Financial Data and Key Metrics Changes - Net sales for Q2 were approximately $1.6 billion, up 3.3% year-over-year, with a comparable sales increase of 0.2% [24][26] - Gross margin was 36%, down 2 basis points from the previous year, while merchandise margin improved by 40 basis points [26][28] - Operating income was $172 million, and diluted earnings per share were $1.85, with adjusted earnings per share at $1.94 [27][28] - Inventory per store increased, with units per store up 4.6% and dollars per store up 8.2% [28] Business Line Data and Key Metrics Changes - The e-commerce channel saw a positive comparable sales increase of approximately 18% during Q2, building on a 10% increase in Q1 [24][10] - Performance across major business categories was consistent, with footwear, apparel, sports and recreation, and outdoor all showing low single-digit increases [10][11] - Seasonal categories like swim and summer footwear experienced a slow start but rebounded in late June and July [11] Market Data and Key Metrics Changes - Strong double-digit growth in foot traffic was observed among customers in the top two income quintiles (households making over $100,000) [12][13] - Traffic share remained flat among middle-income consumers (households making $50,000 to $100,000), while there was erosion in lower-income cohorts (households making less than $50,000) [12][13] - Market share data indicated meaningful gains across key businesses such as apparel, footwear, and sporting goods [13] Company Strategy and Development Direction - The primary growth strategy involves opening new stores, with three new locations opened in Q2, bringing the total to 306 stores across 21 states [15] - The company aims to grow its e-commerce business by improving site navigation, order fulfillment, and expanding product assortment [16][18] - Initiatives to enhance store productivity include adding desirable brands and implementing new technology like RFID scanners [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of inflation on consumer behavior, noting a trade-down effect among lower-income consumers [12][13] - The company remains optimistic about future performance, citing positive momentum and the effectiveness of strategic initiatives [30][31] - Management is closely monitoring tariff impacts and has implemented strategies to mitigate these effects [23][46] Other Important Information - The company has maintained strong liquidity with $300 million in cash and an undrawn $1 billion revolver [28] - Capital allocation remains disciplined, with investments in inventory, dividends, and strategic initiatives totaling approximately $148.7 million in Q2 [29] Q&A Session Summary Question: Insights on consumer behavior post back-to-school period - Management noted episodic shopping patterns and expressed optimism about momentum continuing into the remainder of the quarter [34][35] Question: Impact of tariff pricing on average ticket - Average unit retails (AURs) were up low to mid-single digits, with expectations for further price adjustments in the back half of the year [36][37] Question: Guidance on SG&A and operating leverage - Management indicated expectations for continued moderation of SG&A deleverage, with a focus on maintaining investment in growth initiatives [41][42] Question: Promotional environment and merchandise margin - The promotional environment remains competitive, with higher take rates observed during promotional events [84] Question: Performance of higher-income consumers - The top two income quintiles showed double-digit growth in traffic, offsetting declines in lower-income segments [86][87] Question: Expansion of Nike and Jordan assortments - The company has significantly expanded its Jordan brand assortment and is seeing strong performance from both Nike and Jordan products [92][100]

Core Insights - The company's performance in 2024 was impacted by high base effects, new store ramp-up, and increased financial expenses, leading to a decline in net profit [1] - In early 2025, store performance was under pressure, but a significant recovery was observed in March [2] - The company has outlined its operational plans for 2025, focusing on expanding its restaurant and hotel businesses while enhancing product competitiveness [4] Financial Performance - In 2024, the company achieved revenue of 2.525 billion yuan, a year-on-year increase of 5.14%, but net profit dropped to 100 million yuan, down 67.09% [1] - For Q1 2025, revenue was 690 million yuan, a slight increase of 0.17%, while net profit fell to 52 million yuan, down 21.36% [2] Business Segmentation - **Restaurant Business**: In 2024, revenue from restaurant and accommodation services was 2.205 billion yuan, up 12.69%, with a gross margin of 18.26%, down 2.49 percentage points [3] - **Food Business**: Revenue reached 311 million yuan, a significant increase of 85.52%, with a gross margin of 25.62%, down 10.07 percentage points due to promotional strategies for franchisees [3] Future Plans - The company plans to open 3-5 new restaurant locations and upgrade 20 existing ones in the Yangtze River Delta region [4] - In the hotel sector, the goal is to open 3-4 new direct-operated stores and enhance the franchise business [4] - The food business aims to expand its franchise network by adding 100-150 new stores [4] Profit Forecast - The company anticipates net profits of 210 million yuan, 330 million yuan, and 450 million yuan for the years 2025, 2026, and 2027, respectively, maintaining a "recommended" rating [4]