Good afternoon, everyone. Thank you for waiting, and welcome to join us for MINISO 2025 Q1 Earnings Conference Call. Please note, this event will be recorded. English simultaneous interpretation is available for this conference call. We released our Q1 results earlier today, which are now available at our Investor Relationship website. Joining us today are Mr. Ye Guofu, our Founder and CEO; and Mr. Jingjing Zhang, our Chief Financial Officer. Before we continue, I'd like to refer you to the safe harbor statement in our earnings release, which also applies to today's call as we will be making forward-looking statements. Please note, we will discuss non-IFRS financial measures today, which we have explained in our financial earnings release and filing to the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Additionally, we have prepared a set of slides that include financial and operational information for this call. If you're using Zoom, you should be able to see it now. You can also preview it later on our IR website. Now I'd like to welcome Mr. Ye Guofu to begin his remarks.

Good afternoon, everyone. Welcome to MINISO Group 2025 Q1 Earnings Conference Call. Today, I will share with you our quarterly performance highlights and our future development plans. First of all, let me review our overall performance for this quarter. In Q1 that just concluded, MINISO Group's overall revenue exceeded expectations, with total revenue of RMB 4.43 billion, growing by 90% on a Y-o-Y basis. MINISO China net revenue was RMB 2.49 billion, growing by 9%. MINISO overseas revenue was RMB 1.59 billion, growing by 30%. Coming next, please allow me to talk about our measures behind this growth and our future strategy for those domestic and international markets. Let's talk about the domestic market first. We have continued optimization of same-store performance. Starting from the beginning of this year, domestic same-store sales have shown significant Y-o-Y improvement. In Q1, the Y-o-Y decline in domestic same-store sales narrowed significantly compared with Q4 last year. During the holiday, in particular, we reached the positive timing point in our operational performance with same-store performance shifting from negative to positive. We maintain our guidance on domestic same-store growth, coming positive for this year. Starting from last year, we have established a same-store enhancement as our core strategy. We have broken down the vertical management model and continued to strengthen among operations, merchandise channels, and market environment. Building a flexible and very efficient integrated organizational framework with enhanced coordination enables faster and more agile decision-making and execution. The company also set same-store metrics as our core KPI across our entire business trend. This effectively breaks down barriers between different departments to propose performance improvement solutions from their professional perspectives and achieve cross-departmental resource integration through a coordinated mechanism, driving the entire team to effectively collaborate towards the unified goal of same-store enhancement. The company has also developed a systematic implementation in merchandise and channel management, where we are more precisely capitalizing on same-store attributes for the channel stratification, complemented by big data insights to accurately match the channel characteristics with inventory structure, ensuring our sufficient product offering meets diversified consumer needs. Going forward, we will continue to defend our refined operation, further unlock market potentials, and work with our franchise to advance high-quality developments with high store efficiency and high profitability. Secondly, we strengthened our IP strategy and enhanced product development precision. High-quality growth fundamentally depends on excellent products. The brand MINISO's competitive edge is embedded in every item we create. Each product investment strengthens our market position, and we significantly improve our resources at the forefront of product innovation. We are building a specialized team that tracks trends and new design concepts and functional applications to keep our offerings at the industry's forefront. Our IT collaboration has delivered exceptional results this year, with the ChiiKawa New Year collection, ChiiKawa Cherry Blossoms series, and our recent stitch collections launched alongside a movie release, which all received outstanding market response and sales performance. Our approach for deep IP and creating hit products around them has proven to be successful. Moving forward, we're expanding our IP partnerships. We will also focus on enhancing our product development process to create truly distinctive merchandise. From a strategic category perspective, during the May Day holiday, travel accessories grew by 45% compared with 2024, especially on May 1, setting a new historical high for this category. For the disposable product segment, we created immersive specialty display zooms and products simultaneously showcasing professional third-party testing reports to build customer impressions that MINISO's disposable products are safe. We continue to search for high-quality and more environmentally friendly materials to provide a more exceptional and reassuring user experience. We firmly believe that continued innovation with high-quality and value-driven products that meet evolving consumer needs is essential to our market success. MINISO's journey to date has been built on exceptional merchandise. Going forward, we will further invest as a core competitive edge to gain greater consumer recognition globally and continue to establish MINISO as a truly household name worldwide. Certainly, let’s focus on China upgrading with large stores driving growth. I'd like to share my thoughts on our domestic store expansion strategy. The brand has evolved from rapid land grabbing into an upgraded phase of large-store-driven growth. This year, we are focusing on high-quality channel developments as our strategic goal, working on opening larger, better-performing stores. Since the beginning of this year, we opened 5 new MINISO locations, bringing a total to 8 with another 50 in preparation. We established 43 flagship stores with 150 more in the pipeline. New stores opened in Q1 have achieved a 27% higher average efficiency compared with new stores from the same period of 2024. Since the grand opening of our first IP store in Shenzhen last August, IP grand stores in Shanghai, Chengdu, and other cities have successfully opened, also making impressive deposits this year. These stores not only enhance the brand image but also offer consumers a wider product selection and a unique shopping experience. We are delighted to see that, after the store opening, auto stores continue to break single-store sales records through refined operations and marketing campaigns closely integrated with our IP strategy. Moving forward, we will continue to emphasize our IP stores' position as brand benchmarks, prioritizing IP and product resources to ensure priority product launches and customized limited editions. Currently, the performance contribution from the larger stores is gradually increasing. The single-store model is showing positive development trends. We will continue advancing our large store strategy by optimizing store layouts and improving operational efficiency to further enhance our brand influence and profitability. Beyond actively expanding new stores, we equally focus on renovating and optimizing existing locations, small-to-large conversions, and key initiatives. By increasing store size, we are expanding consumer interaction space through upgraded styling and optimized lighting designs. We will refresh stores with better alignment with our brand positioning. We also proactively and systematically close some smaller outdated stores, optimizing our store portfolio, and further improving the overall operational efficiency, laying a solid foundation for the brand's long-term development. Coming next, let's talk about the international market. We have international market strategy expansion. Our overseas revenue contribution continued to rise, increasing 3 percentage points on a Y-o-Y basis. We implemented a diversified strategy to address different market dynamics. In North America, improving store operational quality and controlling expenses ratio are our key priorities. We're going to focus on 24 states that represent 76% of the U.S. population, cementing cluster-based store openings and leveraging the economics by enabling repeat inventory transfers between warehouse stores, reducing logistics costs, and improving inventory efficiency. We also enhanced merchandise operations through a specialized product development team at headquarters that creates targeted product assortments based on U.S. store formats and positioning, with an emphasis on developing core bestsellers. We believe the market opportunity exists not only in the U.S. but also in Europe, Latin America, and even the Middle East. We are flexibly optimizing cooperation models and deepening partnerships with our agents. We will strengthen control and headquarters coordination with our overseas partners on the ordering side. At the same time, we will also continue to explore new business models. For example, we are continuing to improve our store positioning, which can further improve our opening potentials in the U.S. and continue to leverage our store models in terms of tariffs. We also made some good preparations last year. We continue to build inventories in the U.S. market for reserves, despite some upfront costs, ensuring sufficient stock availability to allow us to fully capitalize on sales potential amidst tariff uncertainties. Furthermore, we enhanced our overall cost competitiveness in the U.S. market by increasing procurement from U.S. local and other overseas supply chains to continue to improve our product competitive edge in the U.S. This April, we held our 2025 global new product innovation in Guangzhou, featuring nearly 4,000 square meters of exhibition space with 9 immersive exhibitions showcasing over 6,000 new products. Through our headquarters' strategic deployment of IP products and the bestsellers, we enhance product differentiation and competitiveness by creating more efficient, innovative store models that bring more engaging shopping experiences to local consumers, further strengthening our brand image. We see tremendous potential in the overseas market and will continue to drive high-quality growth through increasingly refined and localized cooperation. As for TOP TOY, let me just make the following statement. The TOP TOY business continued to maintain steady development through optimized product structures and improved operational efficiency. The proportion of self-divided products exceeded 40% for Q1 of this year, further enhancing TOP TOY's market competitiveness and profitability. Looking forward, we will continue to strengthen TOP TOY's brand building and in-house product development, launching more products to meet consumer needs, thus increasing brand market share and influence. Looking to the future, we are confident in our performance in both the second quarter and the full year. We'll continue to advance our refined operational strategy, strengthen our IP partnerships, upgrade our channels, improve store locations, enhance supply chain management, and build brand influence to solidify a foundation for our full-year performance target. Meanwhile, we'll continue to implement our shareholder return policies, combining dividends and share repurchases. We paid out RMB 740 million in dividends this April and completed nearly RMB 260 million in share repurchase since the beginning of this year. We'll continue this strategy to maximize shareholder value. We are committed to a customer-centric, innovation-driven approach as we advance business upgrades and market expansion in the IP collaboration space. We increasingly focus on maintaining existing partnerships while developing new ones, strengthening long-term IP partnerships, and exploring leading resources in each market. Please believe in the power of our business trajectories. In the interest base and the cultural consumption space, MINISO has built a difficult-to-replicate competitive edge through our unique IP advantage. I look forward to witnessing our continued growth and success with all of you. Thank you. That concludes my remarks. Now I will invite Jingjing Zhang to present to you our financials for Q1 of 2025, please.

Thank you. Thanks, Mr. Ye. Coming next, I'd like to walk you through our financial results for Q1 of 2025. Please note, unless otherwise stated, all figures are in RMB. I will also refer to some non-IFRS financial measures that exclude stock-based compensation expenses as well as costs related to convertible bonds and acquisition loans. First of all, revenue. In Q1 of this year, the overall revenue was RMB 4.43 billion, up by 90%, making steady progress towards our expectations. The 90% revenue growth exceeded the upper limit of our 50 to 80% growth guidance. Looking at each brand, MINISO brand generated RMB 4.09 billion in revenue, growing by 16.5%. Specifically, MINISO China managed revenue was RMB 2.49 billion, which grew by 9%. This 9% growth accelerated compared to the previous quarter. MINISO overseas revenue was RMB 1.59 billion, growing by 30%, also exceeding the upper limit of our 20% to 25% guidance to the market. The Top Toy brand achieved RMB 340 million in revenue, up by 59%, continuing its rapid growth. From the revenue structure, in Q1 of 2025, China mainland revenue accounted for 56% of the total revenue. In the same period last year, the number was 61%. Overseas revenue was 36% compared to 33% last year, increasing by 3 percentage points. The collective efforts of everyone from our CEO to store staff have significantly improved MINISO's same-store sales this year. The Q1 same-store sales declined only by mid-single digits against the high baseline last year. The rate of the decline substantially narrowed down compared to Q4 last year. This improvement trend has continued since the Lunar New Year, particularly impressive in April last year due to the ChiiKawa launch, which created a very high baseline. Still, in April of 2025, we were able to continue the positive trend during the May holiday. We are working towards our goal of achieving positive same-store growth for the full year. Over the course of Q1, MINISO's same-store sales faced some base pressure but showed a similar performance to the domestic trend. However, it's worth noting that in the same period last year, our overseas same-store growth was 20%. Looking at the 2-year compound rate, overseas same-store sales still show solid growth in Q1. We are replicating successful practices from the Chinese market and have already seen improvements in major markets like the U.S. and Mexico in Q2. Having proven our ability to enhance same-store performance in China's intensively competitive market, we are even more confident in our overseas market performance. Regarding the store network, in Q1, we added 95 new overseas locations, steadily expanding our international network. In domestic China, we are actively implementing a strategic channel upgrade. Our approach is to close underperforming stores, open better ones, and replace small locations with larger ones. Notably, most of the stores closed in Q1 were low-productivity locations over 200 square kilometers that had been operating for more than 3 years with average monthly sales lower than 200,000. In contrast, newly opened stores this year average 300 square kilometers with average monthly sales approaching 400,000. This explains why we have nearly double-digit revenue growth in mainland China, even without a net increase in domestic stores in Q1. Regarding gross margin, we saw an increase of nearly 1 percentage point compared to the same period last year, reaching 44.2%. Beyond the gross profit margin improvement driven by the increased proportion of overseas revenue mentioned, our effective IP strategy also contributed to the steady enhancement of our overseas market segment. Looking to the future, there may be some fluctuations due to seasonal factors, but the upward trend in sales continues to gain momentum, providing room for further growth. Let's also talk about expenses. I'd like to highlight our expense report. In Q1 of 2025, combined selling and administrative expenses grew by 45%. Sales expenses increased by 51%, and administrative expenses rose by 22%. Selling and administrative expenses represent 28% of the revenue, a 5 percentage point increase compared to the same period last year. Most of this year-over-year increase is attributed to new direct-operated stores, including labor costs, rental expenses, depreciation, and amortization. In Q1 of 2025, directly operated stores contributed 22% of our revenue, up from 40% in the same period last year, with revenue growing 86% on a year-over-year basis. The growth rate of retail revenue continues to outpace the growth of related expenses. As I continue to talk to the market, our existing investment for directly operated stores captures more sales opportunities to ensure our future business success, especially in our strategically important market like the United States. Meanwhile, we will effectively control headquarters-related management expenses, with the overall proportion decreasing in Q1 of this year and reduced by 1%. We firmly believe in focusing our spending where it matters most. With continued refined operations and strict expense management, our operating expense ratio will continue to improve in the mid- to long-run. This newly opened directly operated store will unlock greater sales and profit potential. Regarding profitability, our adjusted EBITDA margin for Q1 of 2025 was 23.4%, up by 7.5%. The adjusted operating profit margin was 60.6%, down by 4.2 percentage points compared to the same period last year. Let me just break down the reasons behind this by business segment and address why I'm still confident in margin improvement. The operating profit margin of MINISO's mainland China franchised business remained stable compared to the same period last year. The operating profit margin of our overseas agency business slightly improved. Both businesses are performing very well. The decline in the group's overall operating profit margin is primarily due to changes in the revenue structure. The proportion of the high-margin franchise and agency business has decreased while the rapidly growing direct-operated business has increased, diluting the overall profit margin. However, we believe there is significant room to improve our profit margin in the directly operated business. Going forward, we aim to increase efficiency and refine operations to improve the operating margin of the directly operated business. Additionally, investments in new businesses will surely cause short-term fluctuations in profit margin. In mid- to long-run, a 20% profit margin would be a reasonable target. However, during our growth phase, we need to provide new businesses sufficient space and time to develop. In Q1, our adjusted net profit was only RMB 590 million, with an adjusted net profit margin of 30.3%. Beyond operating expenses, a key factor affecting our profit margin in this quarter is the increase in financial expenses primarily driven by three sources: first, the seven-year convertible bond of USD 550 million with a 0.5% coupon rate issued on January 6 of this year. Since its convertible balance in corporate financial derivatives, it generated quarterly revenue fluctuations and accrued interest costs under the effective interest method, which accounting standards require to record as financial expenses. Secondly, bank loan expenses related to our investment in YH include borrowing interest accrued at an annualized rate below 3%. Thirdly, financial expenses are related to store leases for our increased number of directly operated stores. As Mr. Ye just stated, we are committed to long-term thinking. Even if we face short-term pressure, we believe it lays the solid foundation for long-term revenue and profit growth. In Q1 this year, our effective tax rate was 26.6%, primarily due to the convertible bonds and related financial expenses. This reduced pretax profit without generating actual tax liabilities, leading to a higher effective tax rate. Excluding these impacts, the actual operational tax rate was 21.2%, in line with what we saw last year. Looking ahead, we're going to maintain a very stable effective tax rate for our regular operations. Regarding capital allocation, in March of this year, the RMB 740 million 2024 final dividend has already been paid to the shareholders. Meanwhile, starting from the trading window opening in March, the company has continued its share repurchase program. As of now, we have repurchased nearly RMB 260 million worth of shares in 2025, totaling 8 million shares, representing 0.7% of the total outstanding shares. In the near future, we are going to finance rapid business growth while committing to providing shareholders with stable and predictable returns. Looking ahead to 2025, our expectations remain largely consistent with those at the beginning of this year. Due to the comparison base from 2024, the overall revenue pattern will be slower in H1 and accelerate in H2. We believe our operating profit growth will be housing in 2025 as we will be more focused on expense control. However, improvement in operating profit margin still depends on the profitability of our directly operated stores and our investments into new stores. These stores are currently in rapid growth phase and temporarily have lower profit margin but significant room for further improvements in the mid- and long-term range. Looking into the future, we believe our reasonable operating profit margin should be around 20%. Our financial strategy will continue to maintain discipline in budgeting, cost control, and capital allocation while committing to achieving stable and sustained profit growth and healthy cash flow. Thank you very much. This concludes our presentation. We are now ready for Q&A, please.

First question. Let's welcome Michelle Cheng from Goldman Sachs.

I have 3 questions. My first question is regarding MINISO's domestic China business. There are some same-store improvements recently. Could you elaborate on that? Why do we have the same-store improvement? Is it because the format of the store has been changed? Is it because of the metrics of the stores being changed in different tier cities? My second question is, what would be the payback period for your franchisees? Another point you mentioned is the store adjustment strategy. Do you have any guidance regarding the store opening plan or strategy? This is my first question. My second question targets the U.S. market. Tariffs are still experiencing huge fluctuations. With these diverse tariff potentials, do you have any strategies or plans? What about the supply chain adjustments, especially for the U.S. market? My third question is for YH; starting from Q2 of this year, there will be some P&L impact from YH, right? Can you please elaborate on how YH is going to impact the profit and growth of MINISO? YH has already launched some adjusted super hyper stores. Are there any updates on the progress now?

Thank you. Thanks, Michelle, for your questions. Let me respond to your first three questions regarding our domestic business. You want me to elaborate on the specifics of the same-store performance in China. In Q1, domestically, we do have a mid-single-digit decline. For those investors who follow us closely, this is indeed a huge improvement compared with Q3 and Q4 last year. Internally, MINISO is quite inspired by the decline being narrowed to a mid-single-digit number. Here yesterday, we have already narrowed this number to a low single-digit number. In 2025, we still have every possibility of improving positive growth. However, let me just tell you that the micro consumption in China has not yet been fully restored. In such a challenging background, MINISO can guarantee positive growth, showcasing our business resilience. If you further break down the Q1 same-store performance, especially for APS and customer flow, the value per order remains consistent with what we observed last year, but the same-store decline exists because the traffic of physical stores continues to showcase low- and single-digit declines. However, starting from Q2, we expect both value per order and traffic to improve. In terms of region, especially in Eastern and Southern China, in Tier 1 to Tier 2 cities, same-store improvement showed nice progress, with some even achieving positive growth from the beginning of this year. However, we see some pressure for same-store improvement in the northern part of China, especially in northeast and northwest areas. We have devised specific plans for these regions and will follow up periodically on their progress. Overall, we are very confident for much of this year, being very close to breakeven. Moreover, I want to share some insights on the franchise business. Starting from 2025, their ROI has already seen nice improvement alongside the same-store improvement. We have 5 MINISO lands operational and 4 flagship stores, most operated by franchisees. They maintain a deep emotional bond with MINISO and are quite positive about our business. We also have IP land flagship stores in the pipeline, most of which are still owned by franchisees. So we notice that franchisees are quite interested in this new store format, and they are confident in it. As for your third question regarding store opening guidelines in China, in Q1, despite having delivered impressive same-store performance, even with our adjustments in the number of stores, we have registered double-digit growth by improving both same-store and single-store performance, especially those operational within 12 months, which showcases a healthy store metric. This year, we are confident we can achieve double-digit growth. In addition, we will optimize our store network. Regarding the tariff, we have made early preparations for existing tariffs compared to 2018. Over the past year, we have intentionally built up our stock in the U.S., especially the inventory preparations, ensuring that our U.S. inventory can support sales during peak season. While this may bring pressure on expenses, it positions us well to leverage overseas sales potential. Our U.S. inventory can still support operations for another 3 to 6 months. We have also taken steps to adjust our supply chain, aiming to transition MINISO from a single market dependence on China to a global supply chain integration. To enhance supply chain efficiency, we've done significant work on direct sourcing from the U.S. market. We ensure control over costs and stable deliveries of U.S. products, and we have established deep bonds with our international suppliers to adapt to the new landscape. In Q1 this year, U.S. direct sourcing accounted for 40% of local products. In 2025, we will continue to refine our sourcing to improve the diversity and quality of direct sourcing, which will enhance the gross profit margin for our U.S. business. Additionally, we have tax planning tools that can help us effectively reduce our tariff burden in the U.S., ensuring that our products can return higher profits. Regarding YH, starting in Q2 of 2025, YH will be consolidated into our overall performance. The overarching goal for YH is to reduce financial losses through efficiency improvements and cost reduction. The YH business has seasonality; Q1 is a peak time, but from Q2 to Q4, we expect to confirm profits and losses from investments, particularly starting from Q2. For YH adjustments, we have a dedicated team speaking with the capital markets. Overall, YH retrofitted stores are performing according to our expectations. By the ninth of May, 78 stores have been adjusted. We will close another 250 to 350 YH stores with over 200 adjusted stores showing strong performance. From January to May, the top 40 white stores have generated profits of over 100 million. Future profit growth will come from efficiency and management improvements. YH's performance is indeed in line with our expectations, but adjusting the YH business is substantial and will take time to implement effectively.

Next question, let's welcome Samuel Wang from UBS.

I have a question regarding the overseas market. Recently, especially in April and May, what would be the same-store performance trends in overseas markets, especially how is the performance in the U.S.? We noticed that in 2024, you had a new management team for the U.S. market. What would be the outlook for same-store performance in the U.S.? What kind of strategy and measures are you taking to improve same-store performance in the U.S.? My second question is about IP partnerships. The IP market is becoming increasingly competitive with many players. Some new entrants are utilizing unique strategies, such as celebrity ambassadors for promotion. Are you considering any differentiated strategies for IP? Will you incubate your own IP? Or will you consider acquiring IP and developing it in-house, or will you continue to rely on third-party IP licensing to build partnerships for advancing your IP business?

Thanks, Samuel. Regarding same-store performance in overseas markets, as I mentioned earlier, Q1 performance is very similar to what we observed in China, but the baseline is very different. In Q1 last year, overseas same-store growth was 21%, with the Asian market growing directly by over 30%. Retail stores also grew more than 20% for single months, laying a solid foundation. If you consider the 2-year compound growth rate, international, especially overseas same-store growth is quite commendable. Starting in April, we have seen turnaround improvements in both Mexico and the U.S. markets. Generally speaking, we remain very confident about the same-store performance improvements in overseas markets. However, it's important to acknowledge the rapid store expansion we experienced; for instance, prior to 2024, we only had 900 directly operated stores, but last year, we expanded to 1,300 stores, and this rapid growth poses challenges. Within the U.S., we have over 300 stores, but in Q1, only 90% of those contributed to the same-store performance. Another growth driver will be the non-same-store inventory business, which has been operational for around 12 to 15 years and is expected to improve. We project that you'll see low double-digit growth from the U.S. store markets this year. We've adopted successful experiences from China for the overseas market. Specifically, our U.S. management team is doing the right things; the U.S. is the world's largest consumer market and key to MINISO's future global strategy. From 2021 to 2024, we've experienced 100% CAGR, which is remarkable. Single-store performance also ranks us as one of the top 2 fastest-growing markets. Short-term fluctuations in individual sales may be influenced by various factors, but we believe retail is a long-term business. What we are focusing on in the U.S. includes channel optimization and merchandise improvement. Last year, we opened 150 stores, gaining valuable experience. In 2025, we will strategically open stores across 24 states that account for 76% of the U.S. population. These expansions will enhance our scalability, leading to faster deliveries between warehouses and stores, thereby improving customer satisfaction. We're also optimizing our logistics routes to reduce costs and increase efficiency, which has already shown positive results in Q1. Thirdly, we're refining our merchandise strategy as our headquarters have established the tariff task force and high-growth task force specifically for the U.S. market. We've allocated resources towards R&D tailored for the U.S. market demand, ensuring the best-selling products are integrated into our offerings, just as we have effectively managed in the past year by enhancing our supply chain operations. Finally, we're committing to targeted customer profiling based on insights gained, which will no doubt inform our product strategy. Concerning IP, this is indeed a hot topic in the consumer market. Here are three observations. First, the most well-known global IP resources are still valuable, as we expand our market coverage. The way we work with top IP or increase our partnership frequency remains vital for securing exclusive licenses, allowing us to expand our IP presence in the market. Secondly, the design and quality of our IP products will be critical to attracting consumers. Many consumers might seek trendy products, but it's essential to convert interest into effective demand. MINISO has expertise and capacity to converge offerings around IP. Our IP conversion capabilities have been enhanced through our 8,000 stores worldwide over our 7 to 8 years of experience. We've learned valuable lessons that contribute to our IP development. Lastly, we are actively working on developing our in-house IP. Before 2025, we had IPs generating over 100 million in sales, such as Pantene, with some new IPs showing potential for generating sales exceeding 400 million to 500 million. We are excited about our continued work to develop in-house IP.

Next question, let's welcome Justin.

I have a question. I'd like to ask the management team about MINISO's Mainland China business. Looking at MINISO Mainland China, what is your GP margin currently? You’ve mentioned a GP margin target of 38% to 40%. Moreover, many of your merchandise are sourced from third parties, which can attract a broader customer base and improve store sales. How are you going to finance the same-store performance improvement and GP margin enhancement for commodities sourced from third parties? How much do they contribute to your overall sales? Do you have any target? Additionally, you mentioned some weaker products in MINISO stores; how will you balance GP margins while sourcing from third parties with potentially lower margins?

Thank you. That’s a great question. What I can say is that while we share many third-party products, they won’t negatively impact our equity margin. In Q1, the GP margin for our Mainland China business showed flat growth compared to last year. Although we have introduced several third-party products in our stores, they belong to specific categories. Our overall strategy focuses on providing consumers with a treasure-hunting experience, meaning we aim to cater to the customer preferences through diverse offerings. It doesn’t require that every product sold must be self-owned commodities. For example, consider the toy category: in shopping malls across China, the traffic dynamics have shifted fundamentally with families, particularly children, becoming key consumers. MINISO can provide these household customers with a variety of affordable toys through our existing suppliers, effectively converting organic traffic into sales. This means we focus on leveraging our existing manufacturer partnerships to ensure a steady supply without building our own toy supply chain. While doing so, we must also enhance our IP offerings for customers who naturally gravitate towards MINISO. Some organic traffic converts into sales, while others are driven by awareness from advertising through social media. Our approach will be dynamic; we will control our inventories effectively. Thus, this ensures that our GP margin remains stable.

A follow-up question: If you carry third-party products, what happens if some of them do not perform well in your stores? Will you choose to reproduce from the third party, or will it be just buyouts?

Thank you. We currently have some piloting initiatives in place. To clarify, for any single batch of procurement, we have 4,000 stores in China, and we have the capacity to digest inventories adequately. We do not pursue extensive third-party procurement; it's limited to specific categories as mentioned earlier. We utilize our data insights and experience to ensure we make informed purchasing decisions. Additionally, with our extensive store network, we can effectively manage and turn over inventory swiftly, minimizing excessive third-party product backstock. Thus, we don't intend to accumulate large amounts of inventory.

Next question is from Xiaofang Xu from CITIC Securities.

I have a question regarding your stores. At the end of Q1, you reported a net closure of 111 stores in China. Closing some underperforming stores should improve your same-store performance. I believe for your annual guidance, you’re targeting 200 to 300 net openings. Will this guidance remain the same? If so, when do you anticipate this net increase in stores occurring? Given that in Q1 you have already seen net closures, how do you reconcile this with your net openings?

Thank you for your question. Last quarter, I mentioned that we are pursuing a channel upgrade in Mainland China. The rationale is that merely seeking store number growth wouldn't align with our long-term development strategy. That is why we focus on channel optimization. With our same-store enhancements, we foresee some net store openings in H2 of this year. However, we aren’t strictly aiming for those 200 to 300 net openings, instead preferentially choosing a dynamic adjustment strategy. Even if we do not reach that goal, we believe we can still achieve double-digit growth. It's also important to note that closing stores won't directly contribute to same-store sales performance, as our definition of same-store sales requires full store closures that do not affect performance calculations. For operational stores, closures should ideally be no longer than one month. Thus, the improvements in same-store performance relate more to our merchandise and operational strategies for existing stores.

A follow-up question: Regardless of whether it’s from same stores or new openings, as long as your Mainland China sales reach the target, you don't mind how this sales growth is achieved, correct? You just want to ensure well-distributed revenue growth?

Yes, you are correct. This is our promise. However, in 2025, we hope for more growth from China to stem from same-store performance improvements.

Ladies and gentlemen, thanks to all the investors for your time, and thanks for supporting MINISO Group. This concludes the earnings conference call. See you next quarter. Thank you.

Thank you all.