MINISO (Minutes): Focus on store sales growth in 2025

$Miniso(MNSO.US)$MNSO(09896.HK) The following are the minutes of Miniso's FY24Q4 earnings call. For the earnings interpretation, please refer to Miniso: Is Profitability Taking a Step Up, and Is IP Retail a "Money Printer"? - ****

I. Core Information Review of the Earnings Report

Revenue Situation: Total revenue for 2024 was 17 billion yuan, a year-on-year increase of 23%, with an average store count growth of 18%, and same-store sales showing a low single-digit decline. MINISO brand revenue was 16 billion yuan, a year-on-year increase of 22%. Among them, MINISO China revenue was 9.3 billion yuan, a year-on-year increase of 11%; MINISO overseas revenue was 6.7 billion yuan, an increase of 42%. In the overseas market, direct store revenue was 3.8 billion yuan, with a year-on-year high growth of 66%; agency market revenue was 2.9 billion yuan, an increase of 19%, with overseas revenue accounting for 39% of total revenue, up from 34% the previous year.

Gross Margin Situation: The gross margin for 2024 increased by 3.7 percentage points to 44.9%, rising for eight consecutive quarters. This was mainly driven by the IP strategy, which boosted the gross margins of various business segments.

Dividends & Buybacks: In the future, the company will continue to allocate 50% of adjusted annual net profit as dividends and implement dynamic share buybacks.

Future Outlook: The company holds an optimistic attitude toward revenue growth in 2025, due to the base effect, the growth rate in the first half may be lower, while higher in the second half; store expansion will proceed according to a five-year strategy, planning to double the number of stores by the end of 2028 compared to the end of 2023. The number of new stores opened in 2025 will be slightly less than in 2024, focusing on store quality and hoping for more growth from same-store sales.

II. Detailed Content of the Earnings Call

2.1 Key Information from Executives

1. Operating Conditions:

a. Overall ① Stores: As of the end of December 2024, the number of stores in the group reached 7,780, with a net increase of 1,290. Among them, Miniso China added 460 stores, overseas expansion added 631 stores, and TOP-TOY added 128 stores, all exceeding the store opening targets set at the beginning of 2024.

② Members: Global registered members exceed 100 million, with member consumption accounting for over 60% of total sales. The average consumption of members is 2.2 times that of non-members, with approximately 4 purchases per year.

b. Domestic Business Progress:

① In 2024, domestic business revenue grew by 11% based on a 36% high growth rate in 2023, with offline growth of 10% and e-commerce growth of 25%. By the end of the year, the number of stores in China reached 4,386, with a net increase of 460.

② Driving Factors:

• Channel and Retail Partner Optimization: Channel Optimization: Although same-store sales faced pressure in 2024, the average daily sales of newly opened stores were higher than in 2023, and there are improvement opportunities for old stores. Retail Partner Optimization: Support experienced partners, eliminate underperforming partners, and continue to improve partner quality in the future.
• Precise Product Matching: Match products according to channels and consumer profiles.
• IP Cooperation Expansion: Create iconic IP events, planning to launch over 90 IP products in 2025, leveraging platform advantages to smooth out-trend cycles and reduce reliance on a single IP.

c. Overseas Business Progress:

① In 2024, overseas revenue reached 6.68 billion RMB, an increase of 42%; GMV reached 4.16 billion RMB, an increase of 27%; with a net increase of 631 stores. The 3,100 overseas stores contributed nearly 40% of the group's revenue, driving overall revenue growth of 23% to approximately 70 billion RMB.

② Development Strategy: In 2025, deepen the global localization strategy, diversify the supply chain, and reduce reliance on a single procurement market in mainland China. Increase procurement from Southeast Asia, Japan, and South Korea; advance IP strategy: continue to collaborate with IPs to launch limited edition exclusive products and explore local IP resources overseas.

d. TOP TOY:

① Annual growth of 45%, with a net increase of 128 stores, achieving profitability for the year. Gross margin increased by 7.3%, with significant improvements in gross margins for key categories such as building blocks and blind boxes, and the share of high-profit products increased by 3.5%. After opening stores in Indonesia, it continues to grow by leveraging the local demographic structure and development, aiming to play a more significant role in the trendy toy sector in the future.

2.2 Q&A

Q: In the second half of 2024, TOP-TOY faces pressure in China, with significant contributions from well-known IPs in the third and fourth quarters. How do you evaluate same-store performance and growth drivers?

A: Revenue growth in January and February was high and showed improvement. Large stores are recovering well, while small stores are under pressure; in the future, there may be a restructuring of small stores into large ones. This year's same-store performance will improve compared to last year's Q4, with losses continuing to narrow. By August 2024, an IP-themed park has been operational, exceeding performance expectations, created in collaboration with a well-known architectural design company to build an immersive environment of over 1,000 square meters In the future, IP will be the key strategy, opening flagship stores in core locations of first-tier cities to create flagship stores with double efficiency.

Q: Last year, the same-store sales in the U.S. business faced pressure in some quarters. I would like to understand the profit situation of single stores in the U.S. and the trend of same-store sales in 2025. Additionally, overseas direct store expenses are under pressure. How do you view the phenomenon of improving overseas gross margins?

A: The profit margin of overseas direct stores is growing rapidly, and it is expected to reach triple-digit growth by 2025. Although its gross margin is currently low, there is significant potential for improvement. The globalization process requires patience and long-term planning, as the global market space is vast. Past investments in the market have effectively enhanced brand awareness and established sales and operational systems, achieving triple-digit compound growth in the U.S. market from 2021 to 2024. In 2025, we plan to expand stores precisely, focusing on improving store quality, with a net increase of 154 stores in the U.S. in 2024, covering about 54 states. Starting this year, we will optimize the layout and focus on opening stores in key states. By leveraging store scale effects, we will address product supply shortages, reduce costs, and improve logistics efficiency. At the same time, we will establish a product development team to develop new products based on U.S. market preferences, optimize cooperation models, and adopt diversified strategies to ensure the implementation of strategies and business growth, continuously promoting four key initiatives in the U.S. market, especially strengthening the membership system to identify bestsellers, analyze target customers, and improve service levels.

Q: Is the profit growth certainty for 2025, which relies on direct stores and has accelerated revenue growth expectations, not as strong as what was claimed last November?

A: We are confident that revenue and profit growth will be healthy in 2025, with revenue growth accelerating. Each business unit is expected to perform better than in 2024, especially in the Chinese market. It is anticipated that online business in China will thrive in 2025, and offline business will also achieve double-digit growth. The compound growth rate of overseas business from 2021 to 2024 is 43%, maintaining a growth expectation of 35% - 40% in overseas markets. Adjusted operating profit is expected to grow by 70% compared to last year, with net profit margin rebounding to 20%. MINISO's core business operating profit will continue to grow, with profit margins relying on direct store profits. The profits of existing direct stores in 2025 will significantly increase, with single-digit to double-digit profit growth expected. Taking the 2024 Shanghai IP-themed store as an example, although costs are high, the profit margin is considerable, and in the long run, the profit margin of direct stores is expected to reach 20%.

Q: Can you share the business indicators of Yonghui Superstores or introduce the business progress of Yonghui?

A: Regarding Yonghui, we are implementing the "three increases and two decreases" measures. "Three increases" aim to enhance labor efficiency, double or even triple store performance, and efficiency, and elevate store performance or efficiency to a higher level; "two decreases" include reducing the proportion of daily necessities to improve profit margins and developing private labels to enhance competitiveness, as well as lowering procurement and labor costs. In 2025, we will optimize the team and close underperforming stores by the end of 2026, retaining high-quality stores and upgrading all stores to enhance Yonghui's performance Q: What is the store opening target for 2025, and how does the number of new stores compare to 2024? Can you share relevant data, including the number of stores opened in China and overseas markets?

A: The number of new stores in 2025 is expected to be on par with 2024, with a focus on expanding direct-operated stores in the United States and Indonesia. Simply increasing the number of stores is not conducive to long-term development, as consumer demands are diverse; resources need to be optimized to enhance customer experience.

Referring to 2024, the net increase in stores from 2023 to 2024 is approximately 250 - 300, with new stores primarily in emerging markets. For example, in China, there are currently 3 IP-themed stores operating under a light asset model, which will continue to be promoted. We are optimistic about expanding stores in the United States, expecting a total of 350 - 400 stores, with plans to eliminate dozens in the next year. We will also expand into emerging markets such as Canada, Southeast Asia, and Europe, which have seen significant growth over the past year.

Q: How does introducing other brand products in Chinese stores, beyond self-operated products, affect same-store sales, gross margin, and profitability?

A: Regarding third-party products, we plan to launch beauty products starting in the second half of 2024, as they align with our target customer group and enrich our product mix, significantly boosting same-store sales from both profitability and customer attraction perspectives.

Q: Can you share the new IP plans for 2025?

A: The IP plan for 2025 has over 90 IP-related activities and products planned, covering different periods. We will develop new products monthly, focusing on collaborative partnerships. These efforts will enhance brand influence and customer recognition, laying the foundation for product development.

Q: How is the collaboration with Sanrio and Disney progressing? The company pursues high turnover rates; how do you balance this with differentiated design?

A: In 2025, we have planned over 90 IP activities and products of different styles and categories, with S-level projects prepared from the May Day holiday to National Day, showing great potential. We launch new products every year, such as anime products, and develop Miniso's products monthly, emphasizing joint branding and frequently collaborating with other brands on co-branded products. Certain categories are deeply integrated with IP, such as our collaboration with Disney, where the blind box product was approved for launch in the United States on March 30, helping to drive sales in new stores, enhance product recognition, support YH product development, and strengthen the brand.

Over the years, we have continuously upgraded our IP, and optimized products to enhance satisfaction. Different IPs vary, with evergreen IPs having longer lifecycles. In the medium to long term, IP product sales are not affected by non-IP product sales; the key lies in IP design, balancing consumer functional and emotional needs in product development.

Q: Regarding dealer integration, progress is being made in data reform. How is it going? Can integration be completed by 2025?

A: On one hand, we empower experienced partners with abundant resources and close cooperation, providing product and operational support to enhance brand visibility in key locations in first-tier cities; on the other hand, we assist potential partners by optimizing resource allocation, improving utilization rates and brand influence, and will regularly visit older partners who are lagging in development. Although there are fluctuations in the number of small stores daily, we focus more on future high-quality growth, continuously optimizing the product mix, improving operational efficiency, and mitigating the negative impacts of integration, while maintaining the integration strategy Q: Briefly talk about the proportion of online sales in total revenue for 2024 and 2025, and how do you plan to achieve the acceleration target?

A: China's online business is divided into two parts: traditional e-commerce and live e-commerce. Both are expected to grow rapidly in 2024, with e-commerce growth at 25% - 30% and live e-commerce close to 50% - 60%, collectively accounting for about 15% of total business in China. In 2025, further acceleration is expected, noting that achieving double-digit growth in 2024 is not easy, especially considering the growth rate was as high as 36% in 2023.

Q: I see the company plans to open more IP-themed stores, which contribute more revenue than regular stores. How can the company ensure sustained good growth?

A: Currently, enhancing store competitiveness remains key, with a focus on increasing same-store sales. Looking back at same-store sales in 2024, there are many opportunities. On one hand, using location data reveals that aside from changes in the external environment, aspects such as site selection, product display by retail partners, product quality, and service all need improvement; on the other hand, if the store area is below 100 or 200 square meters, same-store sales are mostly in negative growth, confirming the view of "opening larger stores" and indicating that there is still room for improvement in our performance.

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