Lao Pu Gold (Minutes): Store efficiency ranks first in single-store revenue in Chinese malls
$LAOPU GOLD(06181.HK) The following are the minutes of Lao Pu Gold's 2025 H1 earnings call. For earnings interpretation, please refer to "Lao Pu Gold: Is the "Golden Hermes" still reliable as gold prices "cool down"?"
I. Review of Core Financial Information:
(1) Business Performance
Revenue Growth: Sales revenue for the first half of 2025 reached RMB 14.18 billion (YoY +249%), with adjusted net profit of RMB 2.35 billion (YoY +291%);
Same-store Growth: Same-store sales increased by over 200% YoY, with annualized store efficiency per store exceeding RMB 459 million, ranking first in single-store revenue in Chinese malls;
Membership System: Membership reached 480,000 (an increase of 130,000 from the end of 2024), with significant improvements in average transaction value and purchase frequency;
Channel Expansion: Entered the top ten commercial centers nationwide, adding high-end malls such as Shanghai Grand Gateway and Marina Bay Sands in Singapore, with a total of 41 stores globally (covering 16 cities).
(2) Financial Data
Gross Margin: 38.1% (slightly decreased YoY due to rapid gold price increases and pricing adjustments);
Net Profit Margin: 18.4% (YoY +1.7pct), with a net profit margin of 19% after excluding share-based payments;
Cash Flow: Operating cash outflow of RMB 2.215 billion (mainly due to inventory reserves and production cycles), with a net inflow of RMB 150 million after excluding the impact of placement funds;
Inventory: Ending inventory of RMB 8.685 billion (YoY +113%), with turnover days reduced to 150 days (195 days in the same period last year).
(3) Strategic Focus
Product Innovation: Launched new products such as the "Seven Sons Gourd Pendant" and "Gold Enamel Painting", with a total of 273 patents and 1505 copyrights;
International Expansion: First store in Singapore established, with plans to expand into Southeast Asia and European and American markets;
Brand Positioning: 80% overlap with luxury brand consumers such as LV and Hermes, positioned as "Chinese classic culture + world-class craftsmanship".
II. Detailed Content of the Earnings Call
2.1. Key Information from Management
1. Growth Drivers: High same-store growth driven by brand momentum, product iteration, and channel optimization; overseas revenue increased by 455% YoY (successful trial of the first store in Singapore, plans to upgrade to a flagship store).
2. Gross Margin Management: Gold price fluctuations have put short-term pressure on gross margins, expected to recover after the August 25 price adjustment; long-term adherence to a "fixed price" strategy to enhance product value rather than being tied to material prices.
3. Channel Strategy: Focus on optimizing stores in top domestic malls (e.g., Shanghai IFC, Beijing SKP); priority overseas expansion in Southeast Asia (Singapore, Thailand), gradually exploring European and American markets.
4. Cultural Empowerment: Creating product differentiation with "intangible cultural heritage craftsmanship + classic aesthetics" to promote the globalization of Chinese culture; deepening consumer cultural interaction through the Miniso Land model (IP experience stores).
2.2. Analyst Q&A
Q: Could you discuss the growth drivers for the second half of the year and the outlook for gross margins? Additionally, how was the August price adjustment considered?
A: Our growth relies mainly on four aspects: brand momentum, product innovation, channel optimization, and price adjustments. Gross margins are indeed affected by gold price fluctuations in the short term, but we expect them to gradually recover with the implementation of the August 25 price adjustment. In the long term, we aim to achieve a gross margin target of over 40%.
Q: You mentioned an 80% overlap with luxury brand consumers. Is this high overlap sustainable?
A: The core value of our products lies not only in the material but also in their high functional and emotional value (cultural and aesthetic attributes). Therefore, customers are motivated by cultural recognition and aesthetic needs rather than just investment purposes. In the future, we will further consolidate the sustainability of our high-end customer base by continuously enhancing product strength, creating experiential scenarios, and strengthening customer management.
Q: Is your pricing adjustment frequency fixed? Also, what are the store opening plans for 2026?
A: Our pricing strategy involves two to three adjustments per year, which is a proactive brand strategy rather than being solely driven by gold price fluctuations. As for the 2026 plan, we will continue to deepen domestic channel optimization while focusing on expanding the Southeast Asian market and simultaneously conducting research on the European and American markets.
Q: How does the company balance dividends and refinancing? Additionally, is there any consideration for collaboration with luxury giants?
A: Dividends reflect our responsibility to shareholder returns, while refinancing is based on the needs of business development, with funds invested in core operations. As for collaboration, there are currently no plans to partner with luxury giants. Regarding "Golden Treasure", it is an asset of the listed company, with no plans for independent operation.
Q: Inventory increased by RMB 4.6 billion in the first half. How is this capital allocated? Additionally, will discount activities affect brand positioning?
A: The inventory increase is mainly to support future business expansion and new store stocking. In terms of capital allocation, the second half will be covered through operating cash flow and financing. As for discount activities, they are merely part of overall mall promotions and will not affect our brand value, similar to the approach of Moutai.
Q: What is the plan for opening stores in Singapore? Additionally, what is your cultural promotion strategy overseas?
A: The Marina Bay Sands store in Singapore will be upgraded to a flagship store in the future, with further expansion based on market capacity. For overseas promotion, we will focus on "the core of Chinese culture and localization integration" to strengthen the output of values.
Q: Has the recent rise in gold prices affected customer traffic and average transaction value? Is there a noticeable difference in store efficiency between new and old stores?
A: Gold price fluctuations have not significantly impacted overall demand; the increase in average transaction value is the main driving factor. The efficiency difference between new and old stores depends more on the location and size of the mall. In top-tier malls, there is no significant difference in efficiency between new and old stores.
Q: What is the profile of overseas users? What is the proportion of Chinese and non-Chinese customers? Additionally, how do you view the competitive landscape?
A: The overseas customer base mainly includes "cultural recognizers and high-net-worth individuals", with the proportion of non-Chinese customers continuously increasing. We are not concerned about domestic market competition, as our model is difficult to imitate and surpass. In the international market, we will form differentiated positioning with other brands.
Q: How do you view competition from other brands' traditional gold methods?
A: Lao Pu has always focused on returning to the intrinsic value of the product, aligning with the trend of development. In the domestic market, there is a lack of overall product development capability and grasp of high-end brands, leading to limited progress and breakthroughs among domestic peers over the decades. This industry requires commercial innovation, which presents an asymmetric opportunity for us. In the low-end market, imitation and copying might work to some extent, but in the high-end market, there is no path for imitation and copying. Lao Pu's strategy is asymmetric, firmly adhering to its values, and other international brands also uphold their values, so neither low-end brands nor international high-end brands pose competition to Lao Pu.
Q: Does the company plan to enter the European market? If so, how will the products integrate Western elements?
A: The expansion into the European market will proceed strategically. Our products will not cater to specific Western symbols but will extract the "spiritual core" of Chinese culture and resonate with world-class cultures. For example, in terms of religious elements, we emphasize compatibility and integration.
Q: How does the company view Lao Pu's market share in the domestic high-end gold jewelry sector?
A: The Chinese gold jewelry market is worth hundreds of billions, with traditional methods possibly exceeding RMB 100 billion. Market share is an outcome; we pursue brand strength, recognition, and product strength. Market share is a result, not a goal. We focus on doing these processes well, and naturally, good results will follow.
Q: In terms of expanding the high-end customer base, does the company prefer to expand the customer base or delve into the value of individual customers? Additionally, what is the timing for opening stores in the European and American markets?
A: We prefer to naturally attract customers through product excellence, scenario upgrades, and experience optimization rather than deliberate expansion. As for the timing of opening stores in the European and American markets, it needs to be aligned with local cultural adaptation, and there is currently no specific timetable.
Q: What is the expansion strategy for the Hong Kong and Macau markets? Additionally, what is your market share target in the high-end gold market?
A: In the Hong Kong and Macau markets, we will increase brand exposure, strengthen product localization, and strategically layout channels. As for market share, we do not set it as a direct target but focus on enhancing product strength, channel strength, and brand strength, with market share being a natural outcome.
Q: What impact has the recent rise in gold prices had on demand? How is the store efficiency level of new stores?
A: The rise in gold prices has not changed the essence of consumption; demand remains strong, with the increase in average transaction value being the main factor. The efficiency of new stores depends on the level of the mall they are located in. In top-tier malls, the performance of new and old stores is balanced.
Q: In terms of brand promotion in overseas markets, will you use spokespersons or large-scale advertising?
A: Our core promotion strategy is to convey cultural confidence through value resonance rather than relying on hard advertising. Currently, we have no plans to use spokespersons, relying mainly on products, scenarios, and word-of-mouth for promotion.
Q: From the inventory level, does it imply that revenue in the second half can exceed RMB 15 billion? Additionally, what are the plans for new product launches and high-end customer management?
A: The inventory does support our growth in the second half, but we will not provide specific revenue guidance to protect retail investors. In terms of new products, we will continue to launch them and focus on converting high-end customers into "cultural ambassadors" while creating a complete ecosystem for gold jewelry.
Q: Is there a plan to further increase store density in the domestic market? Additionally, will brand marketing expenses increase?
A: We will continue to optimize store locations in first-tier cities but will not pursue store quantity expansion. In terms of marketing, we mainly rely on word-of-mouth and scenario empowerment rather than large-scale expense input.
Q: Can the inventory at the end of June be used as a basis for performance guidance?
A: We are very confident in the brand, but we will not provide performance guidance. For the company, steady progress is key. Our vision is to become a world-class century-old brand. For investors, whether institutional or retail, we must be responsible. Providing guidance might not be beneficial for investors. We can assure that Lao Pu's financing and corresponding inventory reserves are used for business operations, but we cannot provide specific data guidance.
Q: How is the pace of new product launches and SKU planning? What is the proportion of the "fixed price" model in the industry?
A: We will plan the pace of new products based on cultural themes and element standards. As for the "fixed price", it is already a standard for high-end brands and not unique to us. Its sustainability depends on the long-term support of product value.
Q: What is the company's long-term gross margin target? Additionally, what is the profile and proportion of gold jewelry users?
A: A long-term gross margin of 40% is our strategic positioning, not a short-term financial indicator. Gold jewelry users mainly include "cultural deep recognizers and those with collection needs", but specific proportions are not disclosed at this time.
Q: What are the value-added services for high-end customer service? Additionally, what is your overseas talent recruitment strategy?
A: High-end customer service mainly involves arranging exclusive time slots and customized channels, but it is not an absolute distinction. Overseas talent recruitment will be based on actual needs, and we place great emphasis on cultural recognition and the attractiveness of the company's mechanisms.
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