Core Viewpoint - The company, Baiguoyuan, is experiencing a significant decline in revenue and profitability, projecting a net loss of 330 million to 380 million yuan for the first half of 2025, with a revenue decrease of no more than 25% year-on-year [1] Group 1: Company Performance - As of June 30, 2025, Baiguoyuan has a total of 4,386 stores [1] - The decline in revenue and profit is attributed to three main factors: a strategic shift towards high-quality, cost-effective products leading to lower profit margins; ongoing optimization of the store network, prompting franchisees to reassess and potentially relocate or close underperforming stores; and increased one-time expenses related to asset impairment and stock incentive costs [1] - Despite short-term challenges, the company reports an increase in customer traffic and stabilization in sales under its strategy of becoming a "high-quality, cost-effective fruit expert and leader" [1] Group 2: Market and Industry Insights - The Chinese fruit industry has a massive market size, exceeding 1.2 trillion yuan in 2021, with an expected compound annual growth rate of 7.6% over the next five years [2] - The industry is characterized by a fragmented market structure, with the top five companies holding less than 5% market share, indicating significant consolidation opportunities for leading firms [2] - Baiguoyuan has substantial advantages in supply chain, brand effect, and operational capabilities, with a global procurement team of over 300 people and partnerships with over 800 direct sourcing bases across 26 countries [2] - By the end of 2024, Baiguoyuan plans to have launched 46 proprietary fruit product brands, with a sales share of 14.7%, establishing a differentiated advantage and brand reputation with products like "Hua Huang Pineapple" and "Mi Zong Kiwi" [2]

Core Viewpoint - Baiguoyuan (02411) is experiencing a strategic transformation, leading to a forecasted net loss of 330-380 million yuan for the first half of 2025, with revenue expected to decrease by no more than 25% [1] Group 1: Financial Performance - The company anticipates a net loss of 330-380 million yuan for the first half of 2025, with revenue decreasing by up to 25% [1] - As of June 30, 2025, the total number of stores is expected to be 4,386, a reduction of over 700 stores compared to the end of the previous year [1] - The decline in revenue and profit is attributed to three main factors: a shift towards high-quality and cost-effective strategies, ongoing store network optimization, and increased one-time expenses related to asset impairment and stock incentive costs [1] Group 2: Strategic Transformation - Starting in the second half of 2024, Baiguoyuan is shifting from a "high-end" strategy to a dual approach of "high quality + high cost-effectiveness," launching promotional activities for sensitive fruits and enhancing store service standards [2] - The company has reported a stabilization and recovery in single-store sales, with expected double-digit growth in customer traffic and improvements in gross profit per store [2] - A new round of store expansion is set to begin, focusing on different store types to match various consumer preferences and enhancing overall profitability through product diversification and store scale expansion [2] Group 3: Market Potential and Competitive Advantage - The Chinese fruit industry has a market size exceeding 1.2 trillion yuan, with a projected annual compound growth rate of 7.6% over the next five years, indicating significant integration potential due to a fragmented market [3] - Baiguoyuan, as a leading player in the domestic fruit retail sector, has a strong foundation in supply chain, brand effect, and operational capabilities, with over 300 global procurement team members and partnerships with more than 800 direct sourcing bases across 26 countries [3] - By the end of 2024, Baiguoyuan has launched 46 proprietary fruit brands, achieving a sales share of 14.7%, which has created a differentiated advantage and strong brand recognition [3]

Core Viewpoint - The company is undergoing a strategic transformation aimed at improving its operational efficiency and profitability, despite facing short-term losses and a reduction in store count [1][2]. Group 1: Financial Performance - For the first half of 2025, the company expects a net loss attributable to shareholders between 330 million to 380 million yuan, with revenue decreasing by no more than 25% [1]. - As of June 30, 2025, the total number of stores is projected to be 4,386, a decrease of over 700 stores compared to the end of the previous year [1]. Group 2: Strategic Adjustments - The decline in revenue and profit is attributed to three main factors: a shift towards a high-quality and cost-effective strategy, optimization of the store network, and increased one-time expenses related to asset impairment and stock incentive costs [1]. - The company is actively adjusting its product structure to lower gross margins and benefit consumers, while also focusing on closing underperforming stores and concentrating resources on advantageous locations [1][2]. Group 3: Operational Improvements - Starting in the second half of 2024, the company will implement a dual strategy of "high quality + high cost performance," launching promotional activities for sensitive fruit products and enhancing store service standards [2]. - The company has reported a stabilization and recovery in single-store sales, with expected double-digit growth in customer traffic and improvements in gross profit per store [2]. Group 4: Market Potential and Competitive Position - The Chinese fruit industry has a market size exceeding 1.2 trillion yuan, with a projected compound annual growth rate of 7.6% over the next five years, indicating significant growth potential [3]. - As a leading player in the domestic fruit retail market, the company has a strong foundation in supply chain management, brand effect, and operational capabilities, with over 300 global procurement team members and partnerships with more than 800 direct sourcing bases [3]. - The company has launched 46 proprietary fruit product brands, achieving a sales share of 14.7%, which enhances its competitive advantage and market share in a fragmented industry [3].

Summary of Baiguoyuan Conference Call Company Overview - **Company**: Baiguoyuan - **Year**: 2024 - **Net Loss**: 390 million yuan due to high cost-performance strategy leading to a decrease in gross margin from 11.5% to 7.4% [2][4] Key Financial Metrics - **Total Revenue**: 10.27 billion yuan, a decrease of 9.8% year-on-year [4] - **Retail GMV**: 12.7 billion yuan [4] - **C-end Revenue**: Decreased by 13% [4] - **B-end Revenue**: Increased by 22% [4] - **Gross Profit Decrease**: Approximately 550 million yuan [2][4] Strategic Adjustments - **Store Closures**: Net reduction of 966 stores in 2024, with an additional 400 expected in the first half of 2025 [2][6] - **Store Count**: Total stores reduced to 5,127 [6] - **Expansion Plans**: Expected to restart expansion in the second half of 2025 [6] Operational Improvements - **Order and Customer Growth**: Double-digit growth in order volume and customer traffic since April 2024 [2][8] - **Product Structure Optimization**: Improved gross margin and single-store gross profit through product adjustments [2][8] Franchisee Support - **Franchise Fee Waiver**: Cancellation of franchise fees and introduction of opening subsidies [9] - **Initial Investment Cost Reduction**: Reduced from 280,000 yuan to 234,000 yuan, shortening payback period to approximately two years [9][19] Sales Performance - **Same-store Sales**: Flat in the first half of 2025, but customer traffic showed double-digit growth [8] - **Gift Business Growth**: Gift business saw double-digit growth during the Spring Festival [3][8] Market Strategy - **High-Quality, Cost-Effective Strategy**: Focus on enhancing single-store profitability and optimizing investment costs [7] - **Domestic Market Focus**: Deepening channels in catering, tea drinks, and other sectors [7] - **International Expansion**: Opening stores in Indonesia and expanding product categories to include melons and blueberries [7][13] Consumer Insights - **Customer Base**: Approximately 90 million members, with an average purchase frequency of twice a month [5][16] - **Consumer Demographics**: Primarily community residents, including families and elderly individuals [16] Future Plans - **Store Model Development**: Currently refining store models in Indonesia to understand local consumer habits [13][14] - **Lightweight Store Concept**: Reducing investment costs and exploring smaller community store formats [17][18] Challenges and Risks - **High Rent Impact**: Closure of high-rent stores due to long-term contracts and unwillingness of landlords to reduce rents [9] - **Market Competition**: National price reductions affecting same-store sales, particularly for strawberries and cherries [8] Additional Insights - **Gift Strategy**: Continued collaboration with IT companies and designers for diverse gift options, contributing to 15% of store sales [25] - **Temperature Impact**: Recent temperature increases have led to significant growth in fruit sales [24] Conclusion - **Overall Performance**: 2024 was a year of strategic adjustment for Baiguoyuan, with a focus on improving profitability and market positioning through store optimization and enhanced consumer engagement strategies [4][7]