Hello everyone, thank you for your patience. Welcome to MINUSO 2026 Interim Earnings Result Presentation. All participants are currently in listening mode. Following the management remarks, we will host the Q&A session. Before asking your question, please state your name and institution you represent. Please note the event would be recorded. English simultaneous translation would be available for this call. You can select your preferred language by clicking Interpretation in the Zoom meeting We released our Q2 and the interim results of 2026 earlier today, which is now available on our IR.Minnesota.com. Joining us here today, our founder and the CEO, Mr. Ye Guofu, and our CFO, Mr. Zhang Jingjing. Right before we continue, please refer to your Safe Harbor Statement in our earnings press release, which also applied to this call, as we were making forward-looking statements. Please also note, we will discuss non-IFRS financial measures today, which has been expanded in our earnings release and our filing to SEC and Hong Kong Stock Exchange, and reconciling to the most comparable measures reported under IFRS. Unless otherwise stated, all figures are in R&B, In addition, we also prepared a PPT slide containing financial and operational information for today's call. If you are using Zoom, you can see the information. You can also preview it later on our IR website. Now, I would like to welcome Mr. Ye. Hello, everyone. In H1, Minnesota group revenue reached 11.5 billion, up 22.4%. EPS grew 8.2%. and Operating Cash Flow rose 46%. Our global store account accounted 8,674. Minnesota today stands at a critical moment as we operate a larger and better store, building our own proprietary IP and develop our overseas organizational capacity. Opportunities and challenges coexist. I firmly believe The strategic direction and the stage-by-stage significance of those initiatives matter far than the near-term number. I will work you through our business performance this quarter across three segments, including Minnesota-China, Minnesota-Overseas, and the top toy. Official data shows that China's total retail sales of the consumer goods grew by 1.3% on a worldwide basis in H1 this year. Against this micro backdrop, Minnesota's China H1 revenue grew by 26.2%, not only far outpacing the growth of retail sales but also exceeding our prior guidance. This was our 40th H1 growth rate in the past three years. Importantly, the quality of the growth is truly high, driven primarily by the mid and high single-digit growth number. On the channel side, As of the end of 2022, the Q2 and Minnesota-China store count reached 4,665, with a net addition of 97 stores in H1, among which land format store net addition 59, flagship format store 159, regular store record a net closure of 121, On August 22, Minnesota Land's Chengdu Eastern Suburb Memory Store officially opened, marking our 100th Land Store here in China. Store count number was growing solid, but the quality is even more important. At the end of June, our China store count was up 8%, while the revenue grew by 26%. reflecting a substantial increase in per-store output and healthy growth in the overall sales per square meter. I'd like to show you three sets of the data. First of all, sales per square meter and rent ratio varied each month. The land-format store delivered sales per square meter roughly twice as that of the regular store. Compared with the existing store, the stores newly opened in 2026 are significantly larger Yet, the sales per square meter held steadily, with the rent-to-sales ratio improved. To most, our new store mat is no longer a mere tenant but also the engine for food traffic. Secondly, our store renovation pace continues to accelerate. We completed 189 store renovations in H1. Post-renovation store performance has been doubled YOY, against a full-year renovation target of 355. We have every confidence to exceed it by the end of this year. Thirdly, franchise returns continue to improve. Whether measured by the payback period, profit margin, or proportion of the profit store, the profitability of the Minnesota land worldwide and Minnesota stores nationwide in H1 reached its best level since 2019. Franchisees are increasingly willing to open larger and better stores, which is the most direct endorsement for our channel strategy. From swapping the cage to bring the better birds, or large store-driven growth, our channel upgrade strategy has been underway for two years. who yes and remain significantly for the future. This assessment raised two facts. First, the proportion of the Renault store in China remain low, and second, we continue to innovate on this store format. This year, we introduced a new member to our store matrix, that is Super Miniso, the most important innovation of 2026. Looking back to the evolution of our channel upgrades over the past two years, in 2024, Minnesotaland validated the IP-immersive flagship store. In 2025, Minnesot Friends entered into mid- and high-end shopping districts in the affordable luxury tiering. In 2026, Super Minnesot brought the IP experience to the broader mass consumer base. Its product matrix was 50% IP merchandise plus 50% general lifestyle products. Since its launch, it has become one of the most popular store formats among the consumers. The clever aspects of our Super Miniso is not to overturn the consumer's existing brand perception. Rather, it is built upon them. It will retain consumers' familiarity with Miniso, value-for-money merchandise, while injecting frankness and a trade-driven experience through IP. Other formats like Friends, Land, and Space have progressively deepened IP merchandise and mentorship, helping consumers move from lifestyle-general merchandise to IP wonderland as part of the brand upgrade. But I'd like to say, the success of the large store is not merely channel innovation, it's systematic innovation by having content plus space and operation. The store is a space. IP is a soul to fuel it. The momentum of the large store and value of the IP reinforce each other, forming an ever-accelerating flywheel. In June last year, we launched Yuyu, our first proprietary IP. Within just one year, Yuyu has entered into 53 countries worldwide, generating nearly RMB 500 million in related revenue in H1. The most iconic milestone was Yuyu Plus Disney Toy Story 5 collection, Yu Yu version of Moody, Buzz Lightyear, and Slinky Dog sold strongly across source in multiple countries. In just one year, Yu Yu's success has propelled its validated proprietary IP to a new stage where it can engage top-tier global IP as an equal. Beyond the Minnesota flagship store, and Brand. The top toy has also built its own IP matrix. Its flagship IP, Nomi, has surpassed RMB 300 million in cumulative GMV. And you can see that while you validated the methodology within our flagship brand, Nomi Yueyue and Duidui has proven different style under the top toy brand. Around proprietary IP, we have accumulated full-chain SOP, standing artist-signing product definition, design to development, supply chain scheduling, all the way to the pre-launch, standing, debug channel, in-store, events, and fan operation. Our group-wide target of RMB 1 billion in proprietary IP sales set at the beginning of this year was achieved ahead of the schedule by the end of July. This all proven our multi-IP, multi-category globalization strategy is successful. They fully demonstrate Miniso's unique resources endorsement in building proprietary IP. We have the full category coverage, all-channel penetration, global footprint, and full chain operation. Looking across the globe, MINUSO only imposes the greatest flexibilities and expandabilities in product categories. The strongest control and innovation capacity in channel, the boldest and the highest quality Global Store Network in terms of the footprint. On the operation front, Miniso leverages full chain advantage from signing scientists to design to development to marketing and selling products. We deeply empower artists at every stage, maximize the potential of each IP. Those are precisely Miniso's highly differentiated and scarce resources, and they are also the key to Miniso's leap forward development and overtaking the proprietary IP. There are four foods enable us to complete the entire process from IP concept to shelf more efficiently than the vast majority of the companies. So everyone, YuYu is just at the beginning. On August 22nd, we newly launched artist IP ChouChou sold out entirely on its debut day for exceeding expectation. We have already signed multiple designer toys. You can see On the evening of 26th, 5,000 sets of Chochou was sold live with one second. And at the same time, we have already signed multiple designer toy artists, recruiting top recreated talents worldwide through our IP Prodigy program. Our ambition is going forward, leading 100 Chinese IP onto the global stage. At the moment, global IP market is entering into unprecedented boom. The rise of the great nation is inevitably accompanied by the birth of the culture symbol and their global accent. Many souls were backed by our world-leading channel of product and IP operations to secure our top position in this historical moment. Our vision is to become the world's leading IP operating platform, measured by channel scale, We are already the world's largest retailer of IP products, and our proprietary IP business is building a new growth engine that is at once distinctive, explosive, and re-equipable. Our strategic pivot towards proprietary IP is a long-term choice grounded in the trend of our era. We will sustain long-term investment. Even in the short term, the proprietary IP product line has delivered excellent report cards. We not only have YuYu proven to be success, same as ChouChou, our second IP. Its H1 profit margin was above company average. Inventory turnover was capped within 30-40 days. Preparatory IP strategy has placed no pressure on overall profitability, laying a solid foundation to continue our IP ecosystem. Coming next, I'm going to talk about membership strategy. Last year, I said membership would become another important engine for municipal growth. The value of the strategic membership is steadily materialized. Member scale and contribution continue to reach new level. In H1, our China membership grew by 31, reaching 130 median, the all-time high. Member contribution sales rose to 57% in the same period of last year. to 60% for the full year last year, and 33% in Q1, and further 77% now, where at the same time membership is the latest evidence of Minisource growth shifting from the opportunity-driven to the system-driven, the value of the membership manifested in two sides. The core engine of the lifting average transaction value, average transaction value rose by 5%, Working with global IP, for example, like Sunreels, Disney, and Harry Potter, as well as Chihuahua, combined with the blockbuster effect of our proprietary IP, Lightstore has become the core stronghold of the high-value members. As a result, per customer contribution of the China member was two times higher of the non-member. Average transaction value of IP member is more than three times of the non-IP members. Secondly, the top-level engine to improve the retention. Through the precess targeting and benefit-driven retention that can help to further extend the active lifetime or precess identification of the member consumption preference and category needs, enable new product to reach target consumer efficiently, will upgrade the benefits such as the cash paybacks credit and into the purchase into direct momentum for the next purchase. IP member newly acquired in 2025, the retention rate in H1 of this year was 80% points higher than the non-IP members, with purchase frequency 2 times higher than the non-IP members. Members who use cash back credit repurchase 1.6 times frequent than those known members. IP-driven acquisition and large store quality upgrade and repurchase extension is our underlying formula to achieve highly sustainable membership value. When we have scale structure and frequency driving together, they would be able to sustain the long-term success. Let's also take a look at the overseas market. In H1 of this year, overseas revenue grew by 40.9% to RMB 4.06 billion. Store number accounted for 3,644. Frankly speaking, overseas performance fell short of our expectation, weighted somewhat our group profit. The overseas contribution to company profit declined from 35 to 40 in 2023 to 10 to 50% in H1 of this year. The impact are coming from two factors. First of all, a decline in distributor business revenue, and secondly, our direct operating market outside North America still remain in early investment stage. The store model are still in the refinement and not yet profitable. We also made some internal review for those issues. In expanding our overseas directly operated store, we will be more focused and more prudent. vigorously assessing ROI of the new stores, concentrating resources to deepen our presence in priority markets. I ask them to slow down the pace of the store openings, unless you have 100% confidence. In H2, we will first concentrate on operating our existing 800 existing overseas directly operated stores, and replicate after a single store model matures. Overseas market is our vast horizon. Short-term fluctuations won't change our long-term growth trends. We have corrected our past growth approach that over-emphasized on steel and steel palms so that the terminal south growth inventory turnover and headquarter shipment once again would form a closed loop in a healthy way. You know that now it is also the time for us to ready improve the performance in overseas market. Our overseas business is now in the holding stage. We would like to make sure we refine our storm model. And more importantly, we need to make sure the China transformation would be successfully validated in the international market. It's actually the time for another upgrade for the international market. So that's the reason we have already made significant adjustment and the transformation for international business. So, I would like to take this opportunity to encourage our overseas teams. From 2050 to now, our overseas journey has been spent 11 years. The deeper we go for overseas, the more profound I can realize how difficult it is for a Chinese company to truly gain a solid foothold and earn sustainable profit abroad. It was not a product strength in the supply chain, it also organizational capacity, management control model, and localization strategy. Minusul overseas business has been profitable from day one. Yet, we must recognize, overseas challenges today are precisely a sign that Minusul globalization has entered into a deep-water stage. As a share of the direct operated business rise, we must settle in and pursue refined operation, localization, stronger organizational capacity, and a globalized management control model while solidifying our management fundamentals. We see many international consumer brands entering into China did well in the past one decade but started incurring losses in recent years. So no matter international brands come to China or Chinese brands go for international market, we have to be adoptive. Otherwise, profit would be nothing to be talked about. This is also the so-called secondary upgrading and transformation every company needs to face if they go for internationalization. Minuso China's transformation over the past few years achieved great success. We have preliminarily realized brand upgrade and business model reiteration. China business started to burst with fresh vitality. The challenge we are facing for overseas business today is essentially the same as China three years ago, shifting from the scale-first to quality-first. Over the past three years, China delivered its transformation report card, from landing-grabbing extension to wonderland-style upgrade, and then the refined operations. This methodology applies equally to overseas markets who are never sure of the product, supply chain, or channel. What we lack of is more patience to fully refine the single-store model. Going global is a marathon. Every adjustment and every investment we made today lays a solid foundation for the long-term value. Every additional food store Minnesota opened overseas. Every additional consumer well served. Every additional member accumulated brings us one step closer to our vision of becoming a world's leading IP operating platform. I have faith in my overseas team. Give them time. Give them patience. I believe that overseas market tomorrow will surely better than what we have today. Coming next, please allow me to talk about TopToy. In H1, TopToy revenue was grow by 32.7%, global store number 365, including 48 overseas. This quarter, TopToy, first U.S. store being located in Times Square of New York, making it the first China designer toy brand entering to the crossroads of the world. In H1, proprietary IP accounted for 10% of TopToy sales, with proprietary IP metrics continue to expand. We have some pop-up events that are quite popular, especially in Hangzhou debut. A single-month GMV is already more than 50 million. Coming next, I'm going to welcome Ethan to work us through the financials in each one of these. Okay, thanks for Mr. Ye. Now, I will work you through our key financial metrics. Today, rather than going through the financial lies by lie, I will offer some explanation on several data points that are top of the mind for you. First of all, let's review how we performed against H1-2026 guidance we gave to you in the May earnings call. H1 revenue, which is in line with China's same-store guidance, but not that for the North American market. H1 revenue grew by 22.4%, slightly ahead of our guidance, that is 20-22%. On that, China revenue grew by 26.2% in H1. with Q2 in particularly grow by 23% versus our earlier expectation of only a low double-digit growth in China for Q2. These upsides in China came from two factors. First of all, an accelerated channel upgrade. China saw a net addition of 25 stores in Q1, but 72 in Q2, far exceeding our projection of around 40. And secondly, the sales contribution from proprietary IP, especially Yuyu, China's same-store sale, also achieved the guided mean single-digit growth, where for Yuyu, the proprietary IP saw a very good growth. As Mr. Ye has already mentioned, for the short run, our proprietary IP delivered excellent results. The profit of our proprietary IP product is higher than the company's average level, and the inventory turnover has been controlled within 30 to 40 days. But for sure, 30 and 40 days may still be short of the supply now while improving. So in that way, proprietary IP is not pressuring our overall financial of the company. Overseas revenue grew 15% in H1, below our guidance of a high double-digit growth. The main reason was a 10% decline in distributor business revenue, and both Asia and Latin American markets experienced temporary revenue declines. As I have already shared with you, North America's mid-single-digit same-store sales growth came in below our private guidance of the high single to low double digits, largely because we see the weakening of the same-store performance in North America in June. I will work you through the reason later. Adjusted operating profit, excluding the forex gains and loss, grew by 5% on a worldwide basis, In H1, Minnesota Overseas Earthline GMV grew by 40% on YY basis to RMB 8.29 billion. The revenue grew by 50%, reaching 4.06 billion. Let me just break down by region. First of all, let's take a look at Asia. In H1, Asia Terminal GMV grew by low single-digit YY. Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang Our merchandise planning, channel strategy, and terminal execution are not as efficient as what we have made in China business. At the same time, we proactively cleaned up a batch of underperforming low-efficiency stores. For example, in markets such as Philippines, we closed stores with outdated formats and persistently weak output, which had some short-term impact on the revenue. This cleanup of the low-efficiency store in overseas distributor market will continue for another two quarters. But we can also see that for market like Vietnam, following an earlier phase of the higher-end store closure and product mix adjustment, it already started to show improvement in H1 of this year. Its efficiency is being continued to be improved the best in the past three years. Vietnam seems to also grow by 20% in Q2, with continued positive growth momentum. This shows our future direction is correct. Going forward, we will continue to deepen our understanding of the Asian market, enhancing our localized operating capacities in market-specific manner, focusing on channel upgrades and product mix-up adjustment. actively explore the product assortment and the price brands adopting to the change of the local consumption market. Let's talk about Latin America. In H1, Latin America terminal GMV grew by high single-digit YY, but revenue declined by low double-digit YY. There were several reasons for this divergence. For example, A number of the core markets, including Colombia, faced multiple external challenges, such as political volatility, rising freight costs, natural disasters, which had a fixed impact on the overseas orderings and the shipments. However, the terminal demand remained resilient. For example, the top four Latin American countries contribute 80% of our performance here, all delivering solid terminal GMB growth in H1, with Mexico also post high single-digit growth, excluding the Forex impact. And actually, if you use a local currency, the Mexico local GMB was grown by nearly 20%. As external adjustment fading away, disruption fading away, we have our confidence for the long-term development. The third part would be the North America market. North American market in H1 revenue grow by 37%, reaching close 1.8 billion RMB, broadly in line with our expectation, with a mid-single-digit same-store growth. By Q2, Q2 revenue grow moderately slightly to 25%, where 2-year CAG hold at around 50%. However, in Q2, The two-year G-taker was still around 50%, 5-0, residing performance against the high base. The moderation was mainly due to three factors. First of all, a temporary gap in the cadence of the IP product launches. North America has a high share of the IP product and is therefore more sensitive to the IP launch cadence. In H1 of this year, we didn't maintain a sufficiently steady launch frequency, which affected the store traffic and conversion to a certain extent. This was a providing valuable lesson for optimizing our IP product cadence planning going forward. Secondly, the sales share of the locally directed sourced product in the US market used to exceed 50%, but not fully in line with our plan at the very start of this beginning. Earlier this year, against the backdrop of the tariff policy changes, we set out to control and gradually reduce the share of the overseas direct sourcing, But you can see, the directors of sourcing are focusing on the categories that are not operated by the headquarters. However, it takes time to adjust the product metrics, which was not being reflected in H1. Going forward, we will further improve the advanced planning of the overseas merchandise. Thirdly, the upfront cost investment for the newly directly operated store. We have a net increase of 75 stores in H1, nearly double the same period of last year. The upfront investment will have some short-term impact on the profitability, but a good news is that the new stores opened for this year deliver significantly higher profit margin and sales per square meter than older ones. Outperforming in site selection quality channel matching entered into H2 will shift our focus to deep-end our store operation and running our already opened store deep-end through. For the full year, North American and Europe market will still maintain relatively high growth. As for North American store will continue to prove out the success rate. We expect North America will reach close to 4 billion RMB in scale with 10% net margin for the full year. Europe is also a market with a positive arm but is still in the early stage for direct operation development, so fluctuation is expected. In H1, Europe revenue grows moderated to 26% with the same store sells down by mid to single digit. Our European team is building organizational capacity, refine the store model. Let's give them the confidence and patience to allow the market to proven our strategy. In April of 2026, MNCh achieved mid-single-digit same-store growth, in line with our expectation, leaving ample room for our full-year target of low single-digit same-store growth. MISO overseas same-store sell declined low single-digit, with North America achieving mid-single-digit same-store growth. North America's same-store performance was quite strong in Q1, growth by 10%, but moderated in Q2, particularly because the stock-out of the certain best-seller, especially the best-selling IP product, we expect this stock-out would be eased in September. Well, in H1 of 2026, the GDP margin was 44.3%, flat versus same period of last year. For the GDP margin, it was including approximately 0.6 percentage point from the US tariff refunds. For Q2, the GP margin was 45.3%, one percentage improvement compared with last year. This was due to the tariff refunds, which bring 1.2% positive growth. Based upon the refunds received to date, the company expects tariff refunds will also have the 20 bps to 30 bps support to the overall GP margin for the next two quarters. Excluding the external investment and convertible bonds financing, The profitability of our core business in H1 was as follows. The adjusted operating profit was 1.49 billion versus 1.59 billion in H1 last year, down by 6%, excluding the forex effect. The figures was 1.63 billion and 1.55 billion, rolled by 5%. Excluding the forex effect, the adjusted net profit was 1.22 billion and 1.24 billion, down by 1.7%. The corresponding adjusted net margin declined by 2.6% on a worldwide basis. This was also proving that our selling expense ratio rose 2.7% this period. Last year, it was 23.1%. To be specific, rental and depreciation expenses related to directly operated stores rose from 7.1% of the revenue in the same period last year to 8.1% in H1 of this year, rose by 1%. Advertising promotion expenses rose by 2.8%. were regarding IP licensing fees rose from 2.6% in H1 last year to 3.1% in H1 of this year, grow by 0.5%. The increase in the two items largely reflect our strategic investment in proprietary IP. Salary-related labor cost rose from 6.8% last year to 7.2% this year, up by 0.4 percentage point. So, the growth of the above four expenses altogether contribute to 2.6% of the expenses increase. By business unit on this slide, it shows very clearly the main reason for the worldwide margin decline was a structural shift in the revenue. For example, in H1 of 2026, the revenue contribution from the high-margin franchise and distributor business, the net profit margin was more than 60%, but it now fell 6 percentage points, while the contribution from the overseas directly operated business rose by 3 percentage points. However, last year, this number was a single-digit loss.

Let's also take a look at the working capitals.

Inventory turnover in H1 was 102 days. were seized 97 days in same period of last year. MINUSO China inventory turnover was 67 days, which was 73 days last year. MINUSO Overseas Inventory turnover for international market was 273 days, which was 240 days last year. Going forward, our overseas business must prioritize inventory health and take decisive measures to react to support the inventory. Besides that, In the peak seasons, we have to leverage on the IP launches and the holidays. For those South Beaks time, coordinate membership promotion and gifting activities to use blockbuster products to drive the monetization of the slow-moving inventory. At the end of June, our cash reserve was 7.39 billion. Net cash inflow of the operating activity in H1 was 1.48 billion, or by 45.5%. We constantly play high priority on cash flow management. This robust level can also provide solid support for the company's transformation. On shareholder return, in H1 of 2026, the company returned 1.31 billion to shareholders, including dividends and buybacks. of which the company repurchased $520 million, combined with Mr Ye's personal share purchase of approximately $54 million in H1. Our buyback sale in H1 was already exceeding the full year total of 2025, which fully demonstrated the confidence into the future business. We did not declare any interim dividend. This time, because the company believes the current valuation is highly attractive, we will conduct substantial buybacks over the coming period and make a reasonable dividend decision by the end of this year, based upon the full-year profit. The company's shareholder return policy for this year is buybacks plus dividends of no less than 50% of adjusted net profit excluding forex effect. Looking back on H1, our domestic business exceeding expectation, once again validating our path for opening a large store, building IP, and pursue high-quality development works. Overseas market sustained a compound growth rate of nearly 40%. Now, we are in a transition period from the scale expansion to quality upgrade. We still need time to build up organizational capacity. Based upon the company's current projection, we expect the company's revenue to grow by a high single-digit YY in H2, mid-double-digit for the full year, On this, in H2, Minnesota-China revenue expected to grow by mid-double-digit YY, but overseas revenue will grow by low single-digit. Overseas distributed revenue to decline by low double-digit. Overseas directly operated business will grow low double-digit. Pop-toy revenue is expected to flat in H2 with low double-digit growth for the full year. Compared with our full-year outlook at the start of this year, both domestic revenue and profit are somewhat better. With the differences mainly coming from overseas and top toy, in H2, we'll proactively slow down overseas, continue to close a batch of the low-efficiency distributor store, and also controlling the pace of the directly operated stores opening, we expect a net reduction of 50 to 70 stores across overseas market in H2. A net addition of 40 to 50 directly operated stores and a net reduction of 100 to 110 distribution stores for the full year. Our guidance for the low single-digit same-store growth for Minnesota China and Minnesota North America remains unchanged. Excluding Forex, the adjusted operating profit is expected to decline. by a high single-digit YOY. The adjusted operating profit margin expected to decline 3-4% on YOY. Our profit outlook is more cautious than the guidance we gave at the start of this year when we expected accelerated full-year profit growth versus last year. With an implied margin assumption, of a 1 to 2 percentage point decline. However, we now believe it's going to be down by 3 to 4 percentage points. Given the overseas distributed market revenue will decline over the next two quarters, there will be some impact on our margin. This concludes my remarks. Now let's move to the Q&A session. Thank you. Ladies and gentlemen, please rename yourself as your name plus institution you represent. Please make sure you limit your question with just one. Now, let's welcome Michelle from Goldman Sachs, please. Hello. Mr. Ye and Yisheng, thanks for giving me the chance to raise a question. I have a question regarding your large store format in Mainland China. Mr. Ye has already mentioned the large store was performing out of our expectation. We know that for many of the large stores, when they first opened, the performance was pretty well. If the store opening dividend or the first store impact gradually digested, What would be the normal performance of those large stores, especially the compared with the normal stores? What would be the difference on the sales efficiencies and the sales per square meter? Whether you have any target in your mind and you have any criteria in selecting the regions or the size for those large stores? The questions are many regarding the large store format. Please. Thank you. Let me just start with my overall view. The large store model continues to outperform company expectation because our first large stores being opened for two years. It's not going to be a short-term action, where at the same time, we have multiple large stores at the same time. It's not just for one to two stores. From this perspective, were not a short-lived bust driven by the opening hurdles. It is a sustained growth trend. Our store metrics keep evolving, and now we have the park format flagship, regular, and pop-up. Let me just break down the large store unit model with a few metrics. On our store performance, the park format family is very healthy. Minusoland, our earliest format in this family, still delivers. their story performance. above 3 million base life, while the super mini-soul nearly launched in 2026 has already surprised us a lot, which can basically steady above 1 million base life. On the sales per square meter, the POC format was running twice as that of the regular stores. The rent-to-sell ratio, the POC format running slightly higher than the regular store by a single-digit number, but the worldwide trend was downward thanks to the prime treatment. After talking to the malls on the paybacks, the pop-format store achieved a payback within six months in the early stage and now averages sticking one year, faster than 60 to 80 months of the regular stores. Franchising profit margin and share of the profit store has risen in tandem. In H1, the profitability of the Minnesota store nationwide reaches its best level since 2019. In H1, More than 30 land-format stores entered into the same store base, with average daily sales per store up to 30% grow YOY. Flagship-format 400 stores saw average daily sales per store grow a mid- and double-digit YOY. Well, let me just talk about how we choose a site. We will stick to the quality over speed. The share of the large store and the flagship store will keep rising based upon our analysis. Minso China total store number would reach 7,000 to 8,000. Land format family would be 1,200 with 95 in super minso and minso friends. Flagship format reach 2,000, regular format 4,500. On site selection, location value and traffic will always be our key criteria. We will take a look at the commercial district. Priority rise on top... Yang Yunyun, Guofu Ye Hello, Mr. Ye, I'm Yang Renbo from CRCC. I have a question. In H1 of this year, Minnesota China performance was truly ideal. However, the domestic retail environment in China volatile in July to August. Some of the retail companies said that they are pressured. Can you show the consumption trends you were seeing in the market and how the company is going to respond to that with concrete measures? Thank you. This is a very good question. According to the data from the National Bureau of Statistics, as many of you can see, You can see that in June, it was declining, and in July, it was only growing by 0.6%, which is not ideal at all. But for Minnesota China, we remain strong. Since July, Minnesota China GMV has grown about 20% worldwide, driven by both rising shares of the large store and also the land format in our store mix and steady same-store development. You can see that in July, the same-store average daily sales has grown by a median single digit. At this point, we see Minnesota China will have a mid-double-digit revenue growth in H2. Those results are inseparable from our strategies we mentioned. Let me just share with you people, products, and stores. First of all, even if you see the social retail was going down, however, I see for traditional retail business, we still need the consumer to work. However, you see that for emotional sales, The sales was going up. For example, outdoor products, trendy toys, the sales was growing up. But traditional retail business was not growing that fast. That's the reason we have to continue to build our municipal land, because we are building immersive IP scene. That is the future trend. Let's also talk about people. Membership operations are key growth levers for us, especially build out the cash, the membership system. We showed some progress on membership program during the early school, including the growth in membership number, membership contribution to the sales. We need to have the refined operation of the store. And secondly, you need to talk about the product. Our product mix are now be truly aligned with IP, for example, our preparatory IP, which can actually provide most interest-driven product with many emotional value. Those product sales was growing very fast. Especially in H1 of this year, preparatory IP led by Yuyu become a notable incremental driver with the designatory category. Preparatory IP now has already had a mid-single-digit share of the offline sales and a double-digit share of the online sales, growing very fast, especially in top-tier stores such as Minusoland and Minusospace. And in the Genie collaboration, we have been deliberately pushing into higher price lines to test more prime merchandise. and also we're going to have the first Lisa branded pop-up store which would be available starting from the 1st of September. Many international celebrities and superstars are happy to embrace and working with Miniso and hope they will be able to work with us to continue to work on the interest-driven consumption marketing in China. The economy was not good but China's population is still huge. China has 1.4 million and many more. Generation Z and people born after 1980s and 1990s are still going to be a big proportion. Those people are never short of the material consumption. They need emotional value and they need the interest consumption. Our competitors are also growing very fast, which showcasing China has a huge potential to go further. In terms of the channel, I was talking about swapping the cage to bring in the better birds strategy, which will provide empty room for sustainable development of our domestic business in the upcoming years. Upholding the principle of quality over quantity, our domestic business is still in a fairly ideal state. We will keep advancing the renovation of existing stores. I have already highlighted Minnesota, China. 4,665 stores span a variety of store formats. We are going to hook up for the lower-tier stores. And you can see, young people in China, they all need the interest-driven consumption with emotional value. If we are going to build good store scenarios, immersive experience, our trendy toy products and IP products are more attractive. that can actually help us to continue to improve the consumption and continue to draw the designatory enthusiasm and move the price band further. I was coming back from the northeast part of China. I see many of the stores being well positioned. I was mentioning about our store efficiency is no less of our competitors. Some of our stores can even outperform PopMart. That is our internal goal, if you have time. I'd like to suggest you to take a look at our store at the Harbin Parkson store. We have two stores there facing each other. You can see that our performance outperformed PopMart and Harbin Parkson shopping mall, which actually boost our great confidence for the larger stores. We internally proposed we need to improve the sales per square meter over the competitors. That is indeed the internal target we have. We have every confidence to make this target happen because you know that for our product and our transitory product in the land was more than 35 and we're going to make it more than 40. We only have two proprietary IPs now, including Yuyu and Chochou. Chochou was just launched two days ago. If our proprietary Chochou proves to be successful, then we're going to have two proprietary IPs with annual sales of more than 1 billion. If we successfully hit this target, then I believe our diversified format plus proprietary IP is going to be 50% performance from the trendy toys, IP collaboration product for another half. In that way, our business model will be more stable, more sustainable, and more immersive and more experimental. Majority of our store are having more than 800 square meters, including two floors. So I have every confidence in our large store format, especially in the land format, even if we are facing challenges now. However, I should leave. We are still in the pain stage of the transformation. The profit has been under pressure. However, we have a promising future, and I surely believe the business model we're running on still makes us feel excited. That's for domestic market. But for international market, we're facing many problems. I know that starting from H2 of this year, I will spend more time of working on the international market. In H1, we are working for the store of format refinement in China. In H2 of this year, We are going to move to the rest of the international market. In Mexico, from 10th to 15th of September, we are going to also have the municipal land format in Mexico. Problems that happened in China have also been faced in international market. And in Mexico, we're going to celebrate the anniversary. The Latin American consumer preferences are similar to that of China. Their income, population structure, and population density are very close to that of China. It's also the time for them to embrace the transformation and upgrading. And you see, the microeconomic picture, as far as I believe, interest-driven consumption, emotional value would be the next driver for the future growth. We probably don't need too much material value. Only in some African countries we are still in great need of the so-called material value. However, some developing countries like China and Asian countries will be shifted from the material value to the emotional value for interest-based consumption. Thank you. Thank you. Coming next, let's welcome Annie from Jefferies. The line is open, please. Hello, Mr. Yan and Yisheng and the IR team. I have a question that was about your latest performance. What are the latest seems to sell SSS figure for July and August? Has weather been a factor? Could you split same-store-sell into average selling price, ASP, and traffic? How much have store-upgrade, renovation, and product-mix shifts contributed to the growth? Which product categories are performing best, given the softer retail and last year's high base? What's your outlook for the same store sales in H2 of 2026? Are there any differences between the higher tier and lower tier cities? Thank you. In July and August, Miniso China seems to perform very steady, which is beyond our expectation, especially when we have the super Miniso store. The performance was quite competitive. The product, the store format, breaking down, Order Value or Volume Contribution 80% Average Transaction Value Growth by 20% The volume and price are rising, which is very healthy. And we also mentioned we're going to have a higher consumer unit price and higher gross margin, which is not being studied yet. We actually opened more high-end stores in the Mixi as well as the Taiku shopping malls. and the products still in the refining stage, need to be further improved. I also would like to mention, same-store growth is driven by multiple engines, including the store upgrades and the product upgrades along with the memberships. were for the upgrades are not the sole source. Within a mid-single-digit same-store growth, store renovation contributed roughly low single-digit. The rest are coming from the better refined operation, including optimizing the product channel matching, making sure the right product in the right channel, and also tailoring the product mix to different store style or types. I have already mentioned to you, we have more high-end stores, but we are still going to improve our product. Product adjustment takes time, but that's not for the store adjustment. When we're talking about store adjustment, we're still building the infrastructure, building it right, and then we're going to count on our product to continue to grow. We have our proprietary product along with the accelerated development of the product mix. As you can see, no matter for large store model or designer toy, they are now in the tier 1 to tier 2 cities. Penetration ratio in the lower tier cities are very low. This means lower tier cities offer broad room for expansion and are a potential source of the future same-store growth. Let's talk about the category performance. Big Toys is one of our best performing category with share of the total sell up to 1 percentage point on IP shares. IP products overall accounted for around one quarter of the sales. The share from the proprietary IP and Allis IP rose by 4%. Let me talk about H2 Outlook. The high base lending coming from the Zootopia raise in November and December last year. And we also have Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang On the product front, back-to-school season is a key focus. We did not do particularly well last year, and we will make sure we capture it this year. We are chasing opportunities for cultural creative categories, and we're going to work on that further. It's also going to be a good opportunity for us. Thirdly, on holiday, we will capture the self-search window around National Day and Mid-Autumn Day, firstly strengthening repurchase and the mindshare through the membership cashback credit mechanism. Okay, thank you, Mr. Ye. Thank you. Next question. Let's welcome Shi Di from Huadai Securities, please. Thank you. Can all of you hear me? Yes.

Okay.

Good evening. Thanks for giving me the chance. My name is Shi Di from Huadai Securities. You know that Thanks for providing us a very clear guideline. In H1 of this year, the company has many new IP and many new products, for example, collaboration with Cheney, and generated strong bars in H1. Your proprietary IP Chochua and YuYu are also performing very well. What IP types and category extensions are planned going forward in H2? What are the levers? for creating the broadcasters in H2. Any holiday season you have in your pipeline. Our IP strategy remains driven by two engines, licensed IP and proprietary IP. Each has its own plans. for the licensed IP. We have partnered with 180 global IPs, spending NBM film and TV and celebrity IP. Accumulating end-to-end experience from IP selection to product development to operation. You also talk about the journey collaboration. Our product, for example, like accessories, mind box and brush, designing and producing 70 SQUs. Also, you see from the... The first of September, those products would be available. And we also have more IPs in the pipelines. Where at the same time, we also have Chou Chou, which just started to release its great potential. Where at the same time, you can see, and Chou Chou. The demand is far beyond the need, and the wages actually be stocked out. We never expect it's going to be that popular from the very beginning, which is another way to look forward to that. It was very, very popular on the Red Book, which enjoyed very good progress. On 12th of September, we're going to officially launched collaboration with Lisa in Thailand. But at the same time, 9th of September, we're going to have the Lisa collaboration IP exhibition. You all know how impactful Lisa might be. We're going to be the IP collaborator and IP exhibition worldwide. We have already mentioned, we're going to have the product, For example, the blinded box as well as the cloth product or the patent and the price would also be quite friendly to the normal consumer. So you can see the price. would actually be further improved compared with what we have last year. The GP margin contribution is also reaching the best level. We are actually continuing to improve that and continue to improve the product, the price, and be more experienced for the global layout. Well, regarding the proprietary IP, That is our long-term strategy level. We are going to work with a large store format. As I have already mentioned, for YuYu, in June and July, its sales was more than 100 million for two consecutive months. I was going to have a major IP collaboration later. That's going to go beyond the Disney collaboration. As you can see, Youyou also have the collaboration with McDonald's and also working with Sparking Coffee. All those advertisements could be identified on Xiaohongshu yesterday. And we also noticed that Youyou is indeed are very popular ones, and all the consumer brands would like to work with us for that. So take a look at the Xiaohongshu, you will see how popular YuYu would be. So you see that the success of ChouChou proved again our proprietary IP model is truly successful and feasible. And we're also going to have a good design. The team is getting more confidence. Success could be luck, but there are two success. It's not luck at all. You need the methodology and the set of the strategy to be mature. And we're also working with different celebrities, especially our collaboration with Li Yuchun, which is very, very well established, which is also the global leading strategy. As you can feel, that is already go beyond the doubt. We're learning, but we're also surpassing. That is a great strategy of my team. We are going to launch better and good marketing innovation in the near future, go beyond our peers, really surprise the industry society and the consumers. So this can also help us to further clarify our commercial preparatory IP are actually going from stage to stage, to a more mature phase. So to summarize my answer to your question, I think we have a few levers. will continue to work with the publicized IP, celebrity IP, insist on incubating our proprietary IP with our existing IP metrics. We're going to have the IP and the product of working together. We're going to work with different categories and ask you leveraging our largest store and the different format to continue to convert the IP cells and continue to advance our proprietary IP You can even come to our store to take a look at that. You can see that for Disney and Youyou, we are now having the blind box been working together. And you can also see that for Chou Chou, the blind box was also being well created, very much professional. As far as I believe, our blind box is making huge progress. regarding the collaborations which is no inferior than our peers. This is also something we are progressing very fast. As long as we have a good use case, good IP, if the consumers come to our store, they believe we are professional, especially after working with Liu Yuchun, and we surely believe the Minnesota Trendy Toy consumer measure is continuing to progress. that could also help to build future collaboration. But at the same time, it's going to be a great driver for our future growth. That's all for me. Thank you. Thank you, Mr. Ye. Hope we will hear more IP from you. Okay, next question. Samuel from UBS, please. Thank you. Thanks for Mr. Ye and Ethan for the question. I have a question regarding the U.S. market as being shown and talked. And you have already proposed a target for $4 billion USD for revenue and $400 million for profit. But in Q2, we see the sales being somewhat slowed down. And how are you going to complete this target? Are there any drivers you have? But at the same time, regarding the profit, how are you going to improve the profit?

Well, thank you very much.

Internally speaking, we actually make US and Canada as a whole. I have already mentioned and for North America, our performance target was 4 billion and we hope that it's going to be 10% of our net profit margin. Excluding the short-term data, if you take a look at the U.S. only, the Minnesota was the fastest growing retail in U.S. in 2025. It was being covered by Forbes. However, it's not only just a 4%. When we converted our sales from direct to indirect, U.S. business posted a CAGR of 120 from 2022 to 2025, wherefore same-store performance. We are going to maintain A full-year target of low single-digit growth, which is in line with our expectation. Improving U.S. margins, still going to count on the operating leverage, even optimizing the store numbers. For the past two years, we actually opened some stores with large food traffic. Well, at the same time, as you have already mentioned, we're going to slow down, slow down a little bit. and also continue to work together and make improving the profit and revenue as a whole.

Next question coming from CTIC.

Thank you. Thanks for the question to raise a question. Hello, I have a question. In H1 of this year, you have already mentioned that you open stores in peak season and operating your business. And I was talking to you for Ethan and for Mr. Ye, you're quite confident.

What are your expenses planning and looking to H2 of this year, whether the interest are going to be accelerated? Thank you.

I was recording a few numbers. You can see that in H1 of this year in North America, the storm net condition was 75. So in other words, we really want to make sure the stores being opened before the peak season. making sure that we accelerate the growth of the North America store, where for the full year, sales and profit, which is very typical to the retailer in North America, were not making money in H1 of this year. All the time, we count on H2 or even Q4 to help to drive the overall sales. In my prepared remarks, I have already shown you a slide That is a buybu profit rate. You can also see that for 2025, if you take a look at the last year, as you can see that the number was around 30% for franchise and agents business, which really in line with what I have already mentioned, the sales peak season for the seasonality. Looking to H2 of this year, as you can see that our profit will continue to steadily increase. International agency remains stable. However, we'd like to split the direct sales into two parts, including the North America direct sales, which was 10%. We are going to continue to optimize North America back office expenses. In H1 of Asia, the back and expenses ratio in the United States decreased slightly. Profit margin will continue to grow. We are at the same time...

You can see that the adjusted profit margin will decline by 3 to 4 percentage point YY. and we hope that 2027 would be the turning point of our profit margin.

Okay, well taken. You see hope that in 2027 we're going to have a good performance and improvement on net profit. Thank you. Thank you, Ethan. Next question coming from Qingyang from Changjiang Securities. Thanks for the team. Thanks for the opportunity of raising the question. My name is Qingyang from Changjiang Securities. I have a question regarding your US business. Some investors have already asked the question. I'd like to ask you for U.S. merchandise strategy. You know that as well as adjusting our product metrics. So I would like to ask for the management team, what would be our key focus next year in the United States in H2 of this year? How are you going to comment on the violence between the domestic market Direct and the indirect sales. For U.S., refining the product mix is something we do continuously, particularly aiming at micro-policy change. We have constantly adjusting our overseas profit product mix. In terms of the sales contribution, designatory remain our largest category in U.S., contributing over one-third of the sales, especially in veal plush, performing especially well. And you can see that majority of that in the US are built on the licensed IP. We plan to launch proprietary IP next, which should contribute incremental growth going forward. But at the same time, in Q2, some best-selling IP products were out of stock due to merchandise planning. We bridged the sales gap through rapid direct sourcing. As a result, Due to the product planning, some of these products are out of stock. But that is not going to be our key. We are going to continue to differentiate the products. You can see that in the US, The sales was declining from 60 to 70 in early 2024 to close 40 in H1, while the share of the directed sourced product rose considerably. Among those, directed sourced snacks have significantly improved conversion and attachment rates in store. Why US is actually under pressure while still adjusting our product metrics and even we slow down the store openings in the United States. So for US, our headquarter is now actually making huge investment on the merchandise center. Regarding the GP margin, the U.S. market GP margin was around 65% to 70%, partly due to the tariff rebates, which will also give us some positive contribution in H2 of this year. But at the same time, the asset ratio is well under control with launch of the Blockbuster IP and increase in the proportion of the IP, and we believe the GP margin in U.S. would increase in H2 of this year. Thank you. Thank you, Mr. Ye. Next question, Wu Chunxi from Guotan Haitong, please. Okay, thank you. My name is Wu Chunxi. Thanks for giving me the chance to raise a question. As you have already mentioned about the distributor operation are still facing some resilience. I'd like to ask you, what's the company's outlook and plan for the distributor market growth? Thank you. Okay, thank you. I'm Ethan. In H1 of this year, distributors slowed their restocking. However, it's been slowed down, so the revenue was growing. Looking to H2 of this year, and you see that distributor revenue was still going to down by 10%. I think the negative growth in revenue won't necessarily mean the end demand was pragmatic. What's the situation of the distributor market? For the full year of 2025, overall sales of the distributor business was more than 10 billion. The CAGR was more than 10%, which was always robust, including the Forex raisin. You can also see that the GMV still maintained a high single digit in H1.

We see the gap.

which can see some of the channels are still digesting the inventory. In that way, the distributor restores key lags behind their own sales growth, a normal phenomenon in inventory digestion process. Secondly, behind the negative growth, there were also external factors and own issues. Externally, some markets in Middle East and Asia were affected by geopolitical conflict, currencies warnings, and other microfactors. The inventory turnover in those markets came under pressure in H1. Latin American market also faced micro currency and natural disaster headwinds, but its inventory turnover improved in H1. We operated in 80 distributors markets overseas, with top 80 accounted for 80% of the overall business. In H1, inventory turnover in the top 80 market was roughly flat versus last year, and somewhat better than the directly operated market overall, broadly speaking. Internally, as we have already candidly acknowledged, So you can see that internally we have the candid knowledge of private communication, and we just want to maintain long-term health of the channel rather than pushing inventory into short-term result. Terminal sales will be normalized today. And at the same time, we also further reduce the store number. For example, in New Zealand, in Philippines, Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang to 110 in H2 net closure. While this decision makes short-term pressure on distributor revenue, however, in the long run, it can also help to ensure healthy and sustainable development of the entire business ecosystem. As you can see, the Latin American market is our key place. The local distributors are actually having very strong background and operation capacity, and the retail locations of those markets are actually seeing a low single-digit in H1. Terminal performance was steady. In Latin America, likewise, we will not trade short-term revenue for channel house. You can see that Allis-Yueling Chen, Yang Yunyun, Guofu Ye, Jingjing Zhang In terms of the product and operation, for distributed regions with established scale, we will deploy localized product. On IP product, we fully recognize the launch cadence needs stronger planning. We have now built a more complete launch calendar that clearly marks the key local holidays and the launch timing for different stage IP. And through this way, We will be able to maximally incentivize the sales momentum. For categories with growth potential, we will help distributor markets iterate their marketing plans, offering better plans, iteration, and empowerment in scenario-based content, closing the content gap, lifting the sell-through of the high-momentum categories. For the overall product mix, we will phase out low-efficiency, low-margin SKUs, creating value-for-money everyday product to make up the volume, and also bringing high-value-for-money local best-sellers to drive the sales. Okay, thank you, Ethan. Very clearly explained. Thank you, Yinsen. Thanks for all the investors being interested in Minnesota. See you next time. Here comes to the end of today's call.