Core Viewpoint - The company's Q1 2025 performance fell short of expectations, with revenue increasing by 19% year-on-year to 4.4 billion yuan, but adjusted net profit declining by 5% to 587 million yuan due to increased sales and financial expenses from upfront investments in direct stores [1][2]. Group 1: Financial Performance - Q1 2025 revenue reached 4.4 billion yuan, a 19% year-on-year increase, while adjusted net profit decreased by 5% to 587 million yuan [1]. - Domestic business revenue grew by 9% to 2.5 billion yuan, with same-store sales declining in the mid-single digits, and a net reduction of 111 stores [1]. - Overseas business revenue increased by 30% to 1.6 billion yuan, with a total of 3,213 stores, but same-store sales also saw a mid-single-digit decline due to high base effects [1]. - TOPTOY business revenue surged by 59% to 340 million yuan, indicating strong growth [1]. Group 2: Cost and Margin Analysis - Gross margin improved by 0.8 percentage points to 44.2%, driven by higher-margin overseas operations and increased revenue from TOPTOY [2]. - Sales expense ratio rose significantly by 4.4 percentage points to 23.1% due to increased upfront investments in direct stores [2]. - Financial expenses increased to 50 million yuan from a net income of 25 million yuan in the previous year, influenced by interest from stock-linked securities and loans [2]. - Adjusted net profit margin decreased by 3.3 percentage points to 13.3% due to rising tax rates and other expenses [2]. Group 3: Strategic Initiatives - The company is committed to advancing its IP strategy, focusing on interest-based consumption, with several new product lines launched this year [2]. - Plans include expanding the breadth and depth of IP collaborations to create differentiated products [2]. Group 4: Future Outlook - The company aims for positive same-store sales growth in domestic operations for the full year, particularly after improvements noted during the May Day holiday [3]. - Profit forecasts for 2025/26 have been revised down by 14% and 8% to 2.7 billion and 3.5 billion yuan, respectively [3]. - Target prices for Hong Kong and US stocks have been reduced by 8% to 42.28 HKD and 21.82 USD, respectively, reflecting a valuation adjustment [3].