MINISO Group Holding Limited (NYSE:MNSO) Q4 2023 Results Conference Call August 22, 2023 3:00 AM ET Company Participants Guofu Ye - Founder and CEO Eason Zhang - CFO Conference Call Participants Michelle Cheng - Goldman Sachs Anne Ling - Jefferies Lucy Yu - Bank of America Merrill Lynch Samuel Wang - UBS Jingru Song - Industrial Securities Operator [Call Starts Abruptly] In Hong Kong Stock Exchange. In addition, we have prepared a PowerPoint presentation for today's call, which contains financial and operat ...

Financial Performance - Revenue for the fourth quarter was RMB 3,252.2 million (USD 448.5 million), representing a year-over-year increase of 40.3% and a quarter-over-quarter increase of 10.1%[11] - Gross profit for the fourth quarter was RMB 1,295.6 million (USD 178.7 million), with a year-over-year increase of 67.9% and a quarter-over-quarter increase of 11.5%[11] - Operating profit for the fourth quarter reached RMB 690.0 million (USD 95.2 million), showing a year-over-year increase of 153.6% and a quarter-over-quarter increase of 19.8%[11] - Net profit for the fourth quarter was RMB 547.0 million (USD 75.4 million), reflecting a year-over-year increase of 162.4% and a quarter-over-quarter increase of 16.2%[11] - Adjusted net profit for the fourth quarter was RMB 571.2 million (USD 78.8 million), with a year-over-year increase of 156.3% and a quarter-over-quarter increase of 18.3%[11] - Total revenue for the fiscal year was RMB 11,473.2 million (USD 1,582.2 million), representing a year-over-year increase of 13.8%[14] - Adjusted EBITDA for the fiscal year was RMB 2,822.3 million (USD 389.2 million), showing a year-over-year increase of 99.7%[14] - Operating profit reached RMB 2,223.0 million (USD 306.6 million), a year-over-year growth of 152.0%[42] - Adjusted net profit for the fiscal year was RMB 1,844.7 million (USD 254.4 million), reflecting a year-over-year increase of 155.3%[42] - Gross profit amounted to RMB 4,443.1 million (USD 612.7 million), with a gross margin of 38.7%, up from 30.4% in the previous year[39] - Adjusted net profit margin improved to 16.1%, compared to 7.2% in the previous fiscal year[43] Store Expansion - The number of MINISO stores reached 5,791 as of June 30, 2023, an increase of 592 stores year-over-year and 277 stores quarter-over-quarter[14] - The number of MINISO stores in China was 3,604, reflecting a year-over-year increase of 378 stores and a quarter-over-quarter increase of 221 stores[14] - The number of overseas MINISO stores was 2,187, with a year-over-year increase of 214 stores and a quarter-over-quarter increase of 56 stores[14] - The company plans to increase the number of MINISO stores in China from 3,325 at the end of 2022 to approximately 5,000 by the end of 2027[17] - The number of MINISO stores in China increased by 221 during the quarter, with over 90 stores located in first- and second-tier cities, setting a new record for quarterly openings[17] Revenue Breakdown - Revenue from the Chinese market was RMB 2,137.4 million (approximately USD 294.8 million), a year-on-year increase of 39.4%[23] - The company's overseas revenue reached RMB 1,114.8 million (approximately USD 153.7 million), reflecting a year-on-year growth of 42.0%[24] - Revenue from overseas markets increased by 44.6% year-over-year, totaling RMB 3,822.4 million (USD 527.1 million)[36] - Domestic business revenue for the three months ended June 30, 2023, reached RMB 2,137 million, a 39% increase from RMB 1,533 million in the same period of 2022[70] - International business revenue for the three months ended June 30, 2023, was RMB 1,115 million, reflecting a 42% increase compared to RMB 785 million in the same period of 2022[70] Profitability Metrics - Adjusted net profit exceeded RMB 570 million, marking a year-on-year increase of 156%, with an adjusted net profit margin of 17.6%[17] - The adjusted net profit margin for the three months ended June 30, 2023, improved to 17.6%, up from 9.6% in the same period of 2022[68] - The company reported a basic adjusted earnings per share of RMB 0.45 for the three months ended June 30, 2023, compared to RMB 0.18 in the same period of 2022[68] Cash and Assets - Cash and cash equivalents totaled RMB 7,303.3 million (USD 1,007.2 million) as of June 30, 2023, compared to RMB 5,828.3 million a year earlier[33] - Total assets as of June 30, 2023, amounted to RMB 13,447,713 thousand, up from RMB 11,281,788 thousand in 2022, reflecting a growth of 19.3%[62] - Cash and cash equivalents increased to RMB 6,489,213 thousand as of June 30, 2023, from RMB 5,348,492 thousand in 2022, representing a 21.3% rise[62] - Total equity increased to RMB 8,918,268 thousand as of June 30, 2023, compared to RMB 7,027,400 thousand in 2022, indicating a growth of 27.0%[62] Strategic Initiatives - The company has adopted a dividend policy to pay no less than 50% of adjusted net profit as dividends, with a proposed final cash dividend of USD 0.412 per American depositary share[20][21] - The company expects continued strong sales growth driven by improved store performance and network expansion in the upcoming quarter[18] - Miniso has established a large store network globally since opening its first store in China in 2013, promoting a treasure-hunting shopping experience[51] - The company emphasizes high-quality, aesthetically pleasing, and cost-effective products as core attributes of its offerings[51] - The company maintains a commitment to innovation and product development to meet consumer demand and enhance market acceptance[57] Financial Metrics and Definitions - Miniso uses non-IFRS financial metrics such as adjusted net profit and adjusted EBITDA to evaluate its operational performance[53] - Adjusted net profit is defined as profit excluding equity-settled share-based payment expenses[54] - The adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue, providing insight into operational efficiency[54] - The company encourages investors to review its financial data comprehensively rather than relying solely on non-IFRS metrics[55] Miscellaneous - The exchange rate used for converting RMB to USD is 7.2513 RMB per 1 USD as of June 30, 2023[52] - Investor relations contact information is provided for further inquiries regarding the company's performance and strategies[58]

Financial Data and Key Metrics Changes - Revenue for Q3 2023 increased by 26% year-over-year, reaching RMB 2.95 billion, driven by strong recovery in offline operations and overseas business [4][21] - Gross profit margin improved to 39.3%, a 9 percentage point increase from the same period last year [4][24] - Adjusted net profit reached RMB 418 million, a 336% year-over-year increase, with an adjusted net profit margin of 16.4%, up 12 percentage points from last year [4][27] Business Line Data and Key Metrics Changes - MINISO brand China business recorded RMB 2 billion in revenue, a 19% year-over-year increase, with offline store revenue increasing by 25% [5][21] - Revenue from overseas markets was RMB 800 million, a 55% year-over-year increase, with GMV in overseas markets growing by 45% [13][21] - TOP TOY revenue was RMB 114 million, a 24% year-over-year increase, with exclusive products contributing to improved gross profit margin [17][18] Market Data and Key Metrics Changes - In China, retail sales of consumer goods increased by 4.9% year-over-year, while MINISO's offline business outperformed with over 25% growth [6][21] - North America saw GMV growth of over 100%, while Latin America experienced over 60% growth [14][35] - Asian markets, excluding China, recorded about 30% GMV growth, with notable increases in Singapore (90%) and the Philippines (50%) [15][37] Company Strategy and Development Direction - The company is focused on high-quality growth and improving store performance through better merchandise and operations [8][20] - MINISO is committed to its IP strategy, launching successful collaborations, including a series of Pokémon products [9][10] - The company aims to transform into a super brand, with plans for a global flagship store in New York City [20] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained strong performance and improvement in store-level metrics, despite external challenges [28] - The company anticipates continued sales growth driven by store network expansion and improved margin profiles [28] - Management highlighted the importance of globalization to mitigate country-specific risks [15] Other Important Information - The company opened 58 new stores in Q3 2023, with a record low store closure rate of 0.6% [7] - The average number of orders and average order value increased by 8% year-over-year [22] - The cash position at the end of the quarter was approximately RMB 7 billion, up from RMB 6.2 billion at the end of 2022 [27] Q&A Session Summary Question: Comments on gross margin and IP products contribution - Management indicated that merchandise gross margin is expected to approach 60% by the end of Q2 2023, with IP products contributing around 20% [32][34] Question: Insights on overseas operations and market drivers - North America showed over 100% GMV growth, while Latin America and Asian markets also performed well, with varying recovery rates [35][37] Question: Store openings and consumer behavior changes - The company is confident in exceeding its store opening target, with a focus on Tier 1 and Tier 2 cities [40][41] Question: Best-selling items and operating margins - Best-selling SKUs accounted for 40% of total sales in China, with significant year-over-year growth [46] Question: Profitability expectations for TOP TOY - TOP TOY is expected to narrow its losses significantly in the coming year, focusing on product innovation [55]

Financial Performance - Revenue for the third quarter ended March 31, 2023, was RMB 2,954.1 million (USD 430.2 million), representing a year-over-year increase of 26.2% and a quarter-over-quarter increase of 18.4%[11] - Gross profit for the same period was RMB 1,161.7 million (USD 169.2 million), with a year-over-year growth of 64.4% and a quarter-over-quarter growth of 16.5%[11] - Operating profit reached RMB 575.9 million (USD 83.9 million), showing a significant year-over-year increase of 308.5% and a quarter-over-quarter increase of 28.7%[11] - Adjusted net profit for the third quarter was RMB 483.0 million (USD 70.3 million), marking a year-over-year increase of 336.3% and a quarter-over-quarter increase of 29.5%[11] - Adjusted EBITDA for the quarter was RMB 706.4 million (USD 102.9 million), with a year-over-year growth of 164.3% and a quarter-over-quarter growth of 19.7%[11] - Revenue for the third quarter of fiscal year 2023 reached RMB 2,954.1 million, a year-on-year increase of 26.2% driven by an 18.1% increase in revenue from China and a 54.6% increase from overseas markets[21] - Adjusted net profit margin expanded to 16.4%, an increase of 11.7 percentage points compared to the same period last year, with adjusted net profit rising to RMB 483 million, a year-on-year growth of 336%[16] - Basic and diluted earnings per American Depositary Share (ADS) were RMB 1.48 (USD 0.22), an increase of 362.5% compared to RMB 0.32 in the same period of 2022[31] - Net profit for the period was RMB 470.9 million (USD 68.6 million), reflecting a year-over-year growth of 408.2%[28] - Adjusted net profit for the three months ended March 31, 2023, was RMB 483,016 thousand, a 38% increase from RMB 110,699 thousand in the same period of 2022[49] Store Expansion - The number of MINISO stores as of March 31, 2023, was 5,514, an increase of 401 stores year-over-year and 74 stores quarter-over-quarter[14] - The number of MINISO stores in China was 3,383 as of March 31, 2023, reflecting a year-over-year increase of 186 stores and a quarter-over-quarter increase of 58 stores[14] - The overseas MINISO store count reached 2,131 as of March 31, 2023, with a year-over-year increase of 215 stores and a quarter-over-quarter increase of 16 stores[14] - The number of TOP TOY stores as of March 31, 2023, was 116, an increase of 24 stores year-over-year[14] - The number of new stores opened in the quarter increased by 58, doubling the number from the same period last year, with a target of opening 250-350 new stores in China for 2023[16] Market Performance - Average same-store GMV in China increased by approximately 50% year-on-year, with total GMV growth of about 80% in April 2023[17] - Revenue from overseas markets contributed 27.1% to total revenue, up from 22.1% in the same period last year, marking a five percentage point increase[22] - The average number of stores in China increased by 5.4%, contributing to a 25.3% year-on-year revenue growth from domestic stores[21] - The company’s efforts in product design and selection optimization in overseas markets resulted in a revenue increase of approximately 55% to RMB 800.9 million[16] - Domestic business revenue for the three months ended March 31, 2023, was RMB 2,153,000 thousand, an 18% increase compared to RMB 1,823,000 thousand in the same period of 2022[52] - International business revenue surged by 55% to RMB 801,000 thousand for the three months ended March 31, 2023, compared to RMB 518,000 thousand in the same period of 2022[52] Financial Position - As of March 31, 2023, the company had cash and cash equivalents totaling RMB 7,089.1 million (USD 1,032.3 million), up from RMB 6,160.4 million as of December 31, 2022[31] - Total assets increased from RMB 11,281,788 thousand as of June 30, 2022, to RMB 12,561,595 thousand as of March 31, 2023, representing a growth of approximately 11%[43] - Cash and cash equivalents rose from RMB 5,348,492 thousand in June 2022 to RMB 6,380,545 thousand in March 2023, an increase of about 19%[43] - The company's equity attributable to shareholders increased from RMB 7,031,642 thousand in June 2022 to RMB 8,275,575 thousand in March 2023, reflecting a growth of approximately 18%[44] - Non-current assets totaled RMB 3,077,889 thousand as of March 31, 2023, slightly down from RMB 3,209,226 thousand as of June 30, 2022[43] - Inventory increased from RMB 1,188,095 thousand in June 2022 to RMB 1,392,376 thousand in March 2023, marking a rise of about 17%[43] - Total liabilities increased slightly from RMB 4,254,388 thousand in June 2022 to RMB 4,277,357 thousand in March 2023[44] - The company has a strong cash position with total current assets reaching RMB 9,483,706 thousand as of March 31, 2023, up from RMB 8,072,562 thousand in June 2022[43] Strategic Initiatives - The company has established an ESG leadership team to manage environmental, social, and governance matters, reporting regularly to the audit committee and board[20] - The company is focused on expanding its market presence and enhancing product offerings, as indicated by ongoing investments in new product development and technology[40] - Management anticipates continued growth in the retail market, driven by increasing consumer demand and strategic partnerships[40] Other Financial Metrics - Other income was RMB 0.8 million (USD 0.1 million), compared to RMB 2.3 million in the same period of 2022[25] - Sales and distribution expenses were RMB 439.0 million (USD 63.9 million), an increase of 21.3% year-over-year. Excluding share-based compensation, these expenses were RMB 431.5 million (USD 62.8 million), up 22.8% year-over-year[25] - Financial income net was RMB 25.1 million (USD 3.7 million), a year-over-year increase of 444.9% due to increased interest income from bank deposits[27] - Adjusted EBITDA margin was 23.9%, compared to 11.4% in the same period of 2022[31] - The company experienced a foreign exchange loss of RMB 7,967 thousand for the three months ended March 31, 2023, compared to a loss of RMB 11,139 thousand in the same period of 2022[48]

Financial Performance - Revenue for the six months ended December 31, 2022, was RMB 5,266,878, a decrease of 2.9% compared to RMB 5,426,908 in 2021[12] - Gross profit increased by 24.8% to RMB 1,985,660 from RMB 1,591,342 in the previous year[12] - Operating profit surged by 104.1% to RMB 957,070, up from RMB 468,947 in 2021[12] - Profit before tax rose by 113.9% to RMB 1,005,409 compared to RMB 469,956 in the prior year[12] - Net profit for the period increased by 125.6% to RMB 763,911 from RMB 338,618 in 2021[12] - Basic and diluted earnings per share were both RMB 0.61, representing a 117.9% increase from RMB 0.28 in the previous year[12] - Adjusted net profit (non-IFRS) was RMB 790,491, a 103.2% increase from RMB 389,018 in 2021[12] Store Expansion and Market Presence - The company reported a significant increase in the number of stores, contributing to market expansion efforts[18] - As of December 31, 2022, MINISO operated over 5,400 stores globally, with 3,325 stores in China and 2,115 stores overseas[21] - The number of TOP TOY stores in China increased to 117, up from 89 in the previous year[23] - The number of MINISO partners increased by 77 to a total of 998 partners as of December 31, 2022[28] - The company plans to expand the TOP TOY store network in first- and second-tier cities while penetrating lower-tier cities in China[27] - The number of MINISO stores in lower-tier cities rose to 1,477, an increase from 1,307 in the previous year[26] - The total GMV of products sold through the MINISO network reached approximately RMB 9.9 billion for the six months ended December 31, 2022[19] Product Development and Innovation - Future outlook includes continued investment in new product development and technology enhancements to drive growth[18] - MINISO launched over 560 SKUs on average each month, offering a wide product range of over 7,600 core SKUs[20] - The company has established brand collaborations with 82 popular IP licensors and developed over 300 IP products under the TOP TOY brand[20] Financial Position and Cash Flow - As of December 31, 2022, the company's cash and cash equivalents increased by 5.7% to RMB 6.16 billion from RMB 5.83 billion as of June 30, 2022, primarily due to cash generated from operations and proceeds from a global offering[59] - The company reported a net cash position of RMB 5,186,601 thousand at the end of the period, slightly down from RMB 5,151,456 thousand at the end of the previous year[131] - The net cash generated from operating activities for the six months ended December 31, 2022, was RMB 433,256 thousand, a decrease from RMB 731,741 thousand in the same period of 2021[129] Shareholder Returns and Dividends - The company approved a special cash dividend of USD 0.172 per ADS or USD 0.043 per share, paid on September 9, 2022[111] - A special cash dividend of USD 0.043 per ordinary share was declared, totaling USD 53,640,000 (approximately RMB 370,787,000) for the six months ended December 31, 2022[189] Corporate Governance and Compliance - The company has established an audit committee to oversee the integrity of financial statements and compliance with legal requirements[78] - The remuneration committee is responsible for reviewing and recommending director compensation and evaluating the performance of the CEO and CFO[80] - The nomination and corporate governance committee ensures the company's operations align with shareholder interests and compliance with listing rules[83] Acquisitions and Investments - The company acquired 90% of MINISO VIETNAM LIMITED LIABILITY COMPANY for a cash consideration of 3,097,377,000 VND (approximately RMB 893,000) on November 30, 2022[197] - The identifiable net assets acquired included property, plant, and equipment valued at RMB 1,339,000 and inventory valued at RMB 11,573,000[198] Share Repurchase and Incentive Plans - The company repurchased a total of 166,000 shares on the Hong Kong Stock Exchange for a total consideration of HKD 1,694,572, and 824,217 American Depositary Shares (ADS) on the New York Stock Exchange for USD 4,208,433, totaling 3,296,868 shares[106] - The company has approved a new share repurchase plan allowing for the repurchase of up to USD 100 million worth of shares within 12 months starting from September 29, 2022[185] - The total number of outstanding options granted as of December 31, 2022, is 6,476,636 shares, accounting for approximately 0.51% of the issued shares, with 1,751,636 options vested and 4,725,000 options unvested[100] Challenges and Market Conditions - The company experienced a negative impact on retail sales due to COVID-19 restrictions, although most overseas stores have returned to pre-pandemic sales levels[153] - The average transaction volume in China decreased from 154.2 million in 2021 to 120.4 million in 2022, a decline of approximately 22%[34] - The company expects stronger performance in the first half of the year due to seasonal retail demand, typically higher than the second half[153]

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Financial Data and Key Metrics Changes - The company's gross margin increased by 8.9 percentage points year-over-year, reaching a record high of 40% [4] - Adjusted net profit increased by 82% year-over-year, with an adjusted net margin of 15% [4][30] - Revenue in the December quarter was approximately RMB 2.5 billion, a decrease of 10% year-over-year, primarily due to a 27% decline in revenue from China [25] - Gross profit was RMB 997 million, an increase of 16% year-over-year [27] Business Line Data and Key Metrics Changes - Revenue from MINISO's offline operations in China decreased by 28% due to a 32% decrease in foot traffic, although average ticket size increased by 6% [5][6] - TOP TOY revenue decreased by 25% year-over-year, with a gross margin of around 45% [13][15] - The overseas business saw a 40% year-over-year increase in GMV, with revenue reaching nearly RMB 1 billion, representing a 38% increase [9][10] Market Data and Key Metrics Changes - In overseas markets, North America recorded the best performance with 66% year-over-year growth, followed by Latin America at 51% [11] - The average GMV per store in overseas markets recovered to 86% of the level achieved in the same period of 2019 [12] - The top five overseas markets were Mexico, the Philippines, Indonesia, the U.S., and Colombia, with India becoming the sixth overseas market [10] Company Strategy and Development Direction - The company aims to upgrade from a channel brand to a product brand and enhance customer loyalty by transforming the shopping experience [16][21] - MINISO plans to focus on strategic categories with emotional resonance, global appeal, and high growth potential, such as perfumes, which have seen significant growth [22] - The company expects to open between 250 and 350 new stores in China and 350 to 450 overseas stores in 2023 [8][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of consumer spending in China and the growth prospects for 2023 [8] - The company has maintained strong profitability despite pandemic challenges, with an average adjusted net margin of 8.6% over the past 18 quarters [31] - Management highlighted the importance of a disciplined financial policy focusing on budgeting, cost control, and capital allocation [31] Other Important Information - The company added a net 56 MINISO stores in China during the December quarter and 88 stores in overseas markets [8][13] - The company has established a global product innovation center to enhance product development capabilities [16] Q&A Session Summary Question: Inquiry about gross margin improvement - Management attributed the strong gross margin performance to a revenue mix shift towards overseas markets and brand strategic upgrades in China [35][36] Question: Inquiry about overseas business performance - Management reported that overseas direct operations have broken even for two consecutive quarters, with mature markets like India and Indonesia showing strong operating margins [40][41]

Financial Data and Key Metrics Changes - Revenue for the September quarter reached RMB 2.77 billion, increasing by 5% year-on-year, primarily due to a 48% growth in revenue from overseas markets, partially offset by a 9% decrease in revenue from China [23][28] - Gross profit in the September quarter was RMB 989 million, representing a 36% year-on-year increase, with a gross margin of 35.7%, a record high for MINISO Group, up from 27.4% in the same quarter last year [28][34] - Adjusted net profit was RMB 417 million, representing an increase of 127% year-on-year, with an adjusted net margin of 15.1% compared to 6.9% in the same quarter of last year [34] Business Line Data and Key Metrics Changes - MINISO China's revenue was RMB 1.7 billion, with offline business revenue at RMB 1.54 billion, a 9% year-on-year decrease but a 20% quarter-over-quarter increase [8][23] - E-commerce revenue was RMB 163 million, decreasing by 12% year-on-year but increasing by 23% quarter-over-quarter, accounting for 6% of total revenue [9][23] - Revenue from overseas markets was RMB 920 million, accounting for 33% of total revenue, with a year-on-year increase of 48% [26] Market Data and Key Metrics Changes - North America saw store sales growth of nearly 50% year-on-year, matching levels from the same period in 2019 [13] - Europe experienced a 20% year-on-year increase in store sales, doubling the level from the same period in 2019 [14] - Latin America recorded nearly 40% year-on-year growth and 20% from the same period in 2019 [14] Company Strategy and Development Direction - The company remains focused on its globalization strategy, enhancing product offerings, and optimizing its store network [6][7] - MINISO's international operations have turned profitable, contributing to a strong recovery in overseas business [7][21] - The company plans to continue localized product strategies and sophisticated operations to ensure sustainable growth [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue and profit growth potential, citing new pandemic control policies in China as a positive factor for recovery in the offline retail industry [21][22] - The company is cautious about new store openings due to pandemic uncertainties but expects store performance to improve [38] - Management highlighted the importance of cost control and disciplined financial strategy to maintain solid financial performance [35] Other Important Information - The company added 43 stores in China during the quarter, primarily in lower-tier cities, and plans to adjust store openings based on pandemic dynamics [11] - The merchandise gross margin for TOP TOY was about 42%, with a significant narrowing of net loss [19] - MINISO released its first ESG report, enhancing transparency regarding governance and social responsibilities [20] Q&A Session Summary Question: Domestic business performance and store expansion outlook - Management acknowledged the uncertainty of the pandemic but noted that store closures have decreased, and they expect healthy store network growth [38] Question: Gross profit margin outlook - Management indicated that gross margin increased due to a better revenue mix and cost-cutting measures, with expectations for continued improvement [39][40] Question: Operating expense savings and sustainability - Management explained that labor cost reductions contributed to decreased general expenses, and they plan to maintain expense control moving forward [45] Question: Performance during Double 11 shopping holiday - Management reported total GMV exceeding RMB 100 million during Double 11, with significant growth in key product categories [47] Question: Impact of RMB depreciation on gross profit margins - Management clarified that while overseas gross margins are high, RMB depreciation does not directly affect GP margins [50][51] Question: Future GP margin targets - Management expressed optimism about maintaining GP margin improvements through cost reductions and strategic supplier relationships [52][54]