MINISO Group Holding Ltd Q2 FY2025 Earnings Call

Operating profit and adjusted EPS all exceed expectations. The growth rate across all business segments, including overseas and domestic, reached or surpassed our upper limit of the guidance. Meanwhile, we also made significant progress in two strategic directions: our IP strategy and the large store strategy. In Q2, the overall GMV grew by 21%. Revenue grew by 23.1%. We achieved the first positive same-store sales growth in four consecutive quarters. This performance not only exceeds our prior expectations but also accelerated compared with Q1. MINISO and TOP TOY, our two brands, also showed accelerated growth momentum in revenue in Q2. MINISO brand grew by 20%, while TOP TOY achieved robust revenue growth of 87%. In terms of profitability, our gross margin was 44.3%. The GP margin improvement was mainly driven by the increased contribution from overseas revenue and the TOP TOY GP margin optimization. Adjusted operating profit this quarter was RMB 850 million, up by 8.5%, and the adjusted operating margin of 17.2% improved compared with Q1. We expect the operating margin to continue to improve with peak season sales in H2 of this year. First of all, for MINISO mainland China, the business continued to maintain high-quality growth. Revenue grew by 13.6%. In comparison, China's total retail sales of consumer goods grew by 5.4% during the same period. The online retail sales of physical goods grew by 6.3%. This shows that MINISO's mainland China business growth rate not only outpaced the overseas retail industry but also exceeded online channel growth, demonstrating our tremendous advantage of the offline store. Particularly speaking, domestic comparable same-store sales have been recovering steadily since the beginning of this year, turning positive in Q2. Entering into Q3, same-store growth momentum has been further accelerated. Going forward, consistently maintaining same-store sales performance that equals our peers will become our long-term focus. Within this quarter, we achieved a net addition of 30 MINISO stores in China, including seven MINISO LANDs. Last quarter, there were some excessive concerns about the short-term impact of channel upgrades. But from our perspective, this is a necessary move for long-term rapid growth. After one quarter of adjustment, stores have quickly returned to positive growth. The number of retail partners has reached a new height. More importantly, MINISO mainland China achieved double-digit revenue growth despite moderate store additions, fully demonstrating that channel upgrades can indeed be the key high-quality growth driver of our business. The overseas market achieved RMB 1.9 billion revenue in Q2, growing by 28.6%. Among them, U.S. revenue growth was over 80%, benefiting from same-store improvement and also high-quality new stores opened this year. Due to product metric optimization, U.S. same-store sales achieved a mid-single-digit positive growth in Q2. The 37 net new stores added to the U.S. market also demonstrated good performance. The average store efficiency and sales per square meter have significantly increased compared to the existing stores, laying a solid foundation for our accelerated growth. TOP TOY achieved 87% year-over-year growth in Q2 with a net addition of 30 stores during the period, reaching a total of 293 stores; 283 are in China and 10 are in overseas markets, benefiting from effective product differentiation strategies and product power improvement. Same-store sales grew in the low single digits in Q2, with GP margin improved significantly. TOP TOY is also a leader in the pop toy market, which is significant and distinctive in the market. Going forward, we will continue to expand our recognizable brand network, and we will continue to improve our private brands and proprietary IP business. As of June, MINISO has deployed 11 MINISO LAND stores nationwide, covering Shanghai, Beijing, Guangzhou, and Chengdu. Eleven MINISO LAND stores achieved an average monthly efficiency of several million. The global #1 store on Shanghai Nanjing East Road achieved sales of RMB 100 million within 9 months of opening, breaking new records. The SPACE store opened in Nanjing, Deji in June represents another breakthrough for TOP TOY to enter into luxury malls, opening new opportunities for high-end luxury shopping malls and also continuing to build same scenarios for differentiated IPs. MINISO LAND has achieved new breakthroughs in both attachment rates and ASP, along with higher consumer conversion rates. So the MINISO LAND not only set new performance records, but also achieved high sales per square meter compared to regular stores, thus contributing above-average single store GP margins. The MINISO LAND store also achieved excellent profitability and serves as a key base for our hit products and modular zones. For MINISO IP LAND, it has helped to launch new products and limited editions, which can actually form a flywheel for the large store, creating heat, traffic, and regular store scaling up, delivering traffic and sales to store categories across all locations. MINISO LAND serves as a spearhead for continued innovation and breakthroughs, where flagship store is the cornerstone of our large store strategy. As of H1, we have already opened 200 flagship stores with a GFA of more than 400 square kilometers. Around half of them are being opened in 2024. Those larger stores achieved sales and store efficiency above the average. We can see even for the past two quarters, we haven't seen any big change in the absolute number of stores, but our channel structure has already been upgraded. We are not purely seeking quantity growth. We continue to optimize our channel mix and seek incremental growth opportunities. Regarding overseas markets, particularly, I’d like to mention the U.S., our largest directly-operated country. The operational performance and brand momentum have continued to improve with the large store strategy. U.S. stores opened in 2025 achieved store efficiency 1.5 times higher than existing stores. Sales per square meter are also 30% higher. The rent-to-sell ratio is also better than existing stores. The core advantage leverages a diversified product portfolio, including collectibles figures, beauty products, stationery, gifts, and trendy toys that the whole family loves. Large stores can satisfy the interests and needs of every age group, becoming a one-stop shopping destination for trendy lifestyle products for the entire American family. The success of our largest store strategy is due in large part to our excellent supply chain and product capacity. We attach great importance to proprietary product development, with 90% of our revenue coming from proprietary products and a product development and design team of more than 1,000 people. We have accumulated a very strong base of 1,500 high-quality global suppliers. Only by doing so will we be able to support a multi-category, fast-refreshing, and high-turnover trendy department store, large store model. Moving forward, as we continue to optimize and refine our larger store strategy with the ever-expanding global supply chain, we will continue to achieve balanced and stable development. Whether in mainland China or the overseas market, the large store strategy serves as our key platform for deepening our IP strategy. Channels and contents are empowering each other. By creating new spatial experiences, we significantly enhance the IP meets and greets, in-store pop-ups, and limited product launches that create lasting memories for fans, significantly enhancing our integrated marketing and operational capacity for IP. Conversely, IP events and marketing can also draw more traffic to checking activities. For example, when the MINISO landmark Melbourne store opened in July, we partnered with One Piece for an Australia-first launch, driving first-day store performance that exceeded 500,000, achieving a new single-store record for the Australian market. MINISO has also become the collaboration leader in global licensed IP. In the near future, we will leverage our product and operational capacity to work on proprietary IPs and unlock greater value. For MINISO worldwide, we identified potential pop toy artist IPs to build our MINISO's pop toy artist IP landscape. Through the dual-track parallel model with artist IP and pop licensed IPs, we will construct the IP ecosystem. We have already contracted 9 pop toy artists. For example, the artist Yu Yu Chan, launched in June, once launched, it was sold out on our Mini program, making it hard to find in stores. Yu Yu Chan's instant success marks a solid and successful step for MINISO in proprietary IP. The Yu Yu Chan signing event held in July of this year attracted massive fan support. The mechanism will continue to be promoted, hosting signing events and exhibitions for contracted artists at the world's top MINISO LAND stores, building deep appeal for top-tier artists. Yu Yu Chan's IP product will also meet overseas consumers this year, steadily advancing our strategy of bringing 100 Chinese IPs overseas. The operational strategy for Yu Yu Chan fully demonstrates that, in building proprietary IPs, MINISO possesses unique resources, endowments, food category coverage, omnichannel penetration, global deployment, and end-to-end operation. Looking worldwide, only MINISO has great flexibilities and scalabilities in products, the most control and innovation in channels, and the most extensive and high-quality global store network. In operations, MINISO will leverage end-to-end advantages from signing artists to product design development, marketing, and production to sales. We deeply empower artists at every stage, jointly operating and maximizing the IP's value potential. These are MINISO's highly differentiated resources and also the key for us to achieve leapfrog development and overtake competitors in proprietary IPs. Our investment in proprietary IP is not for short-term commercial deployment but also a choice for long-term strategic development. I proposed the interest-driven consumption strategy in 2020; IP is the most important vehicle for interest-driven consumption. The initial success of this IP not only brings us product sales and brand exposure but also allows our global channel partners to fully perceive the potential of the IP consumption and the brand value of MINISO. I truly believe as IP and large store strategy continue to deepen as a synergy, we will create more marketing explosive moments and sales miracles. Now, the China IP market has achieved significant development, but we're just at the start; numerous growth potentials are still ahead. Looking at the global development history from Disney to Warner to the United States, to Bandai and Sanrio in Japan, China will see more several platform-type IP companies. This is a crucial pathway to the great nation's rise and an inevitable outcome of cultural confidence. In this opportunistic market, MINISO, with our unique advantage of full category coverage, omnichannel penetration, global deployment, and end-to-end operation, will secure our leading position in China's top-tier IP market. MINISO's future is to fully develop, thoroughly understand, and deeply cultivate IP, achieving influence not only in China but also worldwide. By deepening collaboration with world-class IPs, we will ensure operational sustainability and stable growth. We also built a differentiated, explosive, and scalable sustainable growth driver through proprietary IP. These are also the keys to our confidence for future growth. MINISO's new strategic vision is to become the world-leading IP design retail group. In terms of the channel network, we are already the world's largest IP product retailer. For the full year 2025, we expect to generate more than RMB 38 billion in GMV and more than RMB 21 billion in revenue. We have already taken the lead in market channels, supply chains, product design, and marketing. Moving forward, we will need to strengthen our proprietary IP capacity. I believe our vision will finally be realized. In H1 of 2025, we have returned RMB 1.07 billion to shareholders through share buybacks and dividends, representing 84% of the H1 adjusted net profit. Going forward, we will remain committed to distributing 50% of the annual adjusted net profit as dividends and also continue dynamic share buybacks to provide predictable returns to shareholders. That's all for me. Next, I will hand over to Eason to introduce you to H2 and interim financials.

Thank you. Thanks, Jack. Welcome, everyone, to the meeting. Next, please allow me to walk you through the financials. First of all, let's take a look at the revenue. In Q2, total revenue reached RMB 4.97 billion, up by 23%, exceeding the upper limit of our guidance of 18% to 21%. Breaking down by brand, MINISO brand Q2 revenue was RMB 4.56 billion, growing by 20%, among which MINISO mainland China revenue was RMB 2.62 billion, up by 14%, accelerated compared with last quarter, exceeding the low double-digit growth we provided as guidance before. MINISO overseas revenue was RMB 1.94 billion, up by 29%, in line with our expectations. The POP TOY brand Q2 revenue was RMB 400 million, growing by 87%, continuing high-speed growth momentum, exceeding our previous guidance of 70% to 80% growth. Looking at H1 of 2025, the total revenue of the group reached RMB 9.39 billion, up by 21%. As we enter H2, we're confident that revenue growth will be further accelerated, progressing towards the guidance we provided to the market at the beginning of this year. From the regional breakdown, China mainland revenue accounted for 62% of the total and 65% last year. Overseas revenue accounted for 38% and 35% last year, with an increase of 3%. Regarding the same-store performance, building on Q1 2025's significant narrowing of same-store decline in Q2, the same-store performance improved significantly. Last year, we had the explosive sales of Chiikawa as a high baseline. But even so, we reached positive same-store quarterly growth in Q2. In H1 of 2025, same-store sales declined in low single digits, representing tremendous improvement compared with H2 of 2024. This benefited from our channel upgrades, product mix optimization, new product launches, and operational improvements. Moving into Q3, MINISO mainland China's same-store performance further accelerated compared with Q2. The year-to-date monthly MINISO same-store growth has already turned positive. Looking into H2, we assure you there will be positive growth here. MINISO has been able to achieve positive same-store sales in China, such a competitive market, which again proves the strong resilience of our business model and our organizational execution capacity, vitality, and lending capacity. We have systematically compiled some of the same-store growth experiences and started to export them to the overseas market in Q2, combining local market conditions to help effectively communicate the strategies and experiences for same-store performance improvement in China. For Q2, overseas MINISO same-store performance has already improved from a mid- to high-single-digit decline in the previous quarter to a low-single-digit decline. The European market and the North American market achieved mid-single-digit growth, which also strengthens our confidence in overseas business growth. In terms of store growth, in Q2, we achieved a net addition of 30 stores, which is more optimistic than our expectations. Internally, we see brand updates channel first. Our channel upgrade can be traced back to Q3 of 2023 when we first opened our first large store in Beijing Road in Guangzhou. Starting from then, we discussed how large store strategy helps improve product assortment, efficiency, and store models. The landmark event was the opening of the MINISO LAND in Shanghai Nanjing East Road in Q3 of 2024. We’re now reaching the peak after the MINISO SPACE at Nanjing Deji Plaza opened in Q2 of this year. To date, we are pleased to share that large stores now account for 5% of our total domestic China MINISO store count, contributing to a mid-double-digit percentage growth. All 30 stores we added in Q2 were all MINISO LAND and flagship stores. Importantly, we have initially formed a channel matrix covering 7 layers of stores. We’re not going to rely on small stores to conquer the market. We have MINISO LAND, flagship stores, regular stores, and pop-up stores to create incremental opportunities. For the full year of 2025, MINISO mainland China store count will continue to see healthy growth. We expect to add 100 to 150 new stores. The structure will be flagship stores and MINISO LAND. We also have some regular stores, but we will still aim for the lower-tier markets. For MINISO as a single brand in the Chinese market, we hope to achieve expected sales of more than RMB 60 billion for this year, positioning us as a leading consumer brand. However, in 2025, we aim for mid- to double-digit scale growth for the full year without significantly increasing the net store count. Behind this goal is our comparable same-store sales achieving healthy positive growth, with new stores being of very high quality. In the overseas market, we added 94 new stores in Q2. The store count continues to expand. As of H1, the overseas store count grew by 189. For the full year, we plan to add over 500 new stores. However, we will be quite cautious. We now expect around 40% of the new overseas stores to be directly upgraded, but we have revised this number down to 35%. In other words, we aim for a more reasonable CapEx, and the team will focus more on the operational optimization of existing stores going all out for the H2 performance peak. Regarding GP margin, in Q2, it increased by 0.4 percentage points compared with last year, reaching 44.3%. In H1 of 2025, GP margin was also 44.3%, up by 0.6 percentage points compared with 2024. Besides the GP margin improvement from increased contribution from overseas revenue, as mentioned earlier, the effective implementation of our IP strategy has also enabled GP margin improvement in our overseas business. The TOP TOY brand's product structure optimization has also enhanced its GP margin. Looking into the future, GP margin may fluctuate due to category structure changes between quarters and seasonalities in business, but the rising contribution from overseas sales and increasing IP sales contributions will likely maintain an upward trajectory. We will be quite cautious in handling GP margins. As you may know, with our brand operating IP strategy, our GP margin has improved from 27% to 44% now. We will continue to pay attention to balancing product volume and price. Going forward, we will be more committed to our consistent value-for-money position on non-IP product lines. Since the beginning of this year, we have already made GP margin adjustments to some categories, both in China and overseas markets, achieving better sales performance and improving our GP margin. As we stabilize GP margin, we will continue to make such adjustments in the near future. Regarding expenses in Q2, total expenses increased by 38%. Selling expenses grew by 43%, while administrative expenses grew by 19%. Selling expenses accounted for 23%, which is 3 percentage points higher than the same period last year. The year-over-year growth is related to our investment in directly-operated stores. For example, labor costs, lease-related costs, and depreciation and amortization grew 56.3%, seeing significant deceleration from the previous quarter's 71.4%. This benefited from our refined operations and strict expense management. In Q2, directly-managed store revenue grew by 78.7%, still higher than the year-over-year growth rate of direct-operated store-related expenses. Administrative expenses growth was slightly slower than revenue growth, mainly attributable to increased employee costs related to our business deployment. As I mentioned, our existing investment for directly-operated stores aims to create more sales opportunities to ensure our success in future business, particularly in strategic overseas markets like the U.S. We believe our upfront investments in directly-operated stores will unleash sales potential in H2 of this year, and profit optimization will continue to be made. The YH investment will impact our financial statement starting from this quarter, and we will take the equity method for settlement. This investment will impact our net profit by RMB 119 million, which will be excluded from the non-IFRS financial indicators. The majority of that will stem from our 29.4% shareholding. Additionally, there will be some optimizations, and the amortization will hover around RMB 5 million every quarter. Regarding profitability, the adjusted operating margin was 17.2%, up by 0.6 percentage points from Q1 but down by 2.3% year-on-year. The decline was narrowed compared to Q1, which is a positive trend. Let’s break down the reasons by business segment to illustrate why I'm confident about margin improvement. Let’s look at the MINISO brand first. Our mainland China franchise business remains quite stable in margin. In China, we also operate warehouse stores and e-commerce stores. Their margins are lower than the franchise business model, but the impact is controllable. The decline in overseas operating margins is due to structural changes in revenue, with more contributions from directly-operated stores. We expect margins to improve as we enter H2 of this year. We believe the profitability of our overseas directly-operated stores can be further improved. We will enhance operational margins through improved efficiency, refined operations, and high growth. As for TOP TOY, we observed a significant GP margin improvement this quarter. We made upfront investments for product R&D, overseas expansion, and IT, which are, in fact, healthy operational investments. In the mid-to-long term, a 20% operating margin is considered a comfortable target. However, as we grow, we must allow new businesses sufficient time and space to develop. Q2 adjusted net profit was RMB 690 million, but adjusted net margin was 13.9%. Adjusted EBITDA grew by 14.7%, while adjusted EBITDA margin remained at 23.1%. In terms of working capital, our channel inventory turnover has remained steady and efficient. As of June 30, our inventory turnover days was 93 days, down from 102 days in the previous quarter. Breaking down by brand and region, MINISO overseas and TOP TOY remained stable quarter-over-quarter. MINISO mainland China saw a significant shortening in inventory turnover days. On the procurement side, we established structured SKU management and strengthen category standardization while implementing dynamic inventory monitoring. For inventory management, we have set up a full chain product lifecycle labeling system, implementing seasonal marketing to create differentiated promotional strategies that lay a solid foundation for improving cash flow and also releasing working capital efficiency. As H1 of this year, our cash reserve stood at RMB 7.47 billion, which remains robust. Our net cash flow from operating activities was RMB 1.01 billion, including RMB 260 million in Q1 and RMB 750 million in Q2. Our business cash flow showed significant month-on-month and quarter-on-quarter improvements, benefiting from our improved working capital efficiency. Our capital allocation strategy will continue to remain balanced. Today, we announced the 2025 interim dividend of approximately RMB 640 million, accounting for 50% of our adjusted net profit, which will be paid after September. We believe that under the existing market conditions, our share price is significantly lower than its intrinsic value. We repurchased shares for more than RMB 340 million in H1 this year, equivalent to 1% of outstanding shares, which means the repurchase amount in H1 this year already exceeds the total repurchases of the entire last year. This represents the highest purchase amount in any half-year to date, and the repurchased shares will be canceled. In H1 of this year, returns to shareholders through share repurchase and dividends were RMB 1.07 billion, representing 84% of adjusted net profit. Last year, that figure stood at 55%. The Board also agreed to utilize the authorization granted by the Annual General Meeting held in June to repurchase up to 10% of the total outstanding shares. We will continue repurchasing in the open market through a Hong Kong repurchase plan and rule 10b5-1 repurchase plan in the near future. We believe repurchasing is in the best interest of the company and shareholders, demonstrating our confidence in future business development. As we enter Q3, we remain optimistic about continued acceleration. We forecast revenue growth of 25% to 28%, significantly higher than H1. Same-store sales will experience low single-digit growth, while adjusted operating profits will show double-digit growth. The adjusted operating margin is expected to continue improving, and the decline is anticipated to narrow. Looking ahead to 2025, our full year revenue growth will be no less than 25%, with accelerated quarterly growth. Additionally, we expect adjusted operating net profit to reach RMB 3.65 billion to RMB 3.85 billion, compared to RMB 3.4 billion during the same period last year. The adjusted operating margin will improve on a quarter-on-quarter basis. Thank you. Let's conclude our presentation. We are happy to take your questions now.

The first question comes from Goldman Sachs, please.

Congratulations to the company for the performance exceeding expectations. I have a question regarding the U.S. business. In Q2, I see sales going beyond expectations, and the fee control has been managed quite well. You also mentioned the large store and product adjustment. Is it possible for Jack to share with us what your new team in the U.S. market is doing right to have such good growth? What would be the key strategies in H2 for the U.S. market, especially regarding the profit margin, both for H2 and for the full year? What would be the profit for the self-operated directly-operated stores in the U.S.? My second question is regarding the opening of new stores. What about the net store additions for the U.S.? We would really like to hear more from you, Jack and Eason, regarding the U.S. business.

For U.S. business improvement, it comes from a few factors. First, we continue to improve the quality of the stores. We are only opening large stores and leveraging our multi-category advantage. Secondly, we are concentrating our store openings in one region—about two weeks ago, in Austin, Texas, we opened three stores together, which has enhanced brand perception. So first, we are opening large stores. Secondly, we are concentrating regional store openings rather than fragmenting them as we have in the past. Thirdly, we focus on trendy toys, for example, collaborating with Sanrio and Disney. The blind boxes and figures also showed great momentum in growth. Fourthly, we have a localized team for MINISO; our U.S. CEO has more than 20 years of experience in the retail market and started leading our U.S. operations last year. Thus, our large store strategy, concentrated new store openings, product power improvement, and localized team form the four key pillars to help us improve our U.S. operations. For H2 this year, our goal is to continue building on same-store improvements. We now have enough store count and need to ensure each store's performance improves. However, we still need the right products, especially for trendy toys. We opened large stores that cover 600 to 800 square meters, dedicating 100 square meters to the trendy store area to continue engaging young people and ensuring our stores remain appealing in the local market. Our second strategy is to implement a holiday strategy, particularly during weekends and holidays, to ensure we have the right and comprehensive products and operations. Thirdly, we must focus on refined operations and optimize logistics scheduling. We've identified a localized team which works very effectively in operations. Those are the three strategies for the U.S. market. We are confident that in the next six months we will continue these strategies. The trendy toy segment has been growing rapidly in the U.S., and we are optimistic about setting new sales targets, particularly in plush products. We anticipate a net addition of 80 stores in the U.S. this year, which is significant yet lower than last year, but we aim to continue improving the quality and efficiency of our larger stores. Some new store efficiencies are significantly higher than those of existing stores. Therefore, the maximum number of new stores has been further elevated. In our new store opening strategies, we wish to concentrate all our regional stores; for example, in Texas, we opened three stores simultaneously to help enhance our brand perception. This is also advantageous for marketing; it maximizes MINISO's exposure in one area while delivering strong performance. Regarding the U.S. market, I will let Eason discuss same-store performance.

Thank you. Thanks, Michelle. As I shared with you in Q1, we had a high baseline. In Q1 of last year, the same-store growth was 30%. In Q1 this year, the high baseline pressured our performance of Q1 2025. However, as we transition into Q2, we have seen same-store improvements accelerate. In Q2, the U.S. same-store performance turned positive, already achieving mid- to high-single-digit growth. In Q3, it has continued to accelerate, showing improvements in profit margins over the H1 of this year. The profit margin of the same-store remained flat compared to last year. Starting from July of this year, with our concerted efforts, operating profit at the stores has improved significantly. So we can foresee strong potential for continued improvements in the profitability of U.S. stores.

Next question, let’s welcome Anne Ling from Jefferies, please.

My first question is regarding the mainland China business. Same-store performance in mainland China has already improved. I would like to know what the driver is for this improvement. Is it due to volume or ASP? For my second question, I also noticed MINISO has engaged in some O2O activities; for instance, I see your stores on taobao.com. Has the improvement in same-store performance benefitted from promotional activities on the e-commerce platform, or have you launched more initiatives on the O2O channel? My third question concerns the overseas business. Could the management team help break down sales contributions from each region, such as the U.S., Europe, and Asia? What about the future growth strategy there? As the company has already mentioned the U.S., we are also quite interested in other overseas markets. Lastly, I'd like to know about TOP TOY. How many overseas stores do we have and what strategy will we adopt there? How will MINISO and TOP TOY differentiate themselves in overseas markets?

Thanks, Anne. I’m Eason. I will ask Jack to help respond to the first question on the same-store improvement for mainland China stores.

Thank you. Please allow me to share with you. For mainland China same-store performance improvement, we’ve enacted a special initiative called the Chief Growth Officer responsible for store performance growth. We have a product center leading efforts to ensure seamless operations between product, operations, digital center, and stores. This coordination enhances operational efficiency. Secondly, we have improved our product offerings, ensuring that product and commercial aspects align with operations. Our execution efficiency has improved significantly. We now have a dedicated task force for this. Additionally, we have created popular products dedicated areas. Some stores will see upgrades from small to large to increase GFA, allowing for more products on the shelves while providing popular product sections. Lastly, we’ve leveraged increased traffic during festival seasons, identifying that family trips have been especially high. Moms and kids can come to MINISO and find all they like. This is the foundation of our successful performance in mainland China same-store sales for H1 this year.

For the mainland China same-store growth as of Q2 this year, it is a single-digit number. ASPs have been a key driver. If you think back to H2 or Q4 last year, we faced a strong baseline that impacted same-store performance negatively due to traffic issues, a common challenge for many retailers. Last year, the traffic shortages put pressure on same-store performance. We are now seeing recovery; our same-store growth indicates that the traffic decline has narrowed. We strongly believe that our conversion rate has gained momentum. O2O has played a role in our same-store performance. In mainland China, we have been engaging O2O strategies for several years. Compared with last year, O2O has not significantly advanced same-store performance but benefitted from robust offline business. Regarding sales contributions from regions, I can share with you our terminal GMV. Overseas GMV from Asia (excluding China) accounts for 1/3, as does Latin America, with Europe and North America combined making up the remaining 1/3. Other regions contribute in single digits to our total GMV. As for TOP TOY differentiating in overseas positioning, I believe Jack can elaborate on this.

TOP TOY is a specialized trendy toy brand with a pricing strategy aimed at the premium market. In contrast, MINISO covers both lifestyle and trendy products. Therefore, while TOP TOY is a dedicated shop for trendy toys, MINISO functions as an all-in-one store with sections dedicated to trendy toys. In terms of price sensitivity, MINISO appeals to a broader market. The positioning and strategies for TOP TOY and MINISO thus differ significantly.

For the overseas market, are you still going to have a net addition of 100?

No, I was discussing the total number of TOP TOY in the overseas market. It will still be more than 100, but we aim for a performance growth of 70 to 80%. This year, we are seeking high-quality growth. The net growth in store numbers will range from 50 to 60, but we still expect strong performance growth of 70 to 80%.

Next, please welcome Samuel Wang from UBS.

I have a question regarding your proprietary IP or collaborative IP with artists. I'd like to ask for the sales contribution from the artist IP or Yu Yu Chan. How significant is its sales contribution to your overall artist IP-related sales? What will be your overall targets, and what contributions do you anticipate to total sales? For artist IP, I assume you might need to establish a new business model for IP operations. Are there any strategies the company can share with us? This is my first question on artist IP. My second question is regarding the overseas markets. I have noticed that U.S. market showed strong positive same-store performance in Q2 while some other overseas markets faced pressure. What regions performed beyond expectations, and which ones underperformed? What forthcoming measures do you have for markets facing difficulties?

Thank you. I'm Jack. Let me share our artist IP strategy. Yes, this is indeed a strategic move. Traditionally, MINISO focused solely on global IP licensing. However, starting six months ago, we adopted a dual strategy. We are now pursuing both international IP and developing our proprietary IP. I was excited to see news from POP MART, highlighting consumer interest in trendy toys. We see trendy toys in their infancy stage in China; the market is expanding. MINISO has excellent growth momentum as we build our proprietary IP, and Yu Yu Chan, our first proprietary IP, has already experienced considerable success, facing supply shortages due to high demand. Proprietary IP is vital to our strategy. Why can we do IP right now? We have realized its importance. MINISO has every opportunity to excel in proprietary IP. Previously, when working with global IPs, MINISO benefitted from product development, marketing, and channels but lagged in proprietary IP. However, now that we are actively pursuing proprietary IP, I believe our future is very promising. We have contracted 9 artist IPs, with Yu Yu Chan likely to achieve RMB 100 million in sales this year. I can confidently report that we’ve grasped the grid methodology for proprietary IP operations. Even with TOP TOY, we acquired IP that was previously projected at RMB 100 million, but we now expect it to reach RMB 250 million this year and possibly RMB 600 million next year. This trajectory applies to both TOP TOY and MINISO as we continue expanding proprietary IP. For example, we have contracted the artist IP like Yu Yu and acquired another IP. These two have already exceeded our expectations. Our strategy will prioritize building more new IPs. As Chinese GDP exceeds USD 10,000, we anticipate a cultural rise, particularly in the IP sector. Currently, the IP culture in China is just beginning to develop, showing great prospects. We expect to generate over RMB 300 million to RMB 400 million in GMV domestically, along with around RMB 30 million in overseas shipments. Our proprietary IP will see further distribution into overseas markets. We have not shared this before, but proprietary IP is an area we continue to explore and grow. MINISO stands out in proprietary IP business modeling, providing another growth avenue that allows us to differentiate and replicate our success. We will engage more artist IPs, often with minimal cost, enabling a win-win situation for both artists and MINISO. In China, only MINISO and two or three other competitors can achieve this successfully. Hence, regarding short-term contribution and profit, we prefer to focus on enhancing the quality of IP and IP values. We hold a high confidence level in our proprietary IP and encourage you to keep an eye on MINISO's strategy concerning proprietary IP.

Thanks, Jack. It’s clear to see your passion for proprietary IPs. This is indeed one of your favorite topics lately. We would like to invite you to join us for offline roadshows in Hong Kong as you share more about this IP strategy. As for your second question, Samuel, regarding overseas performance beyond expectations and those that fell short. We have operations in over 100 countries and regions globally, and performance is variable; some markets face challenges like currency fluctuations, local retail conditions, and macroeconomic factors that may hinder performance growth while others thrive. In H1 this year, we experienced excellent growth in the U.S., Canada, and Australia, particularly in Canada where our localized team has delivered remarkable performance, doubling our sales upon the arrival of our new Canada leader. Conversely, for the Latin American markets, revenue declined in H1, but retail GMV has been on the rise. Local customers, loyal to us long-term, are adjusting inventories, which are now stable. In Mexico, currency fluctuations have impacted business, as many customers shifted to using USD for purchases. However, despite challenges, performance has remained steady in these markets. Additionally, we see emerging markets like Hong Kong showing potential, with traffic shifting toward mainland China. The retail leasing rates remain high, but Hong Kong accounts for a small portion of our business. Overall, from Q1 to Q2 this year, we saw overall market trends improving, with acceleration anticipated in Q3.

Next question, let’s welcome the representative from Huatai Securities, please.

I have two questions. First, regarding tariff impacts that began in Q2, you mentioned making proactive adjustments to your U.S. business. Can you provide any updates on whether the pricing adjustments due to tariffs have affected your sales? We'd like further details. My second question concerns mainland China business in higher-tier cities. You have the IP strategy, while for lower-tier cities, you have a value-for-money strategy. How do these segments perform now, and what are the same-store performance results in higher-tier versus lower-tier cities? Any differences?

Thank you. Let's address your second question first regarding same-store performance in higher and lower-tier cities. Overall, same-store performance in higher-tier cities has outperformed that in lower-tier cities as of H1 this year. Regarding tariff impacts, starting from April this year, U.S. tariffs have been a major concern for the market. To summarize: tariffs did not impact our margins for the U.S. business. We initiated several measures ahead of the tariff implementation: First, before any political changes in the U.S. occurred in 2024, we strategically built inventories in the U.S. Secondly, we leveraged our integrated supply chain management operationally; we focused on direct sourcing in the U.S. to better address local consumer needs. Thirdly, we adjusted our tax strategy in response to tariffs. Overall, these methods have been effective. Our margins were unaffected by tariffs.

That's a very comprehensive introduction. Congratulations on the company's improvements.

Next question, let's welcome a representative from Yangtze River Securities.

I have two questions. The first question is regarding the self-operated and distributor business in overseas markets—what growth rates are we expecting for both? Additionally, we have noted the company has taken significant actions regarding IP. Could you elaborate on MINISO LAND's growth now and how it will drive offline sales in mainland China? Furthermore, what is our future cadence for IP development?

Apologies for the connection issue; could you repeat your second question? As for the first question about the overseas direct sales and distributor business in Q2, our overseas market growth reached 29%. Direct sales are performing better than distribution model growth. We've structured our BU where they complement each other well. Even within direct sales, we incorporate franchise stores. Therefore, it is difficult to strictly evaluate overseas business growth based on these divisions. Yet, we generally see that direct sales are growing faster than the distribution model. As for MINISO LAND's growth, the performance has exceeded our expectations. In our Shanghai Nanjing East Road location, the store has made over RMB 100 million in sales within just 9 months. We have recently opened additional MINISO LAND stores that also proved successful. What benefits does MINISO LAND bring us? It allows us to collaborate with numerous trendy toy artists to create comprehensive in-depth programs. This is rooted in our IP cooperation strategy. For MINISO LAND, IP-related contributions account for 80% to 90% of our output. For instance, in Turkey, we partnered with 30 shopping malls to provide blind boxes and trendy toys. This partnership works since they recognize MINISO as a strong international brand with global IP. As we enter luxury shopping malls, we plan to align with both international and domestic IPs, allowing artists to collaborate on proprietary IP. This approach helps us generate more extensive IP artist resources. MINISO LAND and its collaborations will form three solid product lines as we focus on getting the IP business right across the board.

Thank you very much. Thanks to all participants. We have reached the end of today’s call. See you next quarter. Thank you.