Core Insights - The company's FY26 interim performance is below expectations, with a revenue of 30.5 billion yuan, a year-on-year decline of 12.1%, and a net loss attributable to shareholders of 120 million yuan, compared to a net profit of 210 million yuan in the same period last year [1][2] Revenue and Performance - Revenue from merchandise retail is 29.08 billion yuan, down 12.4% year-on-year, primarily due to intensified market competition leading to a decrease in average transaction value; same-store sales fell by 11.7% [1] - Online B2C business remains resilient, with order volume increasing by 7.4%, contributing to a 2.1% increase in online same-store sales [1] - Rental income is 1.4 billion yuan, a year-on-year decrease of 7.0%, attributed to rental reductions, tenant structure optimization, and shopping street adjustments [1] - Membership fees generated 18 million yuan, an increase of 28.6% [1] Profitability and Cost Structure - Gross margin increased by 0.7 percentage points to 25.3%, driven by the elimination of low-performing products and improved private label penetration [2] - Sales expense ratio increased by 1.8 percentage points to 23.9% due to rigid costs such as rent; administrative expense ratio decreased by 0.2 percentage points to 2.5% due to organizational optimization [2] - Net profit margin decreased by 0.9 percentage points to -0.4% [2] Strategic Developments - The company announced a three-year strategy to accelerate channel restructuring and product enhancement, aiming to complete over 200 store adjustments by the end of FY27, reducing the number of stores to approximately 6,000 and simplifying SKUs to 15,000 [2] - The company plans to increase the share of private label revenue to 10% by FY28, focusing on health trends and cost-effectiveness [2] - The goal is to expand online sales to account for 40-50% of total sales [2] Earnings Forecast and Valuation - Due to pressure on same-store sales and adjustment costs, FY26/FY27 earnings forecasts have been revised down by 86% and 28% to 100 million yuan and 680 million yuan, respectively [2] - The current stock price corresponds to a FY27 price-to-earnings ratio of 22.8 times; the target price has been adjusted down by 21% to 2.2 HKD, reflecting a 20% upside potential [2]