP strategy success. I have a question to you. I know that IP means a lot for your same-store sales growth. There are some pulse-like growth where we know that for many of the investors, we really would like to know how sustained your growth would be when you just do IPO? Your product category are quite similar to Muji. But how are you going to comment on the non-IP product, especially from the existing suppliers? For example, if you're going to benchmark with Muji, Muji also registered a very good growth in China for the past few quarters, I'd like to ask you, how sustainable the growth would be? What are those categories that are going to register sustained growth in the near future? What would be your plan?

We can see within the consumer conception, the most important and the best one is interest-driven consumption. And you can also see the most promising one is also the interest-driven consumption. Consumers no longer just pursue product functionality contributes, but also value the aesthetic identity, social labels, killing experience and spiritual satisfaction behind the product. That would be the ultimate pursuit for consumers.

Going forward, consumer will pay for passion, pay for emotions. This interest-driven, emotionally connected consumption demand has higher stickiness and prime space and also becoming the company's core lever to navigating circles and building differentiated competitiveness.

The IP transformation is not abandoning our existing category advantage, but rather IP plus core categories do well drive, allow our 10 years of accumulated experience to unleash greater value. Our supply chain resources covering the home goods, cosmetics, stationeries, [indiscernible], toys and snacks, along with the mature multi-category product development capacity, which are a great way to support our IP strategy implementation.

MINISO is a very unique business model worldwide. IP empowerment isn't only about single point best seller, but also the full scenario penetration. Our product development capacity's key is understanding category and better understanding how IP can empower categories rather than printing a logo. For example, since November, MINISO's seasonal product has grown very fast, plush socks, scarves and gloves has captured and converted the traffic brought by IP.

Our original key category are the perform [indiscernible] store. Essential categories, including home goods, cosmetics and stationery products, contribute our traffic -- stable traffic and repeated purchase, where IP is a growth catalyst, enhancing product design appeal and the brand pioneer through collaboration and same sale rules. We can also leverage IP popularities to boost the core category sales. The model is quite unique because single IP brands lack multi-category supply chain support, making full scenario coverage difficult.

Traditional general merchandise brands lack mature IP development and operation capacity, but our 10 years of accumulated multi-category supply chain plus IP-integrated development capacity allows IP to rapidly penetrate into high-frequency consumption scenario, where key categories can leverage IP to break through the growth bottlenecks. Ultimately, forming a healthy growth structure of having essential category men traffic and category boost to profit.

Let's also welcome Mr. Wei, Xiaopo from Citi.

Can all of you hear me? Yes, great. My first question is quite forward-looking. Just now, I see Eason has already provided the guidance for the Q4 performance. As Eason, you are quite conservative about the guidance, so I think I don't have any doubt on that. But a question I may have is that U.S. business has a strong Q4 seasonality, where Q1 in 2026 will see seasonal declines.

In your prepared remarks, you also mentioned you are improving your operational efficiency to buffer the seasonality impact. Is it possible for you to share with us from Q4 2025 to Q1 2026, whether the so-called seasonal decline trend would be similar to last year or narrow down compared with same period of last year? This is my first question.

My next question, Mr. Ye, you mentioned about the China IP go for international market. You have already signed 16 artists. Then you're probably going to bring those IP outside China. Mr. Ye, according to your experience, in international market, for Chinese IP go for international business, how long will it take to develop them there? And whether it's going to hurt your profitability?

Let me just respond to your questions regarding the seasonality of the U.S. business. And Mr. Ye will answer the second question. I think the questions are well raised. For the past 3 to 4 years, especially starting from 2021, and we started to work for direct operated business in U.S. Q1, generally speaking, is a low sales season in U.S. The store sales in low season will be around 10% to 20% lower than peak season in Q4. This is the common practice of the U.S. retail industry, but how we can iron out the seasonalities.

One thing is store operation, where another thing is the store opening. You can see that our U.S. store, they do have a very good experience. A key takeaway is that in Q4 of the previous year, you have to make sure your stores being well prepared for presence.

In Q4 of this year, we're going to have all the stores ready and not open new stores next year in Q4 in order to make sure that all stores are well in place in the first 3 quarters of every year. For example, in 2026, when I tell you how many stores we're going to have in U.S.? We need to make sure at least half of those promised stores are already been contracted.

This is also a common practice in retail industry in U.S. In Q1 of 2026, you see we have a very nice store opening growth to iron out the seasonality on scale, where on the other side, regarding the business operation, we're not going to smooth out or iron out, but we are going to follow the trend because the essence of the retail is to capture and satisfy the consumer needs.

For U.S. and the European market, they do have a very strong seasonality and the festival attributes. This is something we can work on. For consumers, they have very different needs in different seasonality. For example, Black Friday is coming. It's the peak season for consumers to spend, and the consumer willingness to consume were peaked. We have already made inventories ready. We have worked on the supply chain, making sure we have enough inventories to take care of the shopping festival needs from the consumer.

And you can see in U.S., Q4 is still going to register good growth. We're not going to give up on the golden growth opportunity in Q4 just because of seasonality difference compared with Q1 of next year. We're going to leverage the seasonality dividends, having good marketing, seasonal disciplines as well as strategic inventory building, translating seasonal fluctuations into an exemplifier of our business. This is how we respect the market and also be able to continue to follow the retail development.

Well, you can see that MINISO brand Chinese IP overseas will definitely leverage our unique advantage, not letting China IP to go it alone. We're going to leverage our past licensed IP experience and massive IP portfolio for mutual empowerment. For example, on first of this month, MINISO Canada National flagship store has its grand opening. Such a prime store provided best stage for IP going overseas, representing a key milestone for MINISO global IP strategy.

The Canada National flagship store open day sales again broke North American new store open sales record. Such successful opening was inseparable from the IP catalyst. The event was featured by [indiscernible] surprise, triggering people to check in and purchase the product. Coordinating with this store opening, our gifted bear family made its overseas debut with very cute and lovely design that filled with the opening atmosphere as a joy for energy.

The Chinese IP go for international market is not starting from 0. It was standing on the shooter of the giants to -- for steady growth. We have every confidence leveraging our store resources worldwide and a very successful experience to bring Chinese IP international wide.

Coming next, let's welcome Samuel from UBS, please.

I have a question also concerning U.S. market. Recently, no matter for the capital market or investors, we find out the U.S. consumer market has been relatively weakened recently and especially the performance of the retail market in U.S. was not looking right. I would like to ask you, what do you see in the U.S. market, especially in October, what would be the SSSG in U.S.? In that way, how you're going to find your own measures? And also, for U.S. market, specifically, how we're going to look into a full-year revenue and profit guidance for U.S. market?

I'm Eason. Let me just respond to your question. U.S., indeed, we see some of the high-frequency consumption data, especially credit data consumption from the U.S. was quite weak. But it was actually external macro environment pressure that it cannot be avoided. What we can do is to strive to be the best of ours and give our all.

I have already mentioned to you the 3 strategies being mentioned. For example, the thing was to take care of the holiday, early preparation, sufficient inventories and good adoptions. Now, we have already been prepared for the decorations ahead of the time, finished creating holiday shopping experience. And the store inventory is more abundant than last year.

We expect that the U.S. Q4 revenue growth would be a low double-digit growth, where for Q4 revenue growth would be 50% to 55%. The same-store growth will be low double-digit growth. Well, for Q4, I think the scale growth would be slower than Q3. It's because we are slower than last year for numbers of the stores opened and the cadence, but still, the profit is going to generate a healthy growth. Thank you, Samuel.

Let me also welcome Xu, Xiaofang from Citic.

I have a question regarding your proprietary designer IP. I can surely feel the company investors and the consumers have a high expectation of a proprietary designer IP. Looking to the next 3 years, how the designer and the proprietary design IP may look like? Are you going to have a designer ecosystem organizing the trendy toy communities exhibitions, where you invest in the secondhand market?

By end of June, we have already signed 9 designer IPs. And by Q3, we signed 16. We are proactively discovering highly potential original toy art IPs globally, working hard to build MINISO trendy toy IP landscape. When there is one IP breaks out, it will definitely show exponential growth. The upper limit for proprietary IP volume is anchored to the trillion level interest to consumption market. Generation Z has already become the key consumption force, close to RMB 260 million of them, and their annual consumption would be more than RMB 5 trillion, and they are happy to pay for emotional value. And -- but at the same time, proprietary IP growth always have the risk backstops.

We continue to test market through small batch trial sales data iteration, but adjust our design style and the category based upon the market needs and feedback. Such model allow proprietary IP to grow steadily within a very safe trial and error framework, avoiding traditional IP incubation pain points of high investment, high risk and unpredictable returns.

We're going to continue. Where for MINISO, we have a great advantage, full category coverage, omnichannel penetration, global layout, full funnel operation. Our stores themselves are theme park ecosystems. MINISO LAND and MINISO FRIENDS has a checking area with proprietary IP characters, placing IP characters sculptured model in the most prominent areas. We also have audience zones like Shiba signing event. And we also have the dedicated product display areas and interactive activities like the gifted bear family plush [indiscernible] that you can see when you visit MINISO stores.

Products are key in IP ecosystem. Good product doesn't consume IP, but actually enhance IP value. Yu Yu second-generation ring [indiscernible] has excellent sales with the product innovation and liability maximizing secondary creation attributes. In marketing, MINISO plush festival gifted bear mascot performed supporting store opening activities, and screens in store checkout areas play cute gifted bear family in cartoon clips in snow form that can help enhance IP exposure and strengthen IP personalities and images.

Coming next, we're going to have Runbo from CICC.

Maybe we will move to our next analyst first. Let's also welcome Shi, Di from Huatai Securities. Can you hear me?

Yes. My question is regarding your China business. I find out your store format is more in retail, including the SPACE, LAND and FRIENDS stores and flagship stores. And can you break down on the appropriate proportion structures of different store types in sequential expansion plans? And for your store renovation and upgraded stores, how it's going to drive your domestic business growth?

In the near future, we're going to have 2 kinds of the store models, different models are going to have different VE and logo. The first one is the Wonderland and the regular stores for -- we leverage meaningful space, meaningful land and meaningful land to provide people a Wonderland experience. But at the same time, we also have the regular stores, benchmarking the higher tier and the newer tier cities, asking for the prime location, where we're going to make sure it can cover as many as the traffic possible.

Looking at the quantities and different store types, more will still be the flagship stores and existing store location optimization expansion, where we have 2 logos for the regular stores. We have 2 store types. When consumers come to our store, when they look at our exterior design, they will surely understand what are those MINISO LAND, FRIENDS and SPACE, what are the regular stores, where at the same time, we can see still -- we're going to continue to work on the flagship store and the store door renovation, where we're also going to leverage our brand priming and bargain power to leverage the best location in the commercial districts and continue to upgrade our channel.

We're also going to leverage 8,000 stores to have a good and high-frequency consumer feedback to provide us the market data and continue to empower our channel upgrading and also lay a solid foundation to further improve our product performance. So that's the reason starting from this year on, our store type is going to be more diversified.

Well, at the same time, even for the MINISO, we have MINISO SPACE, MINISO LAND and MINISO FRIENDS. And in the near future, we're also going to have the Super MINISO. Well, for regular stores, we do have the regular stores, small stores, car parks and also the train station stores. By so doing, we're going to be more focused on our IP strategy and making sure we really roll out the product for the price to quality product, which will make our store presence more clear to the consumer, which will also create good space for our IP strategy to continue to navigate the market development.

Coming next, we're going to have Runbo from CICC to raise a question.

Can all of you hear me?

Yes.

My name is Runbo. Congratulate on the continued optimization of the company. And 2 questions. First of all, I see your domestic business continue to go up with more larger and well-performed stores being demonstrated. What would be your next year business development and your store number forecast?

My second question, for outside China, especially outside China, U.S., what would be the retail market you see now? Do you see some pressures? What will be the regional difference -- performance difference?

I'm Eason. Let me just respond to your question. In China, we have already confirmed, in China, we are going to seek for high-quality growth, inseparable for the store growth, where in China, we have a mid-double-digit or even high-double-digit growth, which would be supported by SSSG improvement.

Well, for this year, our internal KPI assessment also introduced SSSG and hoping that we're going to improve our performance in 2026. The SSSG target for 2026 are not being confirmed yet, but we hope we can have the best-in-class SSSG in our industry.

Regarding international business, in Q3, the international market that performed weak are the third-party agency markets, especially in Southeast Asia and Latin American markets. There are some macroeconomic seasonalities. For example, the local currency exchange rate fluctuations and also the consumption tax changes. But we are happy to see that from beginning to now, the terminal GMV growth is much better than our shipment GMV growth. In other words, our agency inventories would be quite healthy. They can still travel light in 2026.

In some key markets, like Southeast Asia, GMV already been accelerated in Q3 with a double-digit growth. And we also see there are some comparable listed companies in Southeast Asia, say October consumption stay improved, but we're still observing the performance. Thirdly, we will also be proactive in adjusting the product assortment channel. Many of our investors have already joined us for the order meeting with the new heights being achieved.

I surely believe those high order would continued to be converted into revenue contribution in the next few quarters. More importantly, we are very confident that our success in U.S. and China proven our business ability and resilience. We have every confidence to that.

For overseas market, we do have the direct sales and agency business. Direct sales would be something we can reach first, which can actually showcase our key market sensing capacities, fast response, where agency market, it was somewhat not easy to be well managed, and we are adjusting the assortment and the channel. We have already identified the root cause. Let's leave more time for further execution to improve the performance.

Final question, Anne from Jefferies. Can you hear me?

I have 2 questions to you. Now, you see your equity incentives plan was registered a high number. Eason also mentioned there are some equity incentives from TOP TOY included into Q3 performance. Is it possible for you to share with us regarding equity incentives plan? What are the KPIs inside? And how it may look like in next quarter? Will you continue to have such equity incentives in the next few quarters?

My second question for TOP TOY, I think your drafted prospectus has already been filed. What would be your IPO schedule for TOP TOY? What would be the relationship between you and the TOP TOY? I know you may have some related party transactions. And many of the profit and sales being given to TOP TOY. But once TOP TOY has been IPO-ed or spin offed, what will be the relationship between the 2 entities? And how can we protect the interest of the stakeholders of the MINISO?

For this quarter and the next quarter, the expenditure was relatively high due to the equity incentives plan for TOP TOY. As you have already mentioned that for TOP TOY, its revenue doubled this quarter, significantly exceeding expectation. We believe excellent team in excellent sector combined with incentives, they can release more growth potential.

TOP TOY has always been MINISO's fully consolidated subsidiary. So MINISO shareholders were also benefited from TOP TOY's high growth. The IPO plan is advancing now. We will inform the market when any progress being made. Both industry and the TOP TOY brand are in rapid development period. As a leading player, TOP TOY's market share continues expanding from user to category to region. We continue to explore the boundary. TOP TOY also see abundant market opportunities. The only reason for IPO is hoping TOP TOY can become stronger and continue to expand its business, fully capture the broad opportunities in the trendy toy market. Okay.

Let me just give one more comment for Anne. Internally, we actually made some long-term discussion. There's no better strategies to advance by having both entities, MINISO and TOP TOY, would be the best strategy. We can leverage MINISO's full category and omnichannel operation and global presence along with TOP TOY as a specialized trendy toy brands. The trendy toy market is growing very fast with explosive growth rate. I believe both business would be able to let our business to be the top one in the dual market.

You were worried about SBC expenses. It's going to be RMB 100 million for this quarter and another RMB 100 million for next quarter. It's actually a normal accounting that after we have been IPO-ed. For MINISO, in 2020, after IPO, you can see that SBC and the team equity incentives plan, it's going to be diluted and amortized a few quarters after the IPO, and it's going to have higher IPO in the first few quarters, but going to be smaller in the next few quarters.

Ladies and gentlemen, we conclude the earnings call for September quarter. Thank you very much for your participation. If you have any follow-up questions, please contact our IR team. I wish you a wonderful weekend. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]