[Call Starts Abruptly] In Hong Kong Stock Exchange. In addition, we have prepared a PowerPoint presentation for today's call, which contains financial and operational information for this quarter and fiscal year. If you are using Zoom Meeting, you should be seeing it right now. It can also be visited on our IR website later.

Now I would like to hand the conference over to Mr. Ye and Mr. Wang will translate for Mr. Ye. Please go ahead, sir..

Hello, everyone, and welcome to our earnings conference call. Our overall performance once again reached new highs as we achieved breakthroughs in both revenue and profitability. Total revenues exceeded the RMB 3 billion milestone for first time, increasing by 40% year-over-year to RMB 3.5 billion.

GP margin reached 39.8%, an increase of 6.5 percentage points year-over-year. Adjusted net profit surpassed RMB 570 million, increasing by 156%. Adjusted net margin also hit a new high, reaching 17.6%, an increase of 8 percentage points year-over-year.

I'll now walk you through business updates for our 3 major segments; MINISO China, MINISO Overseas and MINISO TOP TOY. MINISO China showed resilience despite the challenging consumption environment.

Offline sales of MINISO China achieved 40% year-over-year growth in this quarter, as well as according to the National Bureau of Statistics China, domestic retail sales increased by only 10%. Average transaction volumes increased by 18%, while average transaction value increased by more than 5% year-over-year.

Entering July, nearly 1/3 of MINISO stores in China achieved new sales record, marking a strong start to the September quarter. GMV increased by over 25% year-over-year with GMV per store increasing by 14%. Average transaction volume and average transaction value increased by 10% and 3% respectively.

For the first 7 months of 2023, GMV per store in China recovered to 2021 level and around 85% of pre-COVID level in the same period of 2019, in line with our expectations at the beginning of the year.

Notably, we opened a total of 221 new stores on a net basis in China during the June quarter, including more than 90 of new stores in Tier 1 and Tier 2 cities. This not only set a quarterly record for store openings for MINISO, but also represents the highest quarterly new store openings in Tier 1 and Tier 2 cities since the pandemic.

Meanwhile, store closure rate in this quarter was only 1.0% below historical average. With the designed [Indiscernible] new store opening and closing reflect is the high confidence of our retail partners.

As of June, MINISO brand had over 1,000 MINISO retail partners with nearly 50% of stores owned by top 50 franchisees, among them, 40 have been cooperating with us for more than 6 years. In the past 4 fiscal years, about 50% of new stores in China are owned by our top 50 partners.

The average number of stores owned by them increased steadily from 27 to 33. We have been recruiting new partners as our store network penetrates into lower-tier cities. The total number of retail partners increased from 754 at the beginning of 2020 to 1,022 as of now.

We are highly confident that we achieved our target of opening 350 to 450 stores in China on a net basis in 2023. We are also optimistic that we will be able to expand our network in different tier cities across China. We now expect to have about 5,000 stores in China by 2027 compared to 3,305 stores we had at the end of 2022.

Let's move on to overseas. Firstly, revenue was RMB 1.11 billion, a 42% year-over-year increase from high base of last year, exceeding even our most optimistic expectations and setting a new record June quarter.

Revenue from directly operated markets increased by 85%, accounting for more than 45% of our overseas revenue, up from 35% in the same period last year. Secondly, GMV in overseas markets increased by 41% year-on-year, including a 69% growth in directly operated markets and a 32% growth in distributed markets.

Overall, GMV per store in overseas market increased by over 25% year-over-year. Average store count increased by about 11%. Major overseas market maintained rapid growth momentum, including 106% growth in North America and a 46% growth in Latin America. Third, overseas GMV per store in the June quarter recovered to 92% of the same period in 2019.

This is meaningfully higher than 77% and 68% recovery rate we saw in the previous quarter and the same period of last year. The distributed markets recovered to 95% pre-COVID levels, while the DTC market recovered to 85%. In our top 5 overseas markets, GMV per store in North America was nearly twice the same period in 2019.

GMV per store in Latin America, Europe, Middle East and North Africa all recovered to about 90% of 2019 levels. Asia markets recovered to about 65%, which was the highest we have seen since the pandemic and the recovery is still very fast. Capital-wise, GMV per store in Mexico is 10% higher than pre-COVID level.

In the first half of 2023, 4,000 new SKUs were launched in Mexico and became a major driver of its local sales. GMV per store in the U.S. was twice the pre-COVID level. Since the grand opening of our first global flagship store at Times Square on May 20, it has consistently been setting new sales records.

Fourth, profit margin of overseas business is substantially improving, thanks to the operating leverage. In this quarter, overseas markets contributed more than 40% of total operating profit, meaningfully higher than the approximately 25% in last quarter. Margin expansion was especially apparent in U.S.

market, along with a rapid revenue growth and refined unit economics. About 9% of our stores there was already profitable in June, significantly driving up the operating profit margin for overseas directly operated markets. In the first half of 2023, 72 new stores were opened in overseas markets on a net basis.

The second half of calendar year tends to be a peak season for store opening and sales. Recently, store openings have accelerated. In July, we added 38 overseas stores. We are still positive with the target of 350 to 450 addition in overseas market in 2023. Since the beginning of this year, I have spent the majority of my time in overseas markets.

During this period, I had a lot of deep thinking about new stores value proposition, and I'd like to take this opportunity today to share with you. In the past 10 years since our inception, MINISO leveraged China's unmatched supply chains.

We used to position our products at 3 highs and 3 lows, meaning high appealing, high quality and high frequency and low cost, low market and low prices. We relied on this cost leadership strategy for a very rapid growth. 2023 marks the first year of MINISO's brand upgrade.

Its value proposition has never been clearer in my mind, facing new changes and new trends both at home and abroad. We cannot survive by relying solely on cost advantages. In addition to that, we also need to differentiate our product offerings as much as we can to engage in global competition.

So I have renewed MINISO's brand positioning to a global value retailer offering lifestyle products featuring IP design. So how should we think about this positioning? The first message I want to deliver is that we attach great importance to the design of every single product.

We have developed a lot of trendy lifestyle products that resonate with young consumers by focusing on creating more interest-driven content, just like Nike has been doing in promoting better design in sportswear. In addition to that, we should become IP powerhouse such as [Disney] and make lifestyle products more fashioned by featuring IPs.

By leveraging consumer demand to right product design, we can always develop products that are truly unique or are believed to offer more value than similar IP products. Only in this way can we continuously design best-selling products and also resonate with our consumers.

We are now cooperating with 80 IP licenses compared to 17 when we listed in the U.S. 3 years ago. Take the recent blockbuster Barbie series as an example. Half of related SKUs we had in store was sold out within the first 5 days of launch.

The collaboration generated immense buzz on social media platforms, including Xiaohongshu, well-related topics received over 13 million comments as well as repo. While the topic accumulated nearly 300 million views as it became another phenomenal IP co-branded event for us. Third, we will stick to value for money proposition.

MINISO believes in our Happy Philosophy as we offer creative and high quality products to global consumers at affordable price. This is in line with our commitment to make it easy for consumers to enjoy happy and quality life.

Leveraging China's efficient supply chain and design capabilities we have accumulated during the past 10 years, MINISO is able to offer global consumers budget-friendly products and build our customer-friendly image. This value for money proposition enables us great advantages in navigating through economic cycles.

We have identified 2 product strategies for overseas markets, globalization and IP strategy. To accomplish these 2 strategies successfully, we need to consistently drive product and design innovations.

That means we need to offer emotional resonance with consumers by providing good-looking, fun and useful products, among which we believe 3 categories will be key to our success. These are big beauties, victories and big IP products.

In this year, [Indiscernible] IP-related plush toys and IP-related buying boxes acted as a keyload categories and have generated explosive growth in overseas markets, opening up new avenues for our future growth. Lastly, we'll implement super store strategy.

I believe super stores play a key role in growing mind share among consumers and strengthening our brand as they contribute larger sales. For example, our recently opened flagship store on Beijing Road of Guangzhou refreshed the sales record of single-string China for years.

This is particularly impressive given ongoing weakness of consumption in China, in particular, the opening performance of Times Square for flagship store was unbelievably strong and it has upgraded our understanding of our business, including for me and the whole management team.

It helped us have better understanding of the market potential in the U.S. and strengthened our confidence in further developing and making investments there. The super store concept is potentially a new path towards improving per store sales for us. Now let me brief you on recent developments from TOP TOY.

TOP TOY revenue increased by 81% year-over-year with an increase of 46% year-over-year in per store sales, an increase of 24% of average store count. I believe that high quality growth is just ahead of us.

In the June quarter, TOP TOY's product mix has been optimized as our exclusive products accounted for 1/3 of total sales, reaching the goal we set about 2 years ago. Merchandise GP margins was about 46%, 5 percentage points higher than the same period last year.

Accounting GP margin continued to increase to a comparable level of MINISO China 1 year ago. This is a reasonable comparison as both business employee and asset-light business model where we mainly attract partners to invest in stores. So when sales reach a certain scale, operational leverage will kick in and drive our profit.

I'll now turn the call over to Eason for a review of our financial performance in June quarter and fiscal year '23..

Thank you, Jack. Hello, everyone. Thank you again for joining us today. I'll walk you through our financial results for the June quarter. Please note that all numbers are in renminbi unless otherwise stated. And I will also refer to some non-IFRS measures, which have excluded share-based compensation expenses.

Revenue is RMB 3.25 billion, representing an increase of 40% year-over-year. Revenue from China was RMB 2.14 billion, up 39% year-over-year. The increase was driven by a growth of 42% in revenue from MINISO's offline stores and a growth of 81% in revenue from TOP TOY.

The 42% year-over-year growth of MINISO offline business was the result of a 9% growth in average store count and 31% of growth in per store sales. However, on a more comparable basis, per store sales increased by about 25%, excluding the impact of store closures last year.

The 81% year-over-year growth of TOP TOY was a result of 24% growth in average store count and a 46% growth in per store sales. On a more comparable basis, per store sales increased by about 30%, excluding the impact of store closures last year.

Revenue from overseas market was RMB 1.11 billion, up 42% year-over-year, driven by an increase of 11% in average store count and a growth of about 28% in average revenue per MINISO store in overseas markets. Revenue from distributed markets was about RMB 609 million, an increase of about 20% year-over-year.

Revenue from directly operated markets was about RMB 506 million, an increase of about 85% year-over-year, accounting for 45% of overseas revenue as compared to 35% last year. Through fiscal year 2023, revenue was RMB 11.5 billion, up 14% year-over-year. Of this, revenue from overseas market was about RMB 3.82 billion, up 45% year-over-year.

Gross profit in the June quarter was RMB 1.3 billion, up 68% year-over-year. Gross margin was 39.8% compared to 33.3% in the same period of last year. The year-over-year increase was due to 3 reasons. 1, GP margin in China increased by about 6 percentage points, thanks to our continuous effort in brand upgrade.

2, GP margin in overseas markets increased by another 6 percentage points, thanks to product optimization and higher revenue contribution from directly operated markets. And 3, GP margin of TOP TOY 10 increased by 10 percentage points due to product optimization.

SG&A expense as a percentage of revenue was 19%, down from 22.7% in the same period last year.

Selling and distribution expense was about RMB 458 million, increased by 33% year-over-year, driven by, 1, increased IP licensing expenses; #2, increased personnel-related expenses; and #3, increased marketing expenses, mainly in connection with our strategic brand upgrade of MINISO in China.

Going forward, we will continue to see marketing expense increase for a while, but we are highly confident to make sure that total SG&A expense maintained at a reasonable and controllable level of revenue. G&A expense were RMB 161 million, decreasing by 10% year-over-year. Turning to profitability.

Operating profit was RMB 690 million, increasing by 154%. Operating margin in this quarter was 22%, the first time ever for us to reach such a high level. For fiscal year 2023, operating margin has reached nearly 20% too. Adjusted net profit in this quarter was RMB 571 million, increasing by 156% year-over-year.

Through fiscal year, adjusted net profit was about RMB 1.85 billion, up 155% year-over-year. Adjusted net margin in this quarter was 17.6% compared to 9.6% in the same period of 2022. For fiscal year, adjusted net margin was 16.1% compared to 7.2% in last year.

As of July -- as of June 30, 2023, we had a strong cash position of RMB 7.3 billion compared to RMB 5.8 billion 1 year ago. Turning to capital allocation strategy. We have established a dividend policy of paying out no less than 50% of adjusted net profit in the future.

For fiscal year 2023, the Board of Directors approved a cash dividend in amount of $0.412 per ADS, about 50% of our adjusted EPS of $0.81. The aggregate amount of cash to be paid approximately $128.5 million or RMB 931.7 million. MINISO aims to be a world-class company.

Our capital allocation strategy in the future will balance new growth opportunities and our commitment to bring stable return to shareholders. So June quarter has witnessed too many breakthroughs and new hits in each major aspects of our operations.

Looking forward into the September quarter, we expect our sales will continue to grow strongly on a year-over-year basis, driven by better store level performance and store network expansion. Meanwhile, our margin profile will continue to optimize on a year-over-year basis. Thank you. And this concludes our prepared remarks.

We are now ready to take questions..

The first question today comes from the line of Michelle Cheng from Goldman Sachs..

So I have 3 questions. So first 2 is for Mr. Ye. The first one is the IP performance has been very strong this year.

And can you share with us the sales contribution from IP products this year? And whether we have any target for the future? And regarding the cooperation method with partners, is there any difference between the domestic market and also the overseas market? And my second question is about the China per store GMV upside given it's still around 15% gap versus pre-COVID level.

Do we have any specific strategy to drive further improvement? And third question is about the OP margin for overseas. This year -- this quarter, we have 35% revenue from overseas and 40% contribution from operating profit for overseas business.

So can you share with us what is the drivers for DTC and also the distribution model? And how should we think about the margin upside for the overseas business?.

Michelle, thank you for your first question. So we will continue to enlarge our cooperation with strong IPs with global influence and in line with our strategic direction of brand upgrade and we'll be helpful in expanding our sales.

Specifically in overseas market, we will stick to our big IP product strategy and we will continue to fund the strong IPs in each important market we are in and that is -- that will be one of our focus too. For the target of IP sales, we do not have specific numbers at this moment.

But my personal estimate is that in the near future, it will be stabilized at about 25% to 30%. In the first half, the IP contribution was about 25%, about 1 percentage point higher than the same period last year. But compared to 2019, it has been a 10 percentage higher.

And I would say, at least for a while, the percentage contribution will be 25% to 30%. But in the future, we will dynamically change the contribution from IP based on the market change. And there's no significant difference between our cooperation model between -- in China and overseas market. We specifically found that IPs in the U.S.

or from Japanese has a global appealing among our customers. And we will cooperate with our IP licenses in terms of product authorization, in terms of marketing, in terms of shopping experience and the store experience and in all these aspects. We will leverage IP to empower in terms -- and power us in terms of branding power and product power.

In terms of the second question, you are right that with the progress of our brand upgrade, we will stick to our big store strategy or flagship store strategy. By the end of June, we -- the average store size of MINISO China store is about 180 square meter, and this number has been stabilized during the past several years.

But with the improvement of our branding power and our product, it has created some conditions of our big stores opening. As I shared earlier, only by opening big stores can we increasing our mind share among our customers as these big stores contribute to larger sales.

And by opening big stores or flagship stores is also a common experience that we have learned from the big retailers, the advanced retailers from European countries and the U.S. So in the first 6 months, we have opened dozens of big stores that have demonstration effect. For example, the flagship stores of Beijing Road and the [Indiscernible] Road.

Now in our store portfolio, we have about 100 flagship stores or big stores, large stores. On average, the initial CapEx is about 2x of ordinary stores.

In the first 6 months, the per store sales has been very great of these big stores because their cost of sales is 3x of that of ordinary stores with ASP 7% higher and the inventory turnover days -- with inventory turnover days of about 30 days. It's about 20 days less than the ordinary stores.

So in general, in terms of ROI and payback, these large stores will be far better than the ordinary stores..

And Michelle, this is Eason. About your third question, about the OP margin of improvements. I think, first of all, you have to know that this percentage in OP margin contribution is the one before the allocation of headquarter overheads because there's always some overheads in headquarters that even is allocatable to each [PU].

And for the OP margin of overseas business, I would say, now currently it's between the 22% of the Group level and about nearly 30% of MINISO China is between them. I'd say, whenever the OP margin of overseas business is above the average -- the Group level, its profit contribution will be higher than its revenue contribution.

And if you look at the comparison between this quarter and last quarter, I would say, the source from the improvement is mainly from the operating leverage.

If we look at the expense structure in both directly operated markets and the distributor markets in this quarter, we will see that the expense ratio -- the OpEx ratio decreased about several percentage points compared to last quarter.

So in general, the OP margin of overseas market in this quarter has improved by about 5 percentage points on a quarter-over-quarter basis. And the last point I would add is, I'm saying it's not the first time that we have seen OP margin contribution of overseas market surpassed 40%.

As we shared earlier, before the pandemic when the overseas market contributed about 35% or nearly 40% revenue contribution, then we already saw nearly 40% or over 40% of margin contribution. And I'd say, because the directly operated market of our overseas business is still picking up operational leverage.

So the overall profit contribution from overseas market, I would say, you were not surprised to see it will fluctuate for a while..

The next question is from the line of Anne Ling from Jefferies..

My first question is on the super store strategy.

Just a follow-up question regarding like whether we will be opening a self-owned super store or how many of these stores in the future will be operated by the franchise? And in the future, what is our target for the [Technical Difficulty] for these super stores in our 300 to 400 store openings for this year for both China as well as for the overseas market? And the second question is coming out from -- it's actually for the U.S.

market [Technical Difficulty] from the U.S.

as a percentage to the -- from the overseas sales? And in terms of the per store performance, how different is it so far versus the China market? I remember that in the past, our -- and it's been gradually building up, which in the future will help drive the sales as well as the profitability?.

For your first question about the large store strategy, I'd say, we'll stick to the strategy. In my design, we have a blueprint that in the future we do believe that each city or each provincial city in China has a flagship store that represents MINISO's brand image. So my best guess is, we should have by 500 such stores.

And there's no such thing that these stores should be directly operated or franchisee operated. The first thing -- the first and the foremost important thing is, we should find the optimal location.

And we will suggest every of our MINISO's overseas market to open suitable flagship stores, because as I said, the big store strategy is critical for our future success because it can bring our -- it builds MINISO's brand image and our store performance to a new heights.

And it will also have a demonstration effect for its peer stores among the sales markets. So for example, in the U.S. market, our flagship stores there, we can deliver like 1.3 million to 1.4 million sales record.

And for our Guangzhou Beijing Road flagship stores, we may have 5 million sales per month and all these are new sales record for MINISO universe. And for the second question about the U.S. market specifically, I'd say, the U.S. market for the past 3 quarters, it has 2 quarters ranked the first amongst revenue contribution in overseas market.

And in June quarter, it's the second largest in terms of revenue contribution. And its revenue contribution of our overseas market is high-teens. And its revenue contribution of our total sales is like mid-single-digits during the past several quarters.

And you are right that we have a lot of potential in terms of store operations, in terms of product optimizations, in terms of unit economics in the U.S. in the near-term. And as I shared in our prepared remarks, the unit economics of the U.S. stores has been improved a lot. For example, the OpEx ratio of U.S.

stores during the past 12 months decreased by about 20 percentage points and that is one big thing that turned this business into a profitable for one..

The next question is from the line of Lucy Yu from Bank of America Merrill Lynch..

So there has been mentioned in the announcement that China is targeting for 5,000 stores in 2027. So what's the allocation or geography allocation of those new stores? And do we have any mid-term plan for the overseas market which may have greater potential in the long-term? And the second one is on the China store unit economics post-COVID.

So what's the detailed GP margin of the expense breaking down as well as payback period?.

Okay. Thank you, Lucy, for the first question about the store opening potential. In China, our target is to have 5,000 stores by year-end of 2027. We have a strong track record and we have high confidence to achieve that goal.

And in terms of our overseas potential, I would say, from my perspective, we do not have any concern about the store opening in overseas market for at least the next 10 years.

My personal observation in this year, I have spent a lot of time in overseas market, is that in a lot of countries in overseas markets, we can open 1 MINISO -- at least 1 MINISO store for each 100,000 people in overseas market..

And Lucy, for your second question about the payback of the domestic stores, we strongly believe that the payback period for most of our franchisees has been shortened during the past several months. There are several reasons. The first is our better store performance during the first half of this year.

And the second reason is the optimization of their expense structures, i.e., the rent level decreased, the staffing cost optimized and there are other savings in their cost too. So our estimate is that our franchisees on average, their margin profile has improved significantly compared to 1 year ago or 2 years ago, especially in Tier 1 cities.

In this year, we have observed that in Tier 1 cities, our MINISO stores, their sales per store increased by 30% -- more than 30% on a year-over-year basis. It's higher than the 20% of the average year-over-year growth.

And for the new stores in Tier 1 cities in this year, we observed that their average rent level has decreased by single-digit compared to last 3 years. As Mr. Ye just shared, in the first half, we have opened a batch of demonstrated big stores. So the big stores, the average payback period is far, far less than the ordinary stores.

So I'll say as my last point to your question is that the big stores will also help increase the ROI of our franchisees..

The next question is from the line of Samuel Wang from UBS..

So we saw from the announcement that our July sales is also very strong with a domestic growth above 25%, overseas growth 50%.

So what are the reasons and drivers behind that?.

Samuel, this is Eason. Yes, our domestic sales increased by more than 25% in July month. It's between 25% to 30% driven by 2 drivers. The first is the per store sales of MINISO China increased by mid-teens during the same period. And we have also dozens of strong number growth.

So on a single store basis, the mid-teens per store sales increase was major from low-single-digit of ASP hike and a high-single-digit or about 10% of traffic improvement. In the overseas market, we also mentioned in the earnings release that the GMV increased by about 50%.

And I'd say, the overseas directly operated market still has a continued high growth rate comparable to the June quarter. And in overseas market, we also see the drivers also come from the traffic and ASP hike..

The next question is from Jingru Song from Industrial Securities..

I will have 2 questions. The first question is about how to improve our supply chain and about the overseas supply speed and control inventory SKU. And the second question is how do we forecast the ASP? Seems like it increased by 3% year-on-year this time.

But how do we forecast about the overseas ASP on the next year and the domestic ASP on the next year?.

Okay. Thank you for your questions. In terms of our overseas supply chain expansion plan, we have 2 points to add here. The first is that we will stick to our accumulated resource in China. So China will definitely will be the major supply chain base, but we are still exploring new partners in Southeast Asian countries such as Vietnam and so on.

And second, we will increase the percentage of direct sourcing in local markets such as the U.S. market. For example, we have been proactively increasing the percentage of IP-related snacks in the U.S. market.

And for your second question about ASP in overseas market, I'd say in China it's around RMB 35, right? And now it's about RMB 37 in the June quarter. For overseas market, I'd say, we have a rough number that on average ASP in overseas market is about 2x or a little bit higher of China's ASP.

But in countries -- in specific countries like in European countries, in the U.S., I'd say, this number is about 3x or even higher than that of China. In our rapid growth markets such as the U.S. and Canada and so on, we still see our ASP increasing at a very fast speed. Thank you..

Thank you once again for joining us today, and our conference call now comes to an end. If you have any further questions, please contact MINISO IR team. Our contact information can be found on today's press release. We will see you in the next quarter. Have a nice day. Good bye..