Haitong Securities International·2025-07-28 13:05Investment Rating - The report maintains a guidance for low single-digit to mid-single-digit revenue growth for the full year [2][9]. Core Insights - Retail performance has shown steady improvement, with overall retail sales value (RSV) decreasing by 1.9% year-on-year in 1QFY26, driven by a 3.3% decline in mainland China and a 7.8% increase in Hong Kong and Macao [2][9]. - The management expects better performance in 2Q compared to 1Q, and better performance in the second half compared to the first half, leveraging the peak wedding season [2][9]. - The franchise channel has shown resilience, outperforming direct-operated stores, with same-store sales in mainland China decreasing by 3.3% year-on-year, while franchise stores remained flat [3][10]. - The proportion of high-margin products continues to expand, with direct sales same-store sales growth (SSSG) for gold products and jewelry inlaid products in mainland China at -1.4% and -2.2%, respectively, while in Hong Kong and Macao, they are +6.6% and +3.3% [4][11]. - E-commerce channels in mainland China saw a 27% year-on-year increase in RSV, contributing 7.6% to total RSV and 16.9% to sales volume, benefiting from strong demand driven by collaborations and promotional events [5][13]. Summary by Sections Retail Performance - The overall retail sales value (RSV) decreased by 1.9% year-on-year in 1QFY26, with a notable decline in mainland China and an increase in Hong Kong and Macao [2][9]. - Management noted that May was the best performing month, and sales continued to improve in July [2][9]. Franchise vs. Direct-Operated Stores - Franchise channels outperformed direct-operated stores, with same-store sales in mainland China showing a narrowing decline [3][10]. - The company closed a net 311 stores in mainland China, focusing on optimizing store performance [3][10]. Product Mix and Margins - The company is focusing on high-margin products, with expectations for the proportion of one-price gold product sales to increase from approximately 20% to 20-23% [4][11]. - Despite rising gold prices, the company expects a year-on-year decrease in gross profit margin (GPM) of 80-120 basis points, partially offset by product mix improvements [4][12]. E-commerce Growth - E-commerce channels are expanding rapidly, with a significant year-on-year increase in RSV, driven by strategic collaborations and marketing efforts [5][13].