Topsports International Hold Stock

Welcome to FY 2025, 2026 Annual Results Presentation of Topsports International Holdings Limited. I'm Rebecca, Head of the Capital Markets of the company. Please allow me to introduce you the management team with us here today. They are Mr. Yu, Chairman, Chief Executive Officer and Executive Director; Mr. Zhang Qiang, Senior Vice President; Ms. Zhang Huijing, Vice President; Mr. Ding Chao, Vice President; Ms. [ Yu ], Vice President.

For today's session, Mr. Yu will first provide opening remarks for a brief recap of the past financial year. Then the management team will walk you through the financial performance and the business progress, followed by a Q&A session.

Ladies and gentlemen, please allow me to welcome Mr. Yu for his opening remarks.

Good morning, dear investors and analysts. Very happy to meet all of you. Welcome to results presentation. Over the past year, the market environment remains under pressure. The industry is going through a phase of structural adjustment. Consumer demand has become more rational and cautious. The channel formats are evolving rapidly and the competition has intensified. The whole industry is now facing [indiscernible].

However, we have always believed the challenges often open up windows of opportunities to value and build capacity. The fact that has been able to weather the pressure and maintain steady operation is a testimony of our clear and consistent strategic direction, the pragmatic execution of the entire team and continued from our partners.

This year, we stay focused on our core business with emphasis on increasing quality and efficiency. On one hand, we optimized our store network, sharpen our focus on single store operational quality and deepen the integration of online and offline channels into refined operations while exploring incremental growth.

On the other, we deepen user value through professional services, [indiscernible] experience and community engagement, solidifying our core customer base. At the same time, we kept pace with the new wave of consumption trends and quickly secure strategic positioning in key segments such as [indiscernible] outdoor anchored by our one-stop operational capacity, we are now building competitive for the future.

Looking into the long-term capacity building, we have continued to advance the application of digitalization and artificial intelligence across the entire business line to drive efficiency, laying a solid foundation for sustainable development.

On the operational side, we have remained firmly committed to our responsibility to the shareholders, deliver long-term and stable returns through solid cash flow and consistent dividend payout. I would like to sincerely thank for all the investors and analysts for your continued attention, trust. and [indiscernible].

Next, our management team will walk you through the full year financials and operational progress across our business in detail.

Thank you. Let me welcome the. Thank you, Mr. Yu. Let me start with a brief overview of our financial performance for the full year. Overall, we delivered in line with our plan and expectation. First of all, affected by sluggish consumption demand and fluctuating offline traffic, revenue declined by 4.7%, reaching RMB 25.7 billion.

Second, the gross profit margin declined by 0.4, reaching 38%. The negative factor was the deepening of the discount rate driven by the change in revenue mix.

Let's take a look at the story behind the [indiscernible]. As discussed with you during the interim results, we do see a change in the revenue mix, specifically higher online contribution led to deeper retail discount rate. in, we have more sales from the online channel, which will impact our discount rate, while at the same time, on the positive side, the lower inventory [indiscernible] together with the revenue mix. I was talking about the wholesale and the retail business, meaning a lower wholesale contribution and a higher retail contribution, while retail carrying a higher GP margin than the wholesale partly offset the negative drag. So the net gross margin declined 0.4 Y-o-Y to 38%. However, we have the two positives being able to help to offset the negative.

The third point, our overall selling, distribution, general and administrative expenses continue to decrease by 6.7%. The flexibility and efficiency of our omnichannel layout, together with prudent expense control helped to drive the SG&A expense ratio down 0.7%, reaching 32.4% Other income declined by 49% during the period, mainly related to the government incentives, and largely consistent with the broader industry observation.

Excluding other income, core operating profit up 0.1% Y-o-Y basis, driving the core operating profit margin up to 0.3 reaching 5.6% the profit attributable to equity shareholders decreased 1.5%, reaching RMB 1.6 billion. The correspond special dividend [indiscernible]. To the interim dividend, the total dividend amounted to 2%. The dividend payout ratio was 71% [indiscernible] H2 revenue declined by 3.7%, Secondly, by channel, the retail revenue was down by 2.7%. Wholesale revenue was down by 0.6%. This trend was largely consistent across H1 and H2 of the year.

Thirdly, by brand, the sales of the key brands declined by 4.2%, reaching RMB 2.3 billion. The sales of other brands decreased by 7.4%, reaching RMB 3.2 billion with the other brand performance primarily affected by the leisure sports brands. Overall speaking, the performance sports category continues to clearly outperform the recreational sports and leisure on Y-on-Y basis [indiscernible] trend has been continued [indiscernible] with let's take a look at the expense ratio. During the period, the revenue declined by 4.7%, but the total expense was also down by 6.7%. The expense ratio was down by 0.7 reaching 32.4%. Against a challenging backdrop, our omnichannel layout online together with cost efficiency management helped to mitigate the operating expense pressures on the side.

The total expense declined by 12.5%. The rental expense ratio was down by 1, the largest contributor to the overall expense ratio improvement. There are several factors behind the same. First of all, on the channel side, we continue to streamline our network with control and efficiency enhance efficiency of new opening and renovation also improved on a Y-o-Y basis. Mr. Zhang is going to provide detailed remarks on that.

The channel mix shift with online contributing a higher share of the total revenue. On staff cost, we kept align with our omnichannel building an agile and efficient that strengthen our cost efficiency edge. The total number of employees down by 18%. The total staff cost decreased by 0.3%. The staff cost ratio declined by 0.2 reaching 10%. This trend, as you can see, was more pronounced in H2 of the [indiscernible] year. which is also consistent with what we shared with you at our interim results in October, mainly the cost efficiency benefit from the organizational effect in first half of this year would gradually flow through over time.

So in other words, in H2 of this year, we see a more pronounced improvement where other expenses decreased by 0.6%, including the depreciation of the plant and equipment services from the e-commerce platform and logistics. The ratio of other expenses rose by 0.5 peak, primarily due to the fast growth of online channel sales during the year, which resulted in higher related platform operating costs.

From an overall business, the operating deleverage from the fluctuating traffic. However, this impact was offset by the continued optimization of our network and the rising contribution of the retail online business.

Now let's turn to our net profit Y-o-Y analysis. Look at the net profit waterfall on the left, the negative contributor to the net profit decline in the gross margin on the right side. You see there are factors [indiscernible] net profit was the decline of the gross profit and the decline in other income, but largely offset by the lower total expenses and reduced net financial costs and income tax expenses.

Looking at the Y-o-Y changes in the net profit margin drivers, the decline in the gross margin and the decline in other income were the negative factors where the lower total expense ratio and reduced net finance cost as well as income tax contributor [indiscernible] despite the 4.7% revenue decline, the net profit decreased only by 1.5% Y-o-Y. The net profit margin improved by 0.1 reaching 4.9%.

Now let's move to our operating working capital efficiency, during the year, inventory management was still the top priority for the company guided by the principle of maximizing inventory efficiency, we managed and [indiscernible] the full omnichannel network. Inventory decreased by 8.6% Y-o-Y. The inventory turnover days decreased by 3.5 days reaching 131.4 days. If you take a look at our track record, 131.4 days and the turnover is already the lowest level in the past financial year. The trade receivable increased by 78% [indiscernible] days up by 0.7 days, reaching 40.8 days. The increase in the trade receivables was mainly due to the timing mismatch of the Chinese New Year between 2026 and 2025. Chinese New Year 2026 fell later in February, while the Chinese New Year 2025 fell in January, which leads to a relatively large Y-o-Y increase in trade receivables.

As of end February 2026, due to the mismatch of the Chinese New Year timing, the trade payable increased by 17.4% over day up slightly, which is consistent with what we saw last year, 8.5 days. In terms of the operating working capital efficiency, despite the Y-o-Y revenue decline, our average operating working capital as a percentage to the revenues remained flat Y-o-Y, indicating we have largely maintained efficient working capital management.

Ladies and gentlemen, now let's turn to our cash generation capacity. The net cash generated from operating activity was RMB 2.3 billion, down by 27% to because we released the report last night I received many inquiries from investors regarding the reason of the net cash generated from operating activities down by 27%. The priming of the New Year between the 2 years, which led to [indiscernible] receivables and corresponding impact on operating cash flow.

In the same period of last year, the Chinese new requirement difference has been that been a positive contributor. So -- as a result, the main a factor between the 2 years 1.16 billion impact from the operating acts they will end Well, you can take a look at the actual Y-o-Y increase in the net cash from operating activities during the period, it was RMB 1.03 billion -- the compare rates RMB 1.16 billion against RMB 1.03 billion, you can see the tie 300 gigawatt [indiscernible] few years. was the most important factor, including the operating cash flow performance, [indiscernible] billion. We are a retail company, there will be government impacted from the timing [indiscernible]. If you take a look at our track record, similar organic also appeared in fiscal year 2021.

Again, driven by Chinese media filing, mismatch and redouble. So what was happening in the past fiscal year has also then from the trust. Free cash flow was RMB 2.44 billion during the period that dividend payouts were CNY 1.67 billion, representing 55% at the beginning of the per cash. [ Star ] cash was CNY 1.57 billion. [ Sandfire ] and cash were CNY 2.44 billion and that cash was CNY 1.17 billion.

During the year, we continued to maintain cash generation capacity. We in the final part of the financials, please allow me to walk you -- let me just walk you through the underlying logic of the capital allocation.

Underpinned by our cash generation capacity, our capital allocation framework consists of three priorities. First of all, supporting organic growth. Secondly, investing in expansion opportunities. And thirdly, delivering strong cash returns to the shareholders. We have constantly followed this framework as you can see from our dividend payout performance.

Looking at the actual cash position during the year after meeting the funding needs of the two prior, we still retain ample cash reserves to support the future business growth.

On the right side of the slide, you can see our free cash flow was RMB 2.4 billion, representing 1.9x the net profit of the [indiscernible], recommended last year, the dividend rate. [ Compared ] [ with ] the whole still having a high dividend payout ratio. [indiscernible]. We aim to continue driving healthy cash flow through efficient operations, creating sustainable value returns to the shareholders. This concludes the financial review. Now I'd like to hand over to Mr. Zhang for the business. Thank you for your data.

If we look at 2025, consumer confidence index remained at a low level, total retail sales of consumer goods at low and volatile pace. The recovery of the consumption remains relatively slow. Consumer become more cautious in their purchasing decision. This created a direct market pressure on sports industry, a common challenge faced by all.

That said, challenges comes with opportunities against the fact of a softer pace each government such as performance for old already emerging trend driving for continued to demonstrate a strong growth momentum. These three issues, consumer demand is operating towards intimate product under no experience and advertise orderer. [ Ektos ] performed the transformation as they contain the channel and operations. traffic operations has been cited from a 5-year floor-based and preplan portal to refine 80 operations that combined trade and to certificate involved the one is at equipment. [indiscernible] target consumer and improve our has become corporate out consumer fulfillment ads has also become more diversified.

The revenue rise of the emerging online channel has aided a highly double China structure drive proposed transaction fulfillment as importing to a simple transition module is to diversify [indiscernible] and on-site model. The overall prudent will be work and plan and a decentralized legal channel diversification advising market contracted updated product demand through the operating loss requiring us to active adopt, reflect and refund.

Only by proactively embracing industrial chain, the strengthened the [indiscernible] so is the competitive investment to achieve the sample [indiscernible]. Same challenges from the structured [indiscernible]. Topsports continue to strengthen our core operating capacity, we lay a solid foundation for long-term study development.

During the year, we report our operational regarding give us aside to navigate market volatility. We have constantly created efficient event management and solid cash generation capacity at our [ cool ] lever, ensuring a steady operation in complex environment. We have enhanced our omnichannel [indiscernible] leveraging more than 4,000 cases or created a base conducting them with online trend and [indiscernible] operation. We have built an extensive and a consumer race.

Those stores are not only terminals, also brand experience revenue, community and [indiscernible], accumulated a user base of more than 90 million with a solid purchase foundation among purchasing users is our most valuable core asset. We continue to deepen our private domain operation strengthen emotional connection with us.

At the same time, we have deepened our brand strategic cooperation, building a portfolio of more than 20 brand partners across by forging strategic brand partners through diversified models, including wholesale distribution, joint operation and investment. We have continued to strengthen our digital and AI capacity to optimize operational process and enhance decision-making efficiency. Through the above strategic purpose, aim to become a trusted one-stop on operation partner on the format, achieving mutually beneficial outcomes with our partners.

Now talk about omnichannel layout. We continue to solidify and implement omnichannel retail framework. Our core store as a foundation, fully covering the three major consumption areas in and connecting with online channel including e-commerce, private domain operation, local and retail to help the traditional stores to complete their omnichannel capacity upgrade. We have built a store and online operating model. They now serve as hub for public domain traffic acquisition, private domain user accent and online, which can also help to cushion and the pressure from the external environment.

More importantly, we have built a testable equation and stable omnichannel operating capacity. In terms of the early store layout, we pit resource pit with new business approach. Our [indiscernible] arriving on single profitability and the strength and onetime synergies across tools. We maintain a prudent and the disciplined pace of store expansion are being live by and the strict control in [indiscernible] quality were [indiscernible] differentiated different operating and renovation of the existing [indiscernible] with operational efficiency at our earning call, we gather our adjustments to each brand positioning project of [indiscernible] group and the product feature, applying one brand, one strategy is to continue to optimize overload to success.

At the end of February 2026, we operated 4,250 directly operating stores. Total sales accounts down by 30.1%. During the year, we opened 201 new stores fewer than 458 in the 5-year period. However, the newly opened store and the renovated stores outperformed the pipeline last year with both 861 stores, significantly lower than 1,282 in the billion.

The loss reduction from the closure was much better than last year. The store [indiscernible] grew by 3.9%. [indiscernible] compete paid than 7.2 [indiscernible] in the prior year. Focuses on our process of the proficiency and sell search profit. Resulting on more streamline resources allocation, the capital expenditure decreased by 22% on a Y-o-Y basis.

With some [indiscernible] the core value of data control is portal retail investors during the provider, we are optimizing and operating foundation of office. We are site differentiating the strategy to expand the omni-channel operating capacity have pace with evolving consumption trends and new growth opportunities. We ramp up content conduct due to cost metrics on the interest agreement consumption leverage heat product combination to reach more customers base improve the model as itself.

At the period end, we operated more than 700 accounts on to and the way that the channel. Different credit domain of pension in ops, it's not only a self-driving, but also a core area of sinter and holding value. We have 3,700 program stores where we have built a service call close through committee operation and that as a data-driven insight for prices recommendation enhanced the user sickness and conversion.

At the high, we strengthened our intrastate capacity to lead the consumer needs to ready to pay at any time here at hand in February. We have 3,800 stores now conducted to test retail. We have also partnered with localized service platform using online vote of our reduction model to drive traffic reforecast traffic pressure. Giving the omnichannel operations [indiscernible] continued resolution of the retail capacity. So in appetites on upgrading [indiscernible] management and retolerate our operations with petiole the omnichannel retail capacity sense.

On the product side, we continue to expand the product share situation is an online [indiscernible], upgrading our omnichannel product operation model followed by digital antipolitics management will achieve an chain ventilation. In during those product growth, it can online as like higher integral efficiency with fully patient operations for the entire omnichannel system. [indiscernible] about our impact to that is a paranoic came dedicated to the sort to interpret four key actions. Smart SOP, single-office model management, diagnostics and knowledge base. Precisely addressing the core practical leads in daily store operations, including asset management, business review, optimization and delay, rebases the sole management no longer revised many data finance.

In fact, data is proactively delivered and petition intelligently utilities. We have also made the complexities of omnichannel retail management is to standardize the daily website. The [indiscernible] hub in the collide stop to assess operations active and advocate investor base but also outlook can go to potential and comprehensive they elevate the independent operating capacity of the store personnel.

To sum up, in a complex market environment, our active exploration and omnichannel retail to cushion the revenue decline. On top of that omnichannel inventory management and accelerated proactive channel optimization adjustments along with prudent expense control helped to ease operating leverage pressure.

Average workforce productivity increased. The staff cost ratio for the year decreased by 0.2, inventory decreased by 8.6% and inventory turnover days decreased by 3.5 days with improved inventory turnover efficiency. The estimated rental expense ratio, including rental from operating lease and depreciation right assets decreased by 1, reaching 11.2% profit revenue and steady cash flow by enhancing quality and efficiency through omnichannel operation all a solid foundation for the company's long-term sustainable development. That concludes my part. I will hand over to Ms. Zhang Huijing who will walk you through our initiatives and progress in user operations and digital intelligence.

Thank you very much. Ladies and gentlemen. Regarding the user operation, [indiscernible] has continued to build diversified value potential and healthy user relations. During the year, we focused on two main pillars, user acquisition and activation deepening member value, driving user growth and member value through segmented operation and innovative privilege comping our omnichannel user growth loop.

We refresh our membership team system, upgrading from the previous page, including [indiscernible] 5 tiers [indiscernible] Legends. The new mandate resonate with the mandate for container optimized as structures extending the proportion of the wet December, making the overall [indiscernible] structure [indiscernible] healthy, we also roll out innovative offerings like unlike group cards and brand [indiscernible] cards, operating the basis for payment to an costliness effectively retain high-value consumer courses. We have implemented five member segment.

Designing differentiated privilege of matrix and algorithm strategy for users and different here, more differentiated needs. With assort movements the first-day customer attend the end customers, brand loyal customer and set plan consumers, enabling the [indiscernible] precession operation together around the development we deploy innovative again such as transaction from production a and the treasure for to drive upgrade purchase Well, for the upline invested installations and [ Astea ] channel life may [indiscernible] strengthened omnichannel with [indiscernible] invite through all the initiatives, our total customer base did CNY 90 million contribution of the repurchasement maintained at 70% or high-value loyal cost base was grow steadily. For that, were heterosis into the quality of our operations.

In terms of the Artificial Intelligence [indiscernible] AI capacity building as a strategic priority with the aim of moving from experienced to intelligence, building a hard and providing technological under for the company's long-term development. We firmly believe that operating scenario, including multi-brand, multi and multichannel together with our extensive user base, providing arena for AI to leverage its scale and efficiency advantage.

Digital and AI capabilities has already become part of our core competitiveness.

Our digital and AI strategy is built around 5 five value chains, including merchandise operation and supply chain, omnichannel retail operation, operation and marketing, operational and management decision-making and manage guided by the principle of efficiency and measurable and actionable outcomes apply AI technology to business full spectrum digital intelligence capacity from frontline to management decision-making. We are focusing on advancing core applications and to deliver the efficiency gain and results realization, ensuring that digital and AI capacity the business growth and embedded in every operational business. In merchandise operation and supply chain, supported by an AI-powered intelligence management and we will be able to fully optimize process of production and pricing, facilitate inventory management, improving inventory efficiency, driving intelligent upgrade of the merchandise operation.

In omnichannel retail operation, we have built a smart campus successfully optimizing the match efficiencies of people, products and achieving efficient user outreach and conversion. In user operation and marketing, we have built [ AIGC ] content factory and pre marketing system through AI-powered content production at scale, we have connected omnichannel membership privilege with multiple scenario road operation workflows on user lifetime value and drive sales conversion.

In operational and management decision-making, we have established a unified data platform and intelligent decision-making courses, consolidating full business data and completing system upgrades, significantly improving operational efficiency and accuracy in business analysis. general management, we have rolled out the knowledge platform and function-specific AI applications, improve assets and empowering organizational efficiency. We developed the proprietary AI tools across different scenarios steadily building [indiscernible] AI-enabled ecosystem that can help to build our moat based upon AI.

Now I will pass on the floor to Mr. Ding, who will share with us the breakthroughs and progress in innovative strategic position. Thank you.

Thanks for Madam can see our core business, we have also actively expanding our core business boundaries with focus layout in professional segment, advancing establishment and operational capacity upgrades to seek for mid and long-term growth opportunity.

Today, consumers have shifted from a basic functionality to a pursuit of performance across emotional value. Niche market like running and prime outdoor strong momentum, become the key growth driver of the whole industry, which also represents a clear opportunity for us to expand our bond.

We focus on two core segments, running and prime outdoor and systematically building our professional operational capacity through brand strategy, content communication, omnichannel operation and community precise and the minds of the building in China, leveraging our existing outdoor business operation. We are focused on strengthening prime outdoor professional capacity. During the year, we launched the boutique store at Beijing and pop-up Shanghai Center successfully validated the store model, workflow and service standard [indiscernible] brands. In terms of the running segment is a flagship brand building.

We continue to engage [indiscernible] [ can ] [ also ] help validate the potential of [indiscernible]. During the year, we also launched limited localized [indiscernible]. We also tested beyond building experience for future category expansion using running as a foundation to reach a broader consumer base.

In our running layout cultivate local culture dedicated scenarios and connections deepen our bond with [indiscernible]. To date, we have running culture brand located in China. We opened our first multi-brand store in Shanghai. It's a hub for [indiscernible] [ running ] host running and community activities, building reputation and growing into an influent running lifestyle platform for brands in early stage for us for flagship brands such as flagship cases more market [indiscernible] reach a broader [indiscernible] professional brands, but also valuable capacities in operation and creation, solid user and brand partners foundation for long-term development in the [indiscernible].

Going forward, we are committed to becoming a one-stop platform for entering China market, providing both mass and niche segment consumers with diversified product choice and high-quality sports experience will continue to bring momentum to the development of the Chinese sports industry.

Today, driven by the combined factors of support technological upgrade and rising consumption demand, the sports consumption industry landscape continues to evolve. Competition is becoming more intensifying, adoptive addressing various challenges, continue to strengthen our core through forward position and efficient execution. On one side, we deliver comprehensive high-quality service to the consumer.

On the other side, we drive collab brand partners, constantly creating long-term and stable investment return for the shareholders. Looking in the future, there are going to be direct for First of all, prioritize operational efficiency with the core business [indiscernible] position and optimize professional segment and upgrade core capacity.

Third, empower digital intelligence to deep omnichannel digital transform and implement fourth, pursue win-win [indiscernible]. I now hand over to Rebecca, to show our sustainable development.

Thank you. Thanks Mr. [indiscernible]. Within this financial year, we continue to defend our sustainable development and actively promote green consumption as well as the development of the circular economy, our efforts environment, social and governance dimensions working with our brand partners to explore new approaches to low carbon value chain.

First of all, on procurement and collaboration, we have continued to drive low carbon [indiscernible]. During the financial year, our Scope 1 and Scope 2 GHG emission decreased by 40%. However, during the past year, we made steady progress our Scope 1 and 2 GHG emission by 60%.

We also conducted our first climate analysis. But at the same time, in consumption and lifestyle through public welfare such as green we promoted green we collected close to [indiscernible] [ on ] [ governance ] and [indiscernible] in diversity and inclusion, employee and supplier integrity and compliance, strengthening our internal foundation for sustainable development.

In addition, our ESG performance has been recognized by external institutions. Our [indiscernible].

This concludes today's results presentation, ladies and gentlemen. [Operator Instructions].

My name is Xiaopo from Citi. I have three questions. The first question, in April and May, people started to feel uncertain about the overall consumption trend. Is it possible for you to share us the operational progress for April and May?

680 shopping festival is ready to be started. Is there any strategies for discount rate you can share with investors for the 680 shopping day?

The second question, a key brand you are working with the U.S.-based brand. Mainland China sales was down by 20% from March to May of this year. We would like to ask you, do you have any new observation or insight within that company for China operation? How long does this aggressive destock initiative of that brand [indiscernible].

The third question regarding the dividend payout. The company to [indiscernible] the free cash flow. So free cash flow is actually [indiscernible] payout ratio 37%. Near future, whether the company is going to prioritize dividend payout ratio or absolute dividend?

Thank you, Mr. Wei. Let me respond to the question one by one. First question, the spring festival of China, the demand from the whole industry has been slowed down compared with January and February. I have to admit the sales pressure compared with H2 of the fiscal year. Our retail [indiscernible] you asked about inside 680 shopping festival. 680 shopping festival started from very early on. We see many of the merchants are courses. So the discount rate would be consistent with what you saw last year. The second question, you were asked about key.

Brands we're working with [indiscernible] . At least according to our observation, that brand is already adjusting its performance in Greater China region aggressive localized would be a key strategy for them. brand has already initiated a strategy named China design. They also adjusted [indiscernible] structure. I think that brand, they really want to build a localized capacity connecting product design, sales and marketing. However, regarding the product, they have two initiatives, local creation and the local merchandising and operation.

For local recreation, the local fast response team and product R&D team has been upgraded into a localized innovation and R&D center with correspond changes. I think that brand is trying to build a more localized merchandise fast response organization. And also they're trying to build a localized product that can respond to the local market the China market rebound and be able to manage the [indiscernible] [ that ] [ terminals ] and more to the user. That's my answer to [indiscernible].

Please allow me to answer your third question regarding dividend payout. First of all, like to thank the investors and all the [indiscernible] [ we ] do have a very healthy cash [indiscernible] [ the ] upper limit of the [indiscernible] [ hope ] I can answer your question. Dustin Wei from Morgan Stanley.

I would like to ask about the pricing [indiscernible] [ that ] the product. What the trend to the full product to be slowed down. So from the whole industry the inventory is going to be optimized [indiscernible] this is my first question.

Second question is regarding channel for the format. I think for the past few years, the company closed [indiscernible] [ square ] meters [indiscernible] [ rental ] I also have a question regarding the guidance [indiscernible].

Let me respond to your first question is the product for the whole industry, the inventory quite kept at a high level. In H2 of last year, we optimized our inventory down by 8.6%. Our overall inventory is well controlled. So from the discount control [indiscernible] [ you ] need to consider our own inventory structure. You also take a look at the discount in the market. I think However, we also see the external [indiscernible] [ is ] giving priority to season and full use of making sure we improve the sales of the product. That is the priority of [indiscernible] as long as you have a good stream, you will be able to lay a solid foundation for the future [indiscernible].

Regarding to your second question, you asked about the store. Last year, we closed more than 600 stores in this year, we're going to narrow down the store closure. The reason is because every year, we need to take care of those underperform stores or the stores performed after years of [indiscernible] are quite cautious and prudent in opening new stores. We are also testing some new store format.

For example, in stores and [indiscernible] in stores. We continue to identify new opportunities to grow our business. I think the whole market is also to professional stores and segmented stores. And we also started to build our own running multi-brand running stores to embrace market and capture the right other store format to take a look at the sales per square efficiency and then to have a periodic review to make the that we can maintain a healthy store format.

The third question is regarding the property rental fees. The higher the property rental fees everything to do with the output of our single perspective, we also [indiscernible] [ supporting ] the stores with omnichannel operational capacity, providing traffic features from the online channel to overcome the fluctuation of the traffic in the offline channel.

For that, first of all, we're going to talk to the property owner against the existing backdrop of the market, we already have some supportive measures from the property owner. Some of that will happen within this fiscal year. Some will be materialized in next year. That can actually help to improve our expense ratio to improve the profit of the stores. So for rental fees on one side, we need the property owner support. And we also need to leverage our own store performance to improve the sales.

[indiscernible] regarding the [indiscernible] [ and ] prudent for short run and optimistic for the long [indiscernible] [ the ] keeping the [indiscernible].

My name is [indiscernible]. I have two questions to the company. First of all, you have two key brands working with. What will be the performance and operation in the year 2026 and fiscal year 2026? And I noticed for the brands, the last year declined more aggressive compared with the key brands mentioned some major brands perform pretty great. Are you going to have some new measures for those brands?

The second question is the channel. In the fiscal year 2026, you closed more than 600 stores. So as you adjust the operations Y-o-Y qualified data you can share with us. And I think the online performance 2026 will be much better than. What would be the online channel performance revenue contribution and how the online channel be differentiated from one to another breakdown you can provide to us?

And the final question regarding the new fiscal year guidelines, what the guidelines for expense ratio and margin [indiscernible]?

Let me respond to your first question. Your first question for the two key brands, operational I think you can read it through their financial release. We're not going to comment on that. But at the same time, we invest more for outdoor opening stores. So we will always be able to adjust our store according to the dynamics of the market and narrow down under.

The second question you were asking about the [indiscernible] store closure I think your third question is asking about the online performance, right? Let me just share with you something on that. Online business was increasing to some extent that the traffic impact in the offline. Online business divided into two parts. The first one is the public domain e-commerce. And the second one is the private domain e-commerce. And we see that our online performance related to the store are performing the best.

You asked about more breakdown for the guidance we provide to the market. I think I have already mentioned some of facing the challenging environment and many complexities from the market, we have to make dynamic adjustments. So it's not the best time for us to provide any absolute predictions now. However, we're going to leverage our own performance improvement and to mitigate the pressure on the revenue. That's the principle [indiscernible].

Sorry, I would like to respond to one more question regarding the sales per square meter and the profit of our stores. Let me see after the store structure optimization and adjustment sales per square meter and profit of the store are all on Y-o-Y basis.

Ladies and gentlemen, we would like to accommodate the final question. Let's [indiscernible].

My name is [indiscernible] from Securities. I have two questions. I like the one. The first question, as we can see in the previous fiscal year, your sales and your sales expense going down, but improving, whether this is going to be the trend for this fiscal year.

My second question, it seems that the corporate income tax rate has been reducing. So I would like to ask you for the corporate income tax, what the rate might be for this fiscal year.

Let me have to respond to the two questions. First of all, regarding the expense ratio, while the sales expense ratio, the expense sales expense ratio is directly linked to our store format and structure adjustment along with the [indiscernible] expenses, we have some [indiscernible] [ 2027 ], we will still have [indiscernible] income tax, I think I have already shared the mid and short the rate is going to be around [indiscernible].

Ladies and gentlemen, we don't see any further questions from our online channel. So ladies and gentlemen, I would like to thank you again. Thanks for all the investors and analysts. Thanks for joining us for this results presentation. The management has already worked through our management as well as the business landscape in the presentation. In the follow-up road shows, we're going to continue to talk to you and please keep in touch with our IR team. Thanks for coming.

[Audio Gap] we continue to stabilize the business. You can say that now, besides the price, we can also see that value has already become a key focus of maturity of the consumers. -- where you can see that we also continue to see the emerging of the new consumption scenario, which is accelerating the evolution of the consumption structure to some extent. We believe that good products need compelling stories to support them. We also need effective presentation method and the life cycle management to truly convene the value of the brands and products. Currently, industry opportunities still exist. But seeing those opportunities has become more challenging than before. Against today's backdrop, Topsports has remained committed in advancing our core strategy and actively adapting to changes in market conditions and consumer demands. Externally speaking, we continue to expand our brand partnership ecosystem and evolve our capacity metrics.

Internally, we persistently refine our omnichannel retail agility as well as operational efficiency. Despite the challenging external environment, we'll still be able to achieve our planned performance in H1 of this year. Look ahead, of the second year, we will remain a product business approach while keeping a resolutely optimistic attitude we will gain marketing sites from Kotak perspective, respond to external challenges with great agility and continued to engage top sports role and value within the industrial ecosystem.

Next, I will hand over the floor to Rebecca, please.

Thank you. Please allow me to update you on the financial performance for H1 as yet. Overall speaking, we achieved our planned performance as expected, which has been mentioned by Mr. Yu, which also exceeds the market expectations we observed from the capital market from the revenue perspective, affected by the weak consumer demand and apply traffic fluctuations, overall revenue declined 5.8% to RMB 12.3 billion. By category, retail business declined by 3% Y-o-Y in H1 of this year. Wholesale business declined by 20.3%.

By brand, core brand sales revenue decreased by 4.8%, reaching $10.8 billion, where other brand sales revenue declined by 12.2%, reaching RMB 1.4 billion. The performance of other brands was primarily affected by lifestyle sports brands. Though overall performance of the specialized vertical brands remain the best comprehensive sports and live sports category. At the GP margin level, specific impacting factors, including One negative factors and the 2 positive factors. Regarding the negative factors, we have a deeper discount rate Y-o-Y, which have a negative impact on the GP margin, which is also indeed the same as what we mentioned to you.

There are a few factors leading to the infection. As you can see, that still we have an ever-increasing number of the business. And especially in China, the online sales discount is more than what we have for the offline channel. So that's the reason the online channel sales continue to go up, which will indeed have a negative impact over the GP margin as a whole, while at the same time, as we have already mentioned, the deeper discount is being further ramped up but still compared with the second half of fiscal year 2025. There's a Navota. Meanwhile, we can see the revenue from the retail business contribution started to go up where you can also see that the brand partner support that can also be supportive to our GP margin with the 2 positive factors to some extent, is diluted the active factors burden.

So in other words, resulting in the overall GP margin declined only by 0.1 percentage reaching 41%. And the percentage ratio perspective during the period, revenue declined by 5.8%. Total expenses decreased by 5.5% with expense ratio only increasing slightly by 0.1%, reaching 33.2%. In the challenging environment, we hope to allegate of operating expenses pressure through the omnichannel deployment and the refined cost efficiency management.

Overall estimated rental expenses from the value perspective is being decreased by 12.1% on a Y-o-Y basis. rental expense ratio declined by 0.8 percentage points, which was the biggest contributor to the overall expense ratio control. First of all, for the offline channel, we continue the structured optimization in offline channels to reduce losses and improve efficiency, where with operating as well as openings and renovation efficiency improved on a Y-o-Y basis. The second point is channel mix changes. The online and light channel indeed performed different for GP margin and cost. Online channel has a lower expense ratio, where we have more revenue from the online channel. It also helped to further lower the overall expense ratio.

Regarding the employment, we maintained a staffing line with omnichannel deployment needs, building an angel and efficient Thailand tape line to consolidate our cost efficiency advantage. Overall, employee head count decreased by 16% Y-o-Y total employee cost decreased by 5.2%. The expense ratio has been quite stable, only increasing 0.1 percentage reaching 10.5%. There are mainly due to 2 reasons. First of all, we aim to provide a long-term development support to quality talents where average productivity improved during this period, but at the same time, we also made organizational efficiency optimization work in H1 of this year, which will be demonstrated in cost efficiency going forward.

Other expenses increased by 1.6% on a Y-o-Y basis, mainly including property, plant, equipment depreciation, platform services, logistic services, where you can see that with rapid online business sales growth during the fiscal year, the corresponding platform operating expenses also increased. From an overall business progress perspective, net factors mainly include operating negative leverage impact from the early traffic situation, where this impact was partially offset by continued optimization of the EFI network and increased the proportion of the online rental business.

Let's also take a look at the net profit changes. The trajectory from the net profit trend chart on the left, you can see the main factor affecting the net profit or decline in GP margin and impact of other income. Well, the remaining items, including total expenses, the net financing cost and the tax expenses provided a positive contribution where you can also see on the right side of this slide. The GP margin deduction along with the decline in GP margin, a slight increase, the expenses ratio and the decline in other income were negative factors where net financing costs and tax expenses provided positive contributions. Excluding the impact of other income, net profit declined by 6% over Y-o-Y basis. consistent with 5.8% Y-o-Y basis, while our net -- our net profit rate was only being reduced by 0.3%, reaching 6.4%. And continue to further improve the negative leverage that may impact our overall business operation. Coming next, let me just discuss our working capital efficiency.

During the fiscal year, inventory management has been our key focus. We adhere to the principle of maximizing merchandise efficiency, conducting omnichannel inventory circulation management inventory amounted to decrease by 4.7% with increased tenor days increased slightly from 1.7 days to 100 reaching 150 days. Trade receivables reduced by 1.5% annual days declined by 3.5 days, reaching 12.6 days. Trade payable decreased by 64%. Turnover days declined 6.5%, reaching 8.2 days payable related to the merchandise procurement reduced, which will also lead to the inventory reduction at the end of August.

Regarding the working capital efficiency, the revenue decline continued to be same, but average working capital as a percentage to revenue remains flat. We continue to maintain essential efficient working capital management.

Let's now move to the cash generation capacities. Net operating cash flow was RMB 1.35 billion, down by 48.2% due to a few factors. So let me just share with you those factors. There are 2 reasons. The change was mainly due to the different the Chinese New Year timing between the 2 years, which actually have $1 billion of the receivables and trade be. And first of all, let me see, regarding the receivables, in H1 of this year, we need to calculate the Y-o-Y difference from Satara August of this year regarding the operational capital. So it's actually 6 months comparation.

So performance in Fibra been essential, while at the same time for February, the performance will be impacted by the Chinese Spring Festival. In Take, the festival was in February. So the peak sales reason, the cash collection happened in March of 2024, but actually in 2025, a pre-festival works in January. So the peak cash collection happens in February of 2025. So that's the reason the month-on-month perspective, you can see that receivables by the end of 2025 February is lower than what we have for the same period of 2024. So indeed, for receivables, different Chinese New Year timing between the 2 years, affecting the Y-o-Y comparison of the sequential changes in receivables where at the same time, we also see impact from different procurement cadence on payable changes.

Payable changes has everything to do with products we procured, we have reduced inventories, so as the payables. The second point is regarding the brand support and collaboration. It's more like a synergy between brands and us, including the rebates and also payment PL and product refund. As we can see for the past few years. All those factors are not going to perform the same on a yearly basis where we always continue to maintain good communication with the brand company to have collaborations to make strategies according to the landscape we have by them. So I was talking about the 2 factors impacting our operation cash flow. Free cash flow was CNY 1.22 billion. During the period, dividend payments were RMB 868 million, representing 34% of the beginning cash. Pega cash was 2.38 billion, down by 1.9%, essentially flat. Net cash was CNY 1.27 billion. During the period, we maintained robust cash generation capacity.

Last not least, I'd like to talk about our dividend payout ratio based upon our cash generation capacity, there are 3 ways for capital allocation First of all, supported organic business growth; second, investing in scale expansion opportunity, third accident shareholder cash returns. We have constantly maintained this approach based upon the actual cash position of the fiscal year of the funding requirement for the first 2 items, we still remain substantial cash result to support future business growth. During the period, our Free cash flow was RMB 1.22 billion, representing 1.5x of the net profit for the same plot, which provide a solid foundation of our dividend payment.

Therefore, the Board has resolved to deploy the interim dividend of RMB flat or consistent maintain the same with last year. We hope we can leverage our high-efficiency operations and continue to provide a positive cash return through our efficient operation, creating sustainable shareholder return value. -- let me just welcome Mr. Zhang to walk you through the business review section.

Thank you very much you H1 of this year, microgatemarket demand for activator. -- social retail data show that tactile and power industry grew by 2.5%, slightly faster than last year. but recovery pace was lower than the growth rate of the total social consumer goods retail sales. Industrial growth is no longer universal. -- extend from the specific scenario and the demographic. In omnichannel data, we now have instant retail, the broader and deeper channel deployments. The experience economy has risen with consumer purchasing not only product, but also service content and emotional connections. Technology innovation also play a crucial enabling role in both back-end operation and front-end infections. Whereas for sports industry, consumer segmentation has been more subdivided and be more diverse, shifting from general sports population to specialized vertical interest communities.

Professional functionality has become the key direction for product upgrades with consumer pursuing high performance and the scientific support. Meanwhile, while domains have been deeply integrated, sports in has been connected to lifestyle social infections and the technologies. Fixing set environment. Industrial leading company generally focus on core strategies invest in product R&D to build technology bearers, capture segmented demand through brand and category metrics expansion, advanced operational lean management, improving resources conversion efficiency. We are facing the external challenges hot spots adapts to trends, refine internal capacity and enhancing our corporate resilience through forward-looking strategy positioning and anger execution.

Against the backdrop of core existing opportunities and the challenges, we have made 2 reinforcement, reinforcing expansion into emerging scenarios and high potential at. Our brand metrics covers the comprehensive sports, lifestyle sports, professional sports and IP culture, and we continue to expand the brand deployment in running and outtocitted to become an omnichannel one-stop operational partners for more partners in China's market on the diversified so landscape. We also have 3 major lituations. In omnichannel retail, we comprehensively focus on continuous lean improvement of the off-line and online efficiency in pilot strategy we have released, Topsports talent philosophy of ambitious self-driven, disruptive, self-reflective, responsible and mutually achieving, focusing on building a growth order entity with both innovation and practical capacity. In technology upgrades, we continue to advance our digital intelligence strategy, optimize and expand the application of diversified tools, improving multichannel digital operational efficiency.

[indiscernible] facing continued evolving consumer habits and scenario demands, we expanded and optimized our omnichannel retail capacities based upon the earthlineand online synergy thus differentiated China operations. We proactively drove transitional stores to break through single growth to comprehensively deploy on plus and diversified operating models. -- 1 physical store as a call extending to online consumption scenarios through the middle school expansion, embracing new platforms and messed connecting with consumers by Pega end our earthlike store has extended to online operational touch points covering multichannels, including cost and e-commerce, private domain operations, local naxtile and instant retail leveraging the multipoint deployment and merchandise advantage.

With coordinated support from merchandise management, user service and digital intelligence, we will be able to capture differentiated demand across were consumption contacts, building a flexible and efficient online operational system to support the high-quality growth of the online business. Where in terms of the store layout, Facing the market environment with fluctuating of traffic, we use operational efficiency as our core encaprudently advancing optimization of underperforming to stores adapting to the demand changes through a flexible layout adjustment.

We adhere to the optimizes principle, optimizing and deploying 1 brand on strategy retail store structural adjustment strategy based upon brand partners differentiated characteristics, target consumer profile and product attributes. More importantly, by building an integrated omnichannel retail network, Topsports has provided consumers with similar connected full scenario service experience.

At the end of August 2025, we operated 4,688 directly operated stores with store count down by 9.4%, sales we down by 4.1%. I or with February 28 of 2025, stock cut down by 6.6%. -- total down by 4.6%. Average sales Alder personal increased by 6.5%, consistent with 4.8% from the same period last year. Due to our more focused resources allocation, capital expenditure decreased by 36%, selling and distribution expenses ratio decreased by 0.2 percentage. Conversing, we recognize essential role a physical store play in sports industry -- we upgrade the store with potential value. We're also actively expanding offline store online capacity, seeking ideal alignment between experimental value presentation and the store performance.

Against the backdrop of complex and the variable retail markets and consumer behavior, Topspots remain strategic follsights continue to work with our upstream and downstream partners to explore diversified offline value providing Chinese consumers with rich experience and good product recommendation across all scenarios.

This year, we jointly let and implemented MBIA China tour activity with major brand partners covering the key CBD well in Shenzhen Chengdu and other cities. San enthusiasm was high at the event value, further highlighting our value as an active co-contributor of the diverse culture. Meanwhile, we launched new concept stores with multiple brand partners, serving as exclusive collaborator and leading facilitator, we're working with brands on localization strategy creating fresher and more carriage product and the store experience for young consumer groups.

We also deeply practice sustainability concept, partnering with emerging Pat brand on its back to launch the used closing recycling charity initiatives in stores, advocating circuit economy principle and engaging more than 10,000 consumers. Regarding the online business, we advanced refined channel operation, optimizing overall metric strategy based upon the nodal characteristics. During the period, retail online business sales, including both public and private domain achieved a double-digit growth Y-o-Y. Let's take a look at operational focus for each channel. For e-commerce, platform, we focus on store class metrics, omnichannel expansion leveraging multi-brand advantage enhance efficiencies through merchandise support.

In content e-commerce, we use account metrics and building product synergy, and to build a heat product penetrating to target demographics through interest-based approach. Private domain operation deeper user connections through process and customized community service. The newly added instant retail during the period leverage our store network to provide instant need instant purchase and instant fulfillment consumer experience.

By period end, we have 800 in and WeChat video accounts, more than 2,300 shareholder accounts with more than 3,600 mini program stores and 3,700 stores participating in instant retail. During the period, we continue to maintain first place on the in sports and outdoor ranking. Our private domain mini program also maintained first place on Tencent official WeCapopular mini-program sports and outdoor category rankings.

Through the above deployment, Topsports online business can now comprehensively cover consumer for major purchase senate as brand interest-based recommendation based and instant need purchase achieve effective extension and the systematic organization of the online business.

That concludes my sharing. Let me just pass on the floor to Ms.Zhang to review our initiatives and achievements in user operation and digitalization.

As many of you can already see, OPPO is committed to building a diversified user value system. We deeply mine use a potential value to for a tocil development ecosystem to continue to deepen the user relationship. -- where the user acquisition, we have a very targeted focus. We focus on omnichannel expansion. -- combining the omnichannel neuro-based interactions, engaging marketing and cross-industry collaboration to engage new users while at the same time, we also drive multi-platform user information integration and consolidation improving omnichannel user profile to ensure users enjoying consistent benefits across both scenarios.

The existing user operation, we upgraded and refreshed the naming and value fits of Topsports membership tier system, deepening emotional connections with users. Meanwhile, we also built an omnichannel integrated operational closed loop using product, content and coupons and entry points to continuously engage and culture user value. whether user or in-store or after bidding, we maintained omnichannel operation thinking. -- closely for the characteristics of each stage in user life circle, achieve recess rate and efficient conversion, further enhancing user belongs and brand affinity. We tenor sports user base has steadily grown to 89 million. The focus on refine deployment managing and continue to give my user value.

We deeply integrated our original membership IP Toansa into city scenarios like travel shopping and Q&A. During the media holiday online active activities awakened more than 1 million private domain users, contribute more than $100 million in sales beyond regular membership activities. We launched money-season cards for high-frequency lenders addressing their high-frequency consumption effectiveness pinpoint. Results show that cat purchase has significant repurchase rate than regular users. Those above initiatives can allow the user to maintain consistent high stickiness and loyalty across a canals. Total member accounts reaching 92.9% of the sales in off-line store and Omani programs with repeated purchase member contributing to 60%.

We also achieved positive results in high-value member operation though they only represent a mid- and single-digit percentage of the coal consuming member, but their value contribution is approaching 35%. High-value member average order value constantly and significantly exceeds the membership average, reaching 6x of the average member order value, demonstrating strong consumption potential and user stickiness. But at the same time, we also build a digital platform as our key strategy. In H1 of this year, our digital platform involved towards a more intelligent strategy. We constantly guided by precision plus efficient inking combined with business strategy to focus on scale expansion and cost reduction and efficiency improvement across omnichannel dimensions. -- will refine and strengthen efforts across series, including omnichannel integration intelligence and the palanomic view building Topsports, smart retail ecosystem. To be specific, omni-channel integration comprehensively connects business processes across 5 dimensions, including product members, marketing, service and data.

In product dimension, we focus on batisystem that can maximize inventory sharing, ensuring omni merchandise viability and fulfillment capacity. In members, we drive universality and value maximization of the traffic application and operation. In every members to achieve consistent and quality services across different touch poles. In marketing, we actually provide strong momentum into business development through diversified coupons and combinations, supporting user value mining and sales conversion. In service we achieved the consistent efficiency in consumer service tickets, significantly improved the user service response speed and quality. We achieved a mid-wall upgrades and migration, improving system utilization and operating speed will delivery efficiency optimization.

While at the same time, we are also improving our sales efficiency. As you can see, in omnichannel intelligence, we continue to further improve the on-shelf efficiency, while at the same time, we will be able to continue to improve the inventory listing and utilizing the efficiency through and supply chain panels control. Intelligent marketing sales, we drive dynamic operates in product delisting were forming automatic process communications with AITC content creation and copy AI assisted product section recommendation. -- at the intelligent operation and the decision-making, we complete the leap from the passive analysis to proactive intelligence, advancing store operations towards automation and recession.

An omnichannel aroonomic views, we rely on digital intelligence capacity to achieve deep constructions of the user ecosystem and valuehome on the AI and power ecosystem. By duties use operational model support that match user value growth curve. We support the development of the user ecosystem across all time parades and narrow and life cycles. Meanwhile, accelerated AI technology penetration also bring moment. -- the Chinese consumer cautious where consumption motivation shifted from a purely practical to pursuing emotional value and on the multidimensional aspects. -- combined with the rising running enthusiasm, consumer demand for sports equipment has been upgraded to dual requirements of professional and quality, whether in both segmented scenario enhancement experience and resonate with brand value, making the vertical segmented sports brands, more base.

Based upon this, we can lease market opportunities by further expanding our freight cycle with a focus on depending deployment in running and outdoor we have successfully launched a partnership with an brands, including Moa -- so sir and outdoor brand Norona, to meet differentiated vertical demand. Additionally, we extend our own capacity circle as exclusive operational partners of those brands in Chinese market. Topsports is responsible for end-to-end operations, including brand strategy, content, communication, omnichannel operation and community cultivation working with brand partners to tap the market potential, achieve effective connections with the target user and sustainable healthy brand environment. Parenty, those brands are proceeding with orderly expansion based upon their distinctive features through a differentiated approach and plans. They attract new users through the maker events and circle activities building social media metrics with leading star products to achieve across scenario brand nature automation and preset demographic service.

In channel, they adopt a multichannel development strategy, successfully opening the offshore online flagship stores were also flexibly utilizing the off-line hook stores and buy stores to meet the Chinese consumers. In deploying those brands, we continue to explore to bring consumer with more diverse and distinctive experiential value across all domains. During the period, the Noda brand operated by top sports debuted at 2025 into monitored trial rate, creating a scenario-based independent retail space, emphasizing on trial experience featuring with minimum lease artistic and a strong design, attracting numerous runners for the on-site inductions. -- sequentially on successfully how the first brand event in China at Azaria, Canin, the [indiscernible] and the well pass to Zen, connecting with domestic running communities to accelerate their presence in China market. as an innovative attempt to invest in more habit in running trucks and retail formats.

We help to connect the runner brands and cultures through running lifestyle brands. Recently, we actually have our running concept store, Raptors in Shanghai reconnecting the traditional off-line retail language with runways as a core, emphasizing our integration into community and rounded to increase user stickiness. The store social infrastructure provides rate with one-stop services. In product selection, we emphasize on professional logic using professionalism to resolve consumer painpoints. We're introducing the unique product to maintain user freshness, where we focus on the community operations and content co-creation, transforming the store positioning from a single run equipment sales pending to become ATCO platform or spreading running culture and promote exchange and growth among the Rane enthusiastic.

We help to achieve good products and service through capital building reputation and the fluids in domestic and international running industry, making acts in the potential operational platform for understanding Chinese lending culture, therefore, engaging more brands to open their new stores in China. Going forward, we are optimistic about the running activation, and we'll have more deployments in this rate out.

Currently, the sports consumption industry are facing the opportunities and the challenges in at the intensified competition. Within such situation, we will actively adapt to the trends and confront market challenges. -- we refine our competitiveness in sports retail industries through forward-looking strategy as well as ensure execution. Looking to the second half of the fiscal year, we're going to focus on the full part or omnichannel scenarios user innovative formats and service positioning for long-term growth. Continued focus on consolidating efficiency, forging fundamental resilience of the retail platform optimize presents efficient digital intelligence empowerment support. -- practice ESG principal building sustainable pathways for ecological coal construction and value cowinning.

So that's all for the presentation. We're now happy to start the Q&A session. We welcome the online investors to ask questions. Thank you.

[Operator Instructions] I mean next, let's welcome Lisa from Citi.

I have 2 questions. My first question is regarding your key partners. A few weeks ago, your U.S. partner, Nate, as make some interesting comments of the China market in the quarterly report, the specifically emphasize they're going to have a major investment in China market. Mr. Jon, in your presentation, you already mentioned, top sports continue to actually refine our omnichannel operation and also to help to tap into the 1 value of the fly stores. Just as was being mentioned by Nike, for net key global directed e-commerce, the Chinese partner dilemma facing the line operation dilemma. So that is online retail business is not 100% aligned with the China market needs. So in other words, as far as I believe that nets to invest more for the offline channel. Is it possible for the Topsports management team to comment on what would be the future of the net in China? Or what about the partnership strategies, what about order and the product you see from Nike.

But at the same time, my second question, in your interim report, your GP margin residence is much better than what we expected. -- you have already mentioned. Part of the reason is because of the brand support, but how sustainable the brand support would be? This is my first question.

Thank you. Thanks for Mr. [indiscernible]. I clearly noticed for Nike Global, it has already disclosed his comment for Chinese market. It was measuring its business structure product in China. -- its business recovery in China is much lower than its business development in other countries. In net this statement, it was mentioning the online platform and online business in China has been quite chaotic. -- people are all competing over the price. So that's the reason that Nate started to roll out its management and plan for online channel, and they are going to further reduce discounted product for e-commerce sales, which has been mentioned by Nike, where we are being supportive to Nate's initiative. We are helping them. We are, at the same time, and it also mentioned it's going to invest for the aid channel. -- because sometimes if you operate a single brand store, the chair would be pretty long, including store selections, GFA decisions, the shelving, liftings and product presentations all the offline store operations been further challenges with more adjustments being needed. We are in the process with Nike for negotiation. Some has already generated a good further results or some are still in negotiation.

Let me just give an example based upon the existing sales and the market landscape. Pop spots already narrowed down the GFA for many of our own stores because you can clearly see the off-line traffic has been changing. So that reason we are actually not GFA for many of our stores. which would also be aligned for the future new openings and the renovations we have for our stores. While at the same time, we also continue to further reduce the accretion cost.

Let me just give you an example. For Category 1 Jordan store for a single store, the traditional -- the accretion criteria cost being reduced by 45% were for STORE 750, actually, the calculation cost being further reduced by 42%, which can also help to further reduce in store operation expenses. -- which can further improve the operation of the physical stores, where there's another improvement of the product or merchandise by embracing the sports brands, we already see 2 significant improvement on 2 categories. The first 1 is a running category. And you can see that our products continue to perform above industrial average. Starting from Q3, we invested in merit -- and its single month sellout is close to 50% to 60%.

In other words, it has already been taken as the best-selling products which actually set improves the selling rate of the new product. In winter, we actually have the momento primer with just 3 months after the product depute the authorization is already more than 40% or the sell rate is already more than 40%. We do see for the run issues, some of the new products and functional products are actually having very good sales performance.

For the basketball category, cope product sales rate was also outstanding. So you can see for the functional product sellers, the matter for running or for Pascal, the key flagship sales all a very nice sell-in performance of the new product and highlight of the new product, where at the same time for top spots in order to make sure we can respond to consumer needs in a more efficient way. As we are working with Nike for their next highlight of flagship product that is outdoor ACG product. for outdoor ACG product, its independent brand for top spots, we are also an important partner of the independent auditor brand, ACG for Nike now, we have already nailed on the first 5 stores. The first 1 is the Beijing sending to in store, it's being operated by Nike, but the top 2 to top 5 stores were all being operated by Topsports stores being located in Nanjing, and Tansa. The location has already been selected. And the commenced time has already been confirmed. We are actually working with the brand to further explore their offline potentials.

I have the second question regarding your brand metrics. -- especially for the past 1 year, we say your brand metric has been further expanded with accelerated pace. For example, the management mentioned you are engaging more brands for partnership and the cooperation was being more innovative, for example, Notaras. So I really would like to know with those new models, for the emerging brands besides Nike and Adidas, for example, like Noda, Titan None -- what would be your future target? Do you have any qualitative or quantitative target that can show basis?

Thanks. We -- this is also a very good question. Let me just respond to a question from different perspectives. If you have any ongoing questions, please send me more message. First of all, for the past 1, as many of the fronts already see, we are accelerating our pace for brand metrics expansion. You see it from the results we shared with you, but actually, it's not a short-term action. It's been a long-term commitment. -- many of the brands, especially the emerging brands, we have already engaged with them for 2.5 or even 3 years. It happened it just been reduced within the past 12 months. we have already have a loan engagement and commitment or negotiation with those brands many years ago.

My second point, let me just share with you how I comment on the brand metrics and the brand family. If you are the 1 for our company for many years, you probably still remember when we go for IPO roadshows, where can people were more like a combination fund or just like the portfolio that you may have. For many of the ETF shelves -- we're going to talk about tracking arrow. -- tracking are can actually reflect whether you can effectively tell the market changes.

We are also bringing the checking at thinking to see whether our brand metrics would be able to tell the brand, the future development, market dynamics or showcasing the segment with new potentials. By having such a thing in our mind. We continue to think about it review. What are those brands? We can work sustainably to bring them into our brand metrics. So generally, for our brand deployment, to a great extent, it also shows the changes we have to the market dynamics, our focus on segmented ores with new highlights. If we deliver the spending segment with good short-term, long-term development value, we'll continue to barinto this segment to make a continued investment to showcase our confidence -- to be more specific, for example, in the secondary market, you may actually have the situations, the matter for consumables or industrial products or technologies. We hope that in the areas, we're supposed to have our presence. We then would like to have more leadership in that segment.

Especially for Topsports, we are a platform having omnichannel presence. We need to continue to leverage our advantage. We indeed have the platform and scale up capacities to work with different brands for Banesh. So that's the reason from this perspective, it can also help you to truly understand why we continue to expand our brand metrics in the way I remember, you also have the second part of your question regarding our vision and our targets. Where for vision, you'll probably has been already implied by what I mentioned, how you understand our brand metrics and the market development. What we do now is to leveraging our partnership with brands -- to continue to support them, besides retail operations, we also provide brand management support and initiative to the brand. Howett the capital market could be more patient? -- because at a new stage, we'd like to take baby steps to make Aristone to consolidate our business finding new business transformation, we also keep an eye on the new model besides transitional retail operations. truly hope to have a more refined product or business model. A new business model provide more promising opportunities to us and to brands to tap into more market potentials.

So 3 points from a response. You can understand our brand combination as the product portfolio, which showcase the market dynamics, our confidence and our investment of the market. Secondly, we hope that by having the ownership and leadership in our key areas, the brand we're working with is also emphasizing our business shift from traditional retail operations to brand management. But still, we are focused on the product, making the business model right to lay a solid foundation for our future sustainable growth. hope I hope to answer your questions.

Thank you. Thanks, Mr. Wei. I find out, there are 2 questions you may need some answer from me. So let me just share with you how sustainable the brand support is going to be and then what about the order. Let me see for the porter sustainability. The market is not performing well. We get more support from the brand partners. we're looking into the future. I truly believe as the largest and the best partners with the brands, we're surely going to have more support more than others can. Regarding the product order for the past 2 quarters, you can see that the order has been decreased on a Y-o-Y basis. Majority of our brands are adapting the flexible supply chain in flexible supply chain, there are opportunities for us to have more order placement. You can see in the actual seasonal sales, our actual sales or product rages actually higher than the order were placed. So that is my answer to your question.

Coming next. Let's welcome Dinheiro Guosen Securities.

Thanks for giving me the chance to raise a question. I'd like to ask the company -- what would be the outlook you have for H2 of this fiscal year or even next fiscal year? And we also noticed the wholesale revenue for Nike in China market was declining for the past few quarters, but the decline in further narrow term. So as somewhat order from Nate where top sports share with us. What would be the breakdown of the new product or -- operator ordered from Nate? -- whether any updates you may have on the discount of product sales from Nike? My third question was supplementary Actos projects, we see that we have more consumers who's been deeply engaged in running. But still, there are some pain points for shopping, for example, the brand preference and know-how of the salesperson, we are very interested in Actos. Is it possible for you to share more the product actos, how is future developments being planned?

Let me just respond to your question regarding H2 fiscal year. where, as you can see from our presentation communication or what you can see from the industry. In no case, the industry still faces challenges even in recent weeks. In such a challenging macro environment, in this fiscal year, what we are committed to is to review our full year guidelines as we provided in May of this year. In other words, in fiscal year 2026, we hope the net profit could be flat. Net profit rate could be improved on a Y-o-Y basis. This is also the commitment is still outlook now. Well, regarding fiscal year 2027, as many of you know, we only give the outlook when we hold the annual release -- so too early to provide the fiscal year 2027 outlook.

Let me just ask Mr. Zhang to respond to the inventory metrics to you.

Thank you for NIKE product around 70% to 80% of the products on the new product, which is healthy and which is also the level we are kept keeping now. We're going to keep it in the near future, where for the key brands, what the key brand is doing now is that we are actually leveraging 3 strategies. For example, we control the volumes to maintain the discount rate. So actually, the discount rate has been quite stabilized. -- where you can also see that the sales of the running-related products may continue to go up, which is indeed supporting the new product sales, which can also benefit our GP margin to some extent. This is what we are having now.

Thank you. Thanks for the questions. All the questions are quite professional and well targeted. That really makes me truly inspired. Those questions are quite good. So please allow me to share with you some of my ideas by responding to the questions. Let me just try to give a few comments on the questions I heard before for actos. Actos indeed is a business or a more accurate manifestations we have for our commitment into this business. So Topsports investment or commitment in running has been further manifestated by Actos. For Actos stores, what is happening for the project and to our stores. What are those content of business going to be presented by Hector? Well, from the physical format, Actos is more like a multi-brand retail space in the physical channel. But when we started a trial operation from the 1st of October to now, it's around more than 20 days. So besides solely the exclusive product relative to be seen by the market. Actos has already become and evolved into a car that can connecting the people who are in love of running.

For example, we have Klaus who come to the store for Visa -- we have the runner to come to the doors to talk to us. In our axles, we core self as a social infrastructure. It's a social infrastructure concept. What do we mean by saying in social infrastructure? For example, there's 1 corner in the Actos store, they are going to open to our membership. In Cosan parks in Chini district, we do have a coastal running pathway. Our store can provide the storage locker and the 24/7 basin service to our run okay, that we'll be able to have direct rates to the rules for more communication and infections where at the same time, for Actos, we also have some top runner from Shanghai.

They are not coming to apples or store visit or shopping, they just take acts as a place or their appointment or engagement, just like the social space, we have in Europe, just what Stabapresented to the community. -- is actually a connection hub of the community. I think for Actos not only bring more product sells engaging more brands. For the past 2 to 3 weeks, there are more sports brands connecting us hoping that we can have some co-branded events or running the brand communities in actors. We're helping them to show more content. So actually, as is a diversified harbor rather than being limited on the physical space. It's already go beyond its physical format. Then how Actos going to develop in the near future? I think it was not contradictory with what we have already mentioned. When Mr. Wei was reading the question, I have already shared with you, we're not only going to limit ourselves for the retail operation or omnichannel deployments, we are now shifting into brand management, too.

So all those initiatives when we combine together, we are, in other ways, continue to embracing brand management with physical platform and ready-to-go strategies. So in other words, Actos is indeed our store, a physical store or manifestation of our commitment for the branding sector. where it's going to be parallel to our single brand business and more emerging business or more connection service would be available at Actos. In other words, let me just use 1 sentence to summarize my comments. Actos is not only a new store of showing the new brands or new products. If you have any further questions, I welcome you to read the questions now or after the meeting. Thank you.

Let's welcome Dr. Wei from Morgan Stanley, please.

Recently, trend update would be my first question. 11 has already been started, and I know you have many good online sales. Do you have any trend to update us? My second question is a long-term question. For retail market in China, offline and online has been changing all the time. Right after '19 in 2023, Affy traffic is being recovered. But in 2014, 2025, offline traffic has been kept at a very low level, I know you closed some underperforming stores, but still the offline traffic continue to go down. I see it's actually structural changes of the consumer behavior. I'm not sure whether I'm making the right statement. Now your online sales is already 40% to 45% in 3 to 5 years, it's going to be 70% of your overall sales. From our membership data, can you indeed see that majority of the young consumer on the age study of the purchase online rather than go for offline store, is such thing happen in the next 3 to 5 years. than for top so. Where we already taking the right strategy to improve our digital capacity, whether that's going to generate some good opportunities or setbacks to our GP margin or business model.

My third question is regarding your new business model. For example, you have exclusive partnership from a few nice emerging brands. Let me just ask you, for example, like Aurora -- are you contracting those brands for exclusive partnerships or within that agreement term. You help them to take care of all the commercials in China, for example, distributions self-directed stores as exclusive partnership look like this. I know that the company has a very strong cash flow capacity. If you really would like to engage those brands in long run. Did you consider JV or equity investment as a way of the part of the emerging brand operation?

Let me respond to your questions. The first question is regarding the market landscape now, where you can see the market data or market sentiment. I think you can already observe that. And the consumer or even you talked on the pure company, you probably already view what the market may look like. I see there are more challenges are in the market, where from to port especially from our fiscal year Q3 to mid October. In other words, from the beginning of September to the mid of October in just 6 weeks. The sales is very much in line with the Q2 performance of the previous fiscal year. I mean, from June to August. Online offline performance are also quite consistent with before. I was talking about the sales, well, regarding the discount and inventories.

Let me see that for inventories, Topsports still maintained a very stringent control over inventory. -- inventory level is pretty healthy and controllable, which has already been mentioned by Mr. John in his presentation. Regarding the discount rate, -- for the past 6 weeks in Q3, discount rate has still been deepened. The attitude of the deepness being narrowed down compared with as we saw in Q2. So these are the latest observation update. Well, regarding the overall market, still we see the challenges. But for Topspots, we always maintain our own cadence in H2 of fiscal year we're going to be more priority-oriented right after moving into H2 of the fiscal year. our business or the actions we take, they're going to be in line with our overall roadmap and the expectation.

Let me just ask Mr. Zhang to respond to your question regarding the evolving landscape of online or business.

Thank you, Dustin. I noticed the observation you mentioned in your question. We see the challenge for the offline channel is truly huge -- this is how we comment on the online opportunity. First of all, the traditional channel expansion used to only focus on the store number, but now we focus on the omnichannel operation. For example, on physical store we to have a 10 online stores. So for 1 store, it has 1 physical store and 10 online stores. That is to make sure the offline store can divide their online capacity, especially when we have the traffic trend for the airplane channel, we have to find a self-rescue strategies. First of all, we need to build our private domain, a heavy private domain to engage in the trading, we will be able to find a way for the outsetting the traffic turned in the offline channel, return the consumer continue to enrich touch points and conversion.

Besides the private domain, we also have the content e-commerce. That is basically restored with Oi and Redbook. And we are signing to have the key stores and the flagship stores on the social platform. engaging more public traffic to sales opportunity for sales. And the third part is Gaming.com or TikTok localized and then they can actually direct the traffic to the stores.

We also have our store presence, sales coupon, interaction with consumers, supporting them to come to our physical store for consumption. The fourth part -- or should I see the most emerging and also 1 of the most important part. That is the instant retail. -- instant retail can actually leverage the heartline discount providing more convenience to the online consumers. The strong like the food takeaway service of delivering Topsports product to consumer hands. We can have a fast fulfillment by providing the localized solution. Those are all indeed the strategies we have in order to support our offline stores to divide their online store capacity. -- to up that the traffic trend age in the physical channel. Those are indeed initiatives we are adopting now.

Okay. Dustin, let me just respond to your final question. I think you have already made a very few important points. Same as you mentioned, for the contracting relationship within certain geographic regions, for some brands partnering with us in Greater China or even in Chinese Mainland algo that is exclusive partnership we reached with the brands. But just 1 more comment I'd like to make on that. We never excluded the possibility of having some equity cooperations with those brands. But let me just point it out being an equity investor is just a tour rather than the final objective. What we are going to do is to share the interest with the brand to have a deep collaboration. We hope that when we were working with different brands, each brand has a very different background, the history, development milestones. -- if equity investment would be a way to deepen such a partnership if other parties being open for negotiation. -- and for sure, we are happy to have the negotiation.

But if the timing is not right, we are still acquired patient and be fully committed of supporting the brands to prove titans we are the right partners for loans and sustainable growth.

Ladies and gentlemen, due to time constraints, let's welcome the final question. Let's welcome Sami Wang from UBS to raise the final question, please.

I'm Sami Wang from UBS. I have a question for the management team. The sales revenue decline is kind of significant innovation. Would you mind to elaborate on the reason -- my second question, you now have adding 9 million users. You must have generated some good insights from the user. Did you see any new trends -- for example, outdoor and running categories still register fast growth were for other categories, whether basket both been pressured or is it being remitted or for other sports, for example, like candies, the like bad meter or like Gulf? Do you have any trends or dynamics updates with us? My final question is regarding the new brands. What about their sales contribution to your overall sales? And what about their profit or even the net profit contribution to our overall business?

Thank you. Thanks for sending -- let me just try to answer your question. I mean the first 2 questions. I will then ask my colleague to respond to a final question regarding new brands. My first response to your first question, wholesale revenue decline in atopic. First of all, has been planned for the full year. This is also within our expectations. You know that for wholesale users, -- they are in the top-tier cities or Tier 1 cities. From the management perspective, I mean, if we consider efficiency, if the efficiency is not in the right timing, we may have some wholesale users or consumers. To know that for wholesale, the of line are the key for wholesale.

Majority of our wholesale consumers, they have many of stores. The alpha traffic is being have impacted for the. So our wholesale partner, I think new revenues being heavily impacted. When we are dealing or handling with the wholesale customers, we would like to focus on the sustainable and housing development. This is a strategy we have with our wholesale partners. Let me just complement on that because the overall micro environment is not looking right wholesale consumer confidence being impacted order continue to go down, where there's another reason, we have to notice the market is facing various competition. The online product price and the spot product price been quite chaotic. I mean the pricing system for some of the wholesalers, they actually ordered last from the wholesale channel, we believe they will be able to get a better discount by having temporary small batch orders.

So that's the reason the wholesale business was going down. Sami, I didn't get your question.

Okay. My question is that you have 89 million users. You might have some bankable used to be pressured, whether the pressure is being elevated for some of the niche sports like admins like or -- do you see there's any brand who have a promising future with nice growth or any category who may have similar performance as outdoor in the near future. My third question regarding new brands. What about the new brand sales contribution and the profit contribution or the net profit rate?

Actually, first of all, sales contribution from new brands or niche brand, you see Topsports is a large company. So now the nice brands contributed less to the profit. You can almost neglect that. But running those niche brands or emerging brands is our strategy or our business pilots for future growth opportunities. Well, regarding profitability, you can see all the brands we are working with are having exclusive partnership with us. For those niche brands, we hopefully can help them to have a good and high quality to build in China consolidate their future growth opportunities in China. So profit and the discount control over those emerging brands being well by done by top spots. So those are the who response I have regarding your new brands question.

Well, let me just be brave in showcasing the promising verticals or the categories. I will ask my colleagues to give you more comments. First of all, as we can see, sports industry is being highly integrated, no matter from sports or from brands. With these preconditions for the past 1 decade, you can see that we have domestic and international brands continue to show up. But to some extent, it was showcasing differentiation people's interest and post the preference being further started. This is actually 1 thing for your reference. We're based upon that. You ask me what are the categories, what are those niche sports can grow?

First of all, some of the so-called non-niche segment may not be muted in the near future. It may engage in more consumers in the near future. Well, based upon that, you see what would be the category that may likely to become the outdoor category -- just like the secondary market, you need to have the Alpine battle. Alpha shows the sports devioments. And beta actually means the market dynamics that may lead to the brand growth in short run. You have to consider both factors together. Well, regarding the Alpha, there are some nice market or sports. We have a very strong momentum for future growth. We have already made the corresponding resources allocation. where for data, it's more like marketing campaigns, you just follow that path online and be a part of that. That's my response.

Let me welcome Mr. Zhang to say a few words.

Responding to your question, category. In the category we are operating now, we see demographics and the construction data is truly aligned. The largest category is still running. -- running the fast and still growing segment we see. It's also a category that all brands in competing ways. For running shoes now, I mean for the night weighted run issues, people just want to make it less than 200 grams. Adidas made a running shoes. We did less than 200 grams -- it's going to be a onetime Marson running shoes. Performance being extreme -- these studies is quite bracable and the same and making sure it have very good elasticity. So in other words, all brands have been competing over technology innovation and material progress. So all brands have been working for running market. It's still the largest application with every growing market momentum. It's still a place with a new product on a daily basis.

All brands are actually taking money as a focused out of development. Well, let's talk about outdoor segment. Outdoor category is more like a high rising -- and even if it was riding fast, but still this market is still a vertical market with focused demographics. No matter like face or other brands. They actually made a substantial growth in the outdoor categories. So which is truly work demonstrated with very nice growth. There are other segments, including basketball. Basketballs more like the inventory market. For fast table, we actually focus on the junior high school and the Sinai school or even sometimes primary school students. Many of those target users are the on-campus students. The brand allocation in the basketball won't change that much. Nike probably be the trial taker where other brands are taking in the corresponding shares. So it's actually a relatively fixed market with nice inventories led by Nike. May the past market is being led by Nike and other brands adjusted taken of the best part of the market is shares.

For the niche market, Tennis was register very nice growth, especially Nike sponsor, Consing,ere in the 10s global competition, we have many new rising starts from China, which actually be a great momentum among the public -- we see such growth momentum from Tennis, but the contribution and volumes quite limited, I see the growth momentum from Chinese is looking good.

Well, for football, football don't have too much promising potential for the professional product lines. For viewers of the football or the people who play foot, in other ones, we have more people watch football games rather than play football. But football lifestyle products do register nice growth for the past 2 years. That would be the category dynamics, I'm happy to share with you.

Okay. due to the time constraint, ladies and gentlemen, welcome to the end of our presentation. Our management and our team will continue to engage our friends from the capital market. Thanks for your time, and thanks for supporting Topsports.