MINISO (MNSO) Q2 2026 Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolSat, August 29, 2026 at 12:28 AM UTC

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Friday, Aug. 28, 2026 at 5:00 a.m. ET

CALL PARTICIPANTS -

Founder and Chief Executive Officer - Ye Guofu

Chief Financial Officer - Eason Zhang

TAKEAWAYS -

H1 Revenue -- RMB 11.5 billion, representing an increase of 22.4% year over year driven by growth in China and the TOP TOY segment.

Adjusted Operating Profit -- RMB 1.49 billion, down 6% from RMB 1.59 billion in the prior year due to a structural shift toward the directly operated business and a decline in high-margin distributor revenue.

MINISO China Revenue -- Grew 26.2% year over year, significantly outpacing the 1.3% growth in China's broad retail sales for the same period.

Overseas Revenue -- RMB 4.06 billion, a 40.9% increase reflecting expansion in North America despite temporary declines in Asian and Latin American distributor markets.

Member Base -- 130 million members in China, a 31% year-over-year increase that reached an all-time high as of June 30.

Member Sales Contribution -- 77% of total sales in China, compared to 60% in the prior year, reflecting successful membership acquisition and retention strategies.

TOP TOY H1 Revenue -- Grew 32.7% year over year, supported by the expansion of proprietary intellectual property metrics.

Proprietary IP Sales -- RMB 500 million generated by the YOYO brand in the first half of 2026, which is now present in 53 countries.

Adjusted Net Profit -- RMB 1.22 billion when excluding foreign exchange effects, representing a 1.7% decrease compared to the first half of the prior year.

Gross Profit Margin -- 44.3% for the half-year period, which included a 0.6 percentage point positive impact from United States tariff refunds.

Operating Cash Flow -- RMB 1.48 billion, an increase of 45.5% year over year, resulting in a cash reserve of RMB 7.39 billion.

Store Efficiency -- Land format stores in China delivered sales per square meter approximately twice that of regular store formats, reflecting the success of immersive retail experiences.

Store Renovations -- 189 stores were renovated in the first half of the year, with post-renovation performance doubling compared to the previous year.

Inventory Turnover -- 102 days globally, though overseas turnover reached 273 days due to restocking delays and inventory digestion in distributor markets.

North America Revenue -- RMB 1.8 billion, a 37% increase, despite same-store sales growth moderating to a mid-single-digit rate in the second quarter due to inventory stockouts.

Selling Expenses -- Rose to 25.8% of revenue from 23.1% in the prior year, driven by higher rental and depreciation costs from directly operated stores.

H2 Revenue Guidance -- Management expects revenue to grow by a high single-digit percentage year over year in the second half of 2026.

Full-Year Adjusted Operating Profit -- Projected to decline by a high single-digit percentage as the company prioritizes inventory health over short-term revenue.

H2 Store Network Guidance -- Management expects a net reduction of 50 to 70 stores in overseas markets, resulting from the addition of 40 to 50 directly operated stores and the closure of 100 to 110 distributor locations.

Proprietary IP Margin -- Profit margins for proprietary intellectual property products were reported as being above the overall company average, reflecting strong demand for interest-driven categories.

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RISKS -

Ye stated, "overseas performance fell short of our expectation," noting that profit contribution from overseas declined from 35% to 40% in 2023 to 10% to 15% in the first half of 2026.

Zhang warned that a 10% decline in distributor business revenue in Asia and Latin America contributed to results falling below previous guidance.

Zhang noted that same-store performance in North America weakened in June due to a "temporary gap in the cadence of the IP product launches" and stock shortages of best-selling products.

Management reported a strategic focus on transitioning the global store network of MINISO Group Holding Limited(NYSE:MNSO) toward higher-quality formats, specifically prioritizing large-scale flagship and "Super MINISO" locations. The company stated that while China operations exceeded expectations with significant membership growth, the overseas segment is entering a period of consolidation to address inefficiencies in distributor markets. This shift includes closing underperforming stores and refining the operational model for directly operated markets in North America and Europe to improve long-term profitability.

CEO Ye stated, "Super MINISO brings the IP experience to the broader mass consumer base," noting that the format integrates intellectual property characters into 50% of its product mix.

The company achieved its group-wide target of RMB 1 billion in proprietary intellectual property sales by the end of July, reaching the goal ahead of the original year-end schedule.

Management reported that the retention rate for intellectual property members acquired in 2025 was 80% higher than for non-IP members in the first half of 2026.

The company plans to introduce a LISA-branded pop-up store in September to test higher price points and expand its celebrity-driven intellectual property offerings.

Ye noted that the success of the YOYO brand has enabled the company to "engage top-tier global IP as an equal," citing the brand's collaboration with Disney's Toy Story 5.

Management indicated that the company would prioritize share repurchases over interim dividends due to current valuation levels, with total shareholder returns planned at no less than 50% of adjusted net profit.

INDUSTRY GLOSSARY -

Blind Box: A collectible toy packaged in a way that hides its specific identity until opened.

GMV: Gross Merchandise Volume, the total value of sales through a platform.

Ichiban Kuji: A Japanese lottery system for limited edition merchandise and collectibles.

IP: Intellectual Property, referring to characters or brands licensed for use on products.

Land format: A large-scale, immersive MINISO store format typically exceeding 800 square meters.

SSS: Same-Store Sales, a comparison of sales for stores open at least one year.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for your patience. Welcome to MINISO 2026 interim earnings results presentation. [Operator Instructions] Please note the event will be recorded. English simultaneous translation will be available for this call. You can select your preferred language by clicking interpretation in the Zoom meeting. We released our Q2 and interim results of 2026 earlier today, which is now available on our ir.miniso.com. Joining us here today are Founder and CEO, Mr. Ye Guofu; and our CFO, Mr. Zhang Jingjing. Before we continue, please refer to your safe harbor statement in our earnings press release, which also apply to this call as we will be making forward-looking statements.

Please also note, we will discuss non-IFRS financial measures today, which has been explained in our earnings release and our filings to SEC and Hong Kong Stock Exchange and reconciling to the most comparable measures reported under IFRS. Unless otherwise stated, all figures are in RMB. In addition, we also prepared PPT slides 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.

Guofu Ye: Hello, everyone. In H1, MINISO Group revenue reached RMB 11.5 billion, up 22.4%. EPS grew 8.2% and operating cash flow rose 46%. Our global store count accounted 8,674. MINISO today stands at a pivotal moment as we operate larger and better stores, 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 [indiscernible] than the near-term number. I will walk you through our business performance this quarter across 3 segments, including MINISO China, MINISO Overseas and TOP TOY. Official data show that China total retail sales of consumer goods grew by 1.3% on a Y-o-Y basis in H1 of this year.

Against this macro backdrop, MINISO China H1 revenue grew by 26.2%, not only far outpacing broad retail sales, but also exceeding our prior year guidance. This was our fastest H1 growth rate in the past 3 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, MINISO China store count reached 4,665 with a net addition of 97 stores in H1, among which land format store addition -- net addition 59, flagship format store 159. Regular store recorded a net closure of 121.

On August 22, MINISO Land Chengdu Eastern Suburb Memory store officially opened, marking our 100th land store here in China. Store count number was very solid, but the quality is even more important. At the end of June, our China store count was up 8%, with 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 3 sets of data. First of all, sales per square meter and the rent-to-sales ratio valued each month. The land format store delivered sales per square meter roughly twice that of the regular store.

Compared with the existing stores, the stores newly opened in 2026 are significantly larger, yet the sales per square meter held steadily with the rent to sales ratio improved. For malls, our new format is no longer a mere tenant, but also the engine for foot traffic. Secondly, our store renovation pace continued to accelerate. We completed 189 store renovations in H1. Post renovation, store performance has been doubled Y-o-Y against a full year renovation target of 255. We have every confidence to exceed it by the end of this year.

Secondly, franchise return continue to improve, whether measured by the payback period, profit margin or promotion of the profit store, the profitability of the MINISO Land worldwide and MINISO store 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 page to bring [indiscernible] for large store-driven growth. Our channel upgrade strategy is underway for 2 years and remains significantly for the future. This assessment with 2 facts. First, the proportion of the MINISO store in China remained low. And second, we continue to innovate on the store format.

This year, we introduced a new member to our store metrics that is Super MINISO, the most important innovation of 2026. Looking back to the evolution of our channel upgrades over the past 2 years. In 2024, MINISO Land validated IP immersive flagship store. In 2025, MINISO Friends entered into mid- and high-end shopping industry in the affordable luxury retail. In 2026, Super MINISO brings the IP experience to the broader mass consumer base. Its product metrics 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 aspect of our Super MINISO is that it's not [indiscernible] the consumer existing brand perception, rather it's built upon them. It retain consumers familiarity with MINISO, value for money merchandise. We're injecting [indiscernible] and trade-driven experience through IP. Other formats like Friends, Land and Space progressively deepen the IP merchandise and share, 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 a systematic innovation by having content space and operations. The store is a space. IP is a source to fill it.

The momentum of the store and the value of the IP reinforce each other, forming an ever accelerating flywheel. In June last year, we launched YOYO, our first proprietary IP. Within just 1 year, YOYO has entered into 53 countries worldwide, generating nearly RMB 500 million in related revenue in H1. The most iconic milestone was YOYO plus Disney Toy Story 5 collection, YOYO version of Woody Buzz Lightyear and Slinky Dog sold strongly across stores in multiple countries. In just 1 year, YOYO success has propelled its validated proprietary IP to a new stage where it can engage top-tier global IP as an equal.

Beyond the MINISO flagship store and the brand, the TOP TOY has also built its own IP metrics. Its flagship IP Nommi has surpassed RMB 300 million in cumulative GMV and you can see that while YOYO validated the methodology within our flagship brand, Nommi, YOYO and DwiDwi has proven different style under the TOP TOY brand. Around the proprietary IP, we have accumulated food chain SOP standing artist signing product definition, design-to-development, supply chain strategy all the way to the prelaunch standing 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 in investment in building proprietary IP. We have the full category coverage, all channel penetration, global footprint and food chain operation. Looking across the globe, MINISO only poses the greatest of 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 footprint. On the operation front, MINISO leverages food chain advantage from signing IPs 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 sales resources, and they are also the key to MINISO's leap forward development and overtaking proprietary IP. There are 4 forces that enable us to complete the entire process from IP concept to shelf more efficiently than the vast majority of the companies. For everyone, YOYO is just the beginning. On August 22, we newly launched artist IP Choco sold out entirely on its debut day far exceeding expectations. We have already signed multiple designer toys. You can see on the evening of 26th, 5,000 sets of Choco were sold live within 1 second.

And at the same time, we have already signed multiple designer toy artists, recruiting top talents worldwide through our IP Prodigy Program. Our ambition is going forward, leading 400 Chinese IP onto the global stage. At the moment, global IP market has entered an unprecedented boom. The rise of the great nation is inevitably accompanied by the birth of the cultural symbol and their global excellence. MINISO is backed by our world-leading channel products 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 sales.

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 one distinctive, explosive [indiscernible]. Our strategic pivot towards proprietary IP is a long-term choice grounded in the trend of our era. We will sustain long-term investments. Even in the short term, the proprietary IP product line has delivered excellent report card. We not only have YOYO proven to be success, same as Choco, our second IP. In H1 profit margin was above company average. Inventory turnover was kept within 30 to 40 days. Proprietary 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 MINISO growth. The value of the strategic membership is steadily materialized. Member sales and contribution continued to reach new levels. In H1, our China membership grew by 31%, reaching 130 million, 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. While at the same time, membership is the latest evidence of MINISO's growth shifting from the opportunity driven to the system driven, the value of the membership manifested in 2 sides.

The core engine of the lifting average transaction value. Average transaction value rose by 5%, working with global IP, for example, like some real Disney and Harry Potter as well as Chiikawa combined with the blockbuster effect of our proprietary IP, large store has become the core stronghold of the high-value members. As a result, customer contribution of China member was 2x higher of the nonmembers. Average transaction value of IP member is more than 3x of the non-IP members. Secondly, top-level engine to improve the retention through precise targeting and benefit-driven retention that can help to further expand the active life cycle.

Our precise identification of the member consumption preference and the category needs enable new products to reach target consumer efficiently while 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% higher than non-IP members. With purchase frequency, 2x higher than non-IP members. Members who use cash back credit repurchased 1.6x frequent and there's no numbers.

IP-driven acquisition and the large store quality upgrade and repurchase extension is our underlying formula to achieve highly sustainable membership value, but we have sales 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. We did somewhat our group profit. The overseas contribution to company profit declined from 35% to 40% in 2023 to 10% to 15% in H1 of this year. The impacts are coming from 2 factors. First of all, a decline in distributor business revenue.

And secondly, our direct operated market outside North Europe. Americas 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 fluctuation won't change our long-term growth trend. We have cracked in our past growth approach that overemphasize on store and store counts so that the terminal sales 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 already improve the performance in overseas market. Our overseas business is now in the holding stage. We would like to make sure we refine our store model. And more importantly, we need to make sure the China transformation will 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 in the transformation for international business. So I would like to take this opportunity to encourage our overseas teams. From 2015 to now, our overseas journey has been spent 11 years. The deeper we go overseas, 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 is also organizational capacity, management control model and the localization strategy. MINISO overseas business has been profitable from day 1. Yet we must recognize overseas challenges today are precisely a sign that MINISO globalization has entered into deepwater stage.

As the 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 entered into China did well in the past 1 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 the transformation every company needs to face, if they go for internationalization. MINISO China transformation over the past few years achieved a great success.

We have a preliminary realized brand upgrade and business model iteration. China business started to burst with fresh vitality. The challenge we're facing for overseas business today is essentially the same as China 3 years ago shifting from the scale first to quality first. Over the past 3 years, China delivered a transformation report card from a lending grabbing expansion to land style upgrade and then the refined operation. This methodology applies equity to overseas market. We're never short of the product supply chain or channel, what we lack of is more patience to fully refine the single store model. Going global is marathon. Every adjustment and every investment we made today lays a solid foundation for the long-term value.

Every additional good store MINISO open overseas, every additional consumer well served, every additional member cumulated brings us one step closer to our vision of becoming a world-leading IP operating platform. I have faith in my overseas team, give them time, give them patience, I believe that overseas market tomorrow was surely better than what we have today. Coming next, please allow me to talk about TOP TOY. In H1, TOP TOY revenue was grown by 32.7%. Global store numbers 365, including 48 overseas. This quarter, TOP TOY first U.S. stores being located in Times Square of New York making the first China designer toy brand entered into the crossroads of the world.

In H1, proprietary IP accounted for 10% of TOP TOY sales with proprietary IP metrics continue to expand. We have some pop-up events that are quite popular, especially [indiscernible], especially in Hangzhou debut, single mask GMV is already more than 50 million. Next, I'm going to welcome Eason to walk you through the financials in H1 of this year, please?

Eason Zhang: Okay. Thanks for Mr. Ye. Now I will walk you through our key financial metrics. Today, rather than going through the financial lines by line, 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 same-store guidance, but not that for the North America market. H1 revenue grew by 22.4%, slightly ahead of our guidance, that is 20% to 22%.

On that, China revenue grew by 26.2% in H1, with Q2 in particular grow by 23% versus our earlier expectation of only a low double-digit growth in China for Q2. This upside in China came from 2 factors. First of all, an accelerated channel upgrade. China saw a net addition of 25 stores in Q1, 72 in Q2, far exceeding our projection of around 40. And secondly, the sales contribution from proprietary IP, especially [indiscernible]. China same-store sales also achieved the guided mid-single-digit growth. Well, for [indiscernible], 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 has not pressured 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 mid-single-digit same-store sales growth came in below our prior 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 walk you through the reason later. Our adjusted operating profit, excluding the ForEx gains and loss, grew by 5% on a Y-o-Y basis, slightly below our earlier projection of the high single-digit growth, mainly due to the decline in distributor revenue, a high-margin part of our business. In H1, MINISO Overseas offline GMV grew by 40% on Y-o-Y basis to RMB 8.29 billion. The revenue grew by 50%, reaching RMB 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 Y-o-Y, while revenue declined low single digit Y-o-Y. Markets such as Indonesia, India and the Philippines were the main driver, weakening on Asia overall performance. Objectively speaking, those markets are facing macro challenges, but it is undeniable that our localized operating capacity still have some further room to improve. Our localized understanding of the market shifts and the product channel matching are not taping off. 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 2 quarters. But we can also see that for market like Vietnam, following an earlier phase of the higher-end store closure and the product mix adjustment, it already started to show improvement. In H1 of this year, its efficiency has been continued to improve, the best in the past 3 years. Vietnam same-store sales grew 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 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 Y-o-Y, but revenue declined by low double digit Y-o-Y. There were several reasons for this divergence.

For example, a number of the core markets, including Colombia, faced multiple external challenges such as political volatilities, rising freight cost, natural disaster, which had a [ first ] impact on the overseas orderings and the shipments. However, the terminal demand remained resilient. For example, the top 4 Latin American countries contribute 80% of our performance there, all delivering solid terminal GMV growth in H1, with Mexico also post high single-digit growth, excluding the ForEx impact. And actually, if you use the local currency, the Mexico local GMV 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 American market.

North American market, in H1 revenue grew by 37%, reaching close to RMB 1.8 billion, broadly in line with our expectation with a mid-single-digit same-store growth. By quarter, Q2 revenue grew moderately slightly to 25%, while 2-year CAGR held at around 50%. However, in Q2, the 2-year CAGR was still around 50%, 5-0, resilient performance against the high base. The moderation was mainly due to 3 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 providing valuable lesson for optimizing our IP product cadence spending going forward. Secondly, the sales share of the locally directed sourced product in the U.S. 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 direct sourcing are focusing on the category that are not operated by the headquarter.

However, it takes time to adjust the product metrics, which was not being reflected in H1. Going forward, we will further improve the advanced -- the planning of the overseas merchandise. Thirdly, the upfront cost investment for the newly directed -- 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 the good news is that the new stores opened for this year delivered significantly higher profit margin and sales per square meter than older ones, outperforming in site selection quality channel matching.

And getting into H2, we will shift our focus to deepen our store operation and running our already opened store deep and 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 RMB 4 billion in scale with 10% net margin for the full year. Europe is also a market we're positive on, but it's still in the early stage for direct operation development. So fluctuation is expected. In H1, Europe revenue growth moderated to 26% with same-store sales down by mid- to single digit.

Our European team is building organizational capacity, refined the store model that give them the confidence and the patience to allow the market to proven our strategy. In H1 2026, MINISO Mainland China achieved a mid- high -- 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. MINISO overseas same-store sales declined low single digit with North America achieving a mid-single-digit same-store growth. North America same-store performance was quite strong in Q1, grew 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 GP margin was 44.3%, flat versus same period of last year. For the GP margin, it was including approximately 0.6 percentage points from the U.S. tariff refunds. For Q2, the GP margin was 45.3%, 1 percentage improvement compared with last year. This was due to the tariff refunds, which bring 1.2 percentage positive growth. Based upon the refunds received to date, the company expects tariff refunds will also have 20 bps to 30 bps support to the overall GP margin for the next 2 quarters. Excluding the external investment and the convertible bonds financing, the profitability of our core business in H1 was as follows.

Adjusted operating profit was RMB 1.49 billion versus RMB 1.59 billion in H1 last year, down by 6%. Excluding the ForEx effect, the figures was RMB 1.63 billion and RMB 1.55 billion grew by 5%. Excluding the ForEx effect, the adjusted net profit was RMB 1.22 billion and RMB 1.24 billion, down by 1.7%. The corresponding adjusted net margin declined by 2.6 percentage on Y-o-Y basis. This was also proving that our sales expense ratio rose 2.7 percentage this period. Last year, it was 23.1%.

To be specific rental and depreciation expenses related directly operating store rose from 7.1% of the revenue to the same -- in the same period last year to 8.1% in H1 this year, grew by 1%. Advertising promotion expenses grew by 2.8%, where regarding IP license fees rose from 2.6% in H1 last year to 3.1% in H1 of this year, grew by 0.5%. The increase in the 2 items largely reflect our strategic investment in proprietary IP. Selling-related labor cost rose from 6.8% last year to 7.2% this year, up by 0.4 percentage points. So the growth of the above 4 expenses altogether contributed to 2.6% of the expenses increase.

By business unit on this slide, it shows very clearly, the main reason for the Y-o-Y margin decline was a structural shift in the revenue. For example, in H1 of 2026, the revenue contribution from the high-margin franchise and the distributor business, the margin was -- net profit margin was more than 50%, but it's 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 capital. Inventory turnover in H1 was 102 days versus 97 days in the same period of last year.

MINISO China inventory turnover was 67 days, which was 73 days last year. MINISO 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 sales' peak time. Coordinated membership promotion and city activities to use blockbuster products to drive the monetization of the slow moving inventory. At the end of June, our cash reserve was RMB 7.39 billion. Net cash inflow of operating activity in H1 was RMB 1.48 billion, grew 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 approximately 54 million in H1. Our buyback sales in H1 was already exceeded the full year total of 2025, which fully demonstrate the confidence into the future business. We did not declare an interim dividend this time because the company believes the current valuation is highly attractive.

We will conduct the 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 exceeded expectation once again validating our path for opening 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 operation, 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 high single-digit Y-o-Y in H2, mid-double digit for the full year. On this in H2, MINISO China revenue is expected to grow by mid upper digit Y-o-Y, but overseas revenue will grow by low single digit. Overseas distributor revenue to decline by low double digit. Overseas directly operated business will grow low double digit. TOP 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, the domestic revenue and profit are somewhat better with the differences mainly coming from overseas and TOP TOY.

In H2, we proactively slowed 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 for overseas market in H2, a net addition of 40 to 50 directly operated stores and a net reduction of 100 to 110 distribution distributor stores. For the full year, our guidance for the low single-digit same-store growth for MINISO China and MINISO North America remain unchanged. Excluding ForEx, the adjusted operating profit is expected to decline by a high single digit Y-o-Y. The adjusted operating profit margin is expected to decline 3 to 4 percentage points on Y-o-Y.

Our profit outlook is more cautious than the guidance we gave at the start of this year. While 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 distributor market revenue will decline over the next 2 quarters, there will be some impact on our margin. This concludes my remarks. Now let's move to the Q&A session.

Operator:[Operator Instructions] Now let's welcome Michelle from Goldman Sachs.

Michelle Cheng: I have a question regarding your largest 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 larger stores, when they first opened, the performance was pretty well. If the store opening dividend for the first store impact gradually digested, what would be the normal performance of those large stores, especially compared with the normal stores? What will be the difference on the sales efficiency 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 question is mainly regarding the large store format, please.

Guofu Ye: Thank you. Let me just start with my overall view. The large store model continues to outperform company expectation because our first large store opened for 2 years. It's not going to be a short-term action. But at the same time, we have multiple large stores at the same time. It's not just for 1 to 2 stores. From this perspective, one largest and short [indiscernible] driven by the opening [indiscernible]. It is a sustained growth trend. Our store metrics keep evolving and now we have the top format flagship regular and pop-up. Let me just break down the large store unique model with a few metrics. On our store performance, the pop-format family is very healthy.

MINISO Land, our earliest format in the family still deliver the store performance above 3 million baseline, while the Super MINISO newly launched in 2026 has already surprised us a lot, which can basically steady above 1 million baseline. On the sales per square meter, the pop-format was running twice that of the regular stores. The rent-to-sell ratio, the pop-format is running slightly higher than the regular store by a single-digit number, but the Y-o-Y trend was downward, thanks to the prime treatment after talking to the malls. On the paybacks, pop-format store achieved payback within 6 months in early stage and now average in 1 year, faster than 60 to 80 months of the regular stores.

Franchisee profit margin and share of the profit store have risen in tandem. In H1, the profitability of the MINISO store nationwide reached its best level since 2019. In H1, more than 30 land-format store entered into the same-store base with average daily sales per store up to 30% growth Y-o-Y. Flagship format, 400 stores. So average daily sales per store grew mid and double digit Y-o-Y. Well, let me just talk about how we choose the 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. MINISO China total store number would reach 7,000 to 8,000.

Land-format family would be 1,200 with 95 in Super MINISO and MINISO 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, prioritized on top traffic versus the prime commercial area. For example, we let's look at the store structure, priority right the core position, the street-facing front. Certainly, we take a look at the consumer circulation, making sure that the store is sit right on the main customer traffic corridor.

Operator: Now let's welcome Yang Runbo from CICC.

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Runbo Yang: I'm Yang Runbo from CICC. I have a question. In H1 of this year, MINISO 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 share the consumption trends you were seeing in the market? And how the company is going to respond to that with concrete measures?

Guofu Ye: 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 grow by 0.6%, which is not ideal at all. While for MINISO China, we remain strong. Since July, MINISO China GMV has grown about 20% Y-o-Y, 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 mid-single digit. At this point, we see MINISO 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 the stores. First of all, even if 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 MINISO Land, because we are building immersive IP thing. That is the future trend. Let's also talk about people.

Membership operation are key growth lever for us, especially build out the to the membership system. We shared some progress on membership program during the earnings call, 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 will not be truly aligned with IP. For example, our proprietary IP, which can actually provide the most interest-driven product with an emotional value. Those product sales was growing very fast. Especially in H1 of this year, proprietary IP led by YOYO become a notable incremental driver with the designer toy category.

Proprietary IP now has already had a mid-single-digit share of online sales and a double-digit share of the online sales growing very fast, especially in top-tier stores such as MINISO Land and MINISO Space. And in the Jennie collaboration, we have been deliberately pushing into higher price band 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 market in China. The economy was not good, but China population is still huge.

China has 1.4 billion people. Generation Z and people born after of the 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 age to bringing the better bird 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 with existing store.

I have already highlighted MINISO China, 4,665 stores and a variety of the store formats. We're going to go for the lower-tier stores. And you can see young people in China, they all need interest-driven consumption with emotional value. If we are going to build good store scenarios, immersive experience, our 20 toy products and IP products are more attractive that can actually help us to continue to improve the consumption and continue to draw the designer to enthusiasm and move the price further. I was coming back from Northeast part of China. I see many of the stores seem well positioned. I was mentioning about our store efficiency not less of our competitors.

Some of our stores can even outperform [indiscernible]. 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 2 stores there facing each other. You can see that our performance outperformed [indiscernible] at 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 trendy toy product inland was more than 35, and we're going to make more than 40. We only have 2 proprietary IPs now, including YOYO and Chou. Chou was just launched 2 days ago. If our proprietary Chou proved to be successful, then we're going to have 2 proprietary IPs with annual sales of more than RMB 1 billion. If we successfully achieve this target, then I believe our diversified format plus proprietary IP is going to be a 50% performance from the 20 Toy IP preparation products for another half.

In that way, our business model will be more stable, more sustainable and more immersive and more experimental. Majority of our stores are having more than 800 square meters, including 2 floors. So I have every confidence in our large store format, especially the format. Even if we are facing challenges now. However, I believe we are still in the pen stage of the transformation. The profit is still under pressure. However, we have a promising future and I surely believe the business model we're running out still make us still excited. That's for domestic market. But for international market, we are facing many problems.

I know that starting from H2 of this year, I will spend more time working on the international market. In H1, we are working for the store format refinement in China. In H2 of this year, we're going to move to the rest of international market. In Mexico, from 10th to 15th of September, we're going to also have the MINISO Land format in Mexico. Products happen in China also being faced in international markets. And in Mexico, we're going to celebrate the anniversary. The Latin American consumer preference 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 operating. And you see the macroeconomic picture as far as I believe, interest-driven consumption, emotional value will be the next driver for the future growth. And 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 ASEAN country -- Asian countries will be shifted from the material value to the emotional value for interest-based consumption.

Operator: Coming next, let's welcome Anne from Jefferies.

Kin Shun Ling: Mr. Ye and Eason and the IR team. I have a question that was about your latest performance. What are the latest same-store sales SSS figure for July and August? As weather being a factor, could you split Same-Store Sales into average selling price, ASP and traffic? How much have a store upgrade renovation and the product mix shift contributed to the growth? Which product categories are performing best? Given the softer retail in the last year's high base, what's your outlook for the same-store sales in H2 of 2026. And are there any difference between the higher-tier and lower-tier cities?

Guofu Ye: 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 volume contribution 80%. Average transaction value grew by 20%. The volume and price are rising, which is very healthy. And we also mentioned we're going to have higher consumer unit price and higher gross margin, which is not being started yet. We actually opened more high-end stores in The MixC as well as the Taikoo shopping malls. And the products are 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 where for the upgrades are not a sole source. Within a single, a mid-single-digit same-store growth, store renovation contributed roughly low single digit. The rest are coming from the better refined operation including the optimizing the product channel matching, making sure the right product in the right channel and also tailoring the product mix to different store 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 the 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 products 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 low-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.

Plush toys is one of our best performing category with share of the total sales up to 1 percentage point on IP shares, IP products overall accounted for around 1/4 of the sales. The share from the proprietary IP and artist IP rose by 4%. Let me talk about H2 outlook. The high base spending coming from the Zoomtopia in November and December last year, and we also have a decent IP lineup for the same period of this year. Always speaking, with same-store sales growing mid-single digit year-to-date, we remain confident in delivering full-year low single-digit same-store growth in China and the mid-double-digit revenue growth in H2. We also see several important levers.

First of all, keep optimizing low efficiency stores. Second, on the product front, back-to-school season is a key focus. We did not do particularly wise last year, and we will make sure we capture it this year. We're seizing opportunities for culture 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-served window around National Day and mid-autumn day, you will see a strengthening repurchase and the [indiscernible] market share through the membership cash back credit mechanism.

Operator: Next question, let's welcome Shi Di from Huatai Securities.

Di Shi: My name is Shi Di from Huatai Securities. You know that -- thanks for providing us a very clear Y-o-Y. In H1 of this year, the company has many new IP and many new products, for example, collaboration Jennie that has generated a strong buzz in H1. Your proprietary IP and are also performing very well. What IP types and category expansion are planned going forward in H2? What are the levers for creating the blockbusters in H2? Any holiday season you have in your pipeline?

Guofu Ye: Our IP strategy remains driven by 2 engines, licensed IP and proprietary IP, each has its own plans. For the licensed IP, we have partnered with 180 global IP film and TV and celebrity IP, spanning anime, film and TV, and celebrity IP. Accumulating end-to-end experience from IP production to product development to operation. You also talked about the collaboration. Our product, for example, accessories Blind Box and designing and producing 70s SPUs. Also, you see from the 1st of September, those products would be available.

And we also have more IPs in the pipeline where at the same time, we also have Total, which just started to release its great potential, where at the same time, you can see Total demand is far beyond the need and the wages actually be stocked that out. We never expect this 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 enjoy very good progress. On 12th of September, we're going to officially launch 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 this might be. We're going to be the IP collaborator and IP extension worldwide. We have already mentioned we're going to have the product, for example, the blind box as well as plush products or the patents 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 continue 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.

We're going to work with the large store format, as I have already mentioned, for YOYO in June and July, sales was more than RMB 100 million for 2 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, YOYO also have a collaboration with McDonald's and also working with Luckin Coffee. All those advertisement could be identified on Xiaohongshu yesterday. And we also noticed that YOYO is indeed a very popular one 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 YOYO would be.

You will see that the success of Total proved again our proprietary IP model is truly successful and feasible. And we're going to have a good design, the team is getting more confident. Success could be enough, but there are 2 success. It's not enough 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, 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 [indiscernible]. That is a great strategy of my team.

We're going to launch better and good marketing innovation in the near future, so beyond our peers, that is surprise the industry society and the consumers. So this can also help us to further clarify. Our commercial proprietary 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. We continue to work with the top licensed IP, celebrity IP in integrating our proprietary IP with our existing IP metrics. We're going to have the IP and the product working together.

We're going to work with different categories and SKU, leveraging our large store and different formats to continue to convert the IP sales 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 YOYO are now having the Blind Box in working together. And you can also see that for Total, the Blind Box was also be well created, very much professional. As far as I believe our Blind Box is making huge progress regarding the collaborations, which is no [indiscernible] in our peers. This is also something we're progressing very fast.

As long as we have a good in use case, good IP, if the consumers come to our store, they believe we are professional, especially after working with new trends and we surely believe the MINISO to consumer measure is continue 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 from me. Thank you.

Operator: Next question, Samuel from UBS.

Samuel Wang: I have a question regarding the U.S. market has been has been shown and talked. And you have already proposed a target for USD 4 billion for revenue and USD 400 million for profit. But in Q2, we see the sales being somewhat slowed down. And how you going to complete this target? Is there any drivers you have? But at the same time, regarding the profit, how you going to improve the profit?

Guofu Ye: Well, thank you very much. Internally speaking, we actually make U.S. and Canada as a whole. I have already mentioned and for North America, our performance target was USD 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 MINISO was the fastest-growing retail in the U.S. in 2025. It was being covered by [indiscernible]. However, it's not only just [indiscernible] when we converted our sales from direct to indirect. U.S. business posted a CAGR of 120% from 2022 to 2025. We for same-store performance.

We're going to maintain a full-year target of low single-digit growth, which is in line with our expectation. Improving U.S. margin still going to count on the operating leverage, even optimizing the store number. For the past 2 years, we actually opened some stores with large food traffic. While 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 improving the profit and revenue as a whole.

Operator: Next question coming from Citic.

Unknown Analyst: 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 Eason and for Mr. Ye. You are quite confident. What would be your expenses planning and look into H2 of this year, whether the interest are going to be accelerated.

Guofu Ye: I was reporting a few numbers. You can see that in H1 of this year in North America, the net addition 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. Well, for the full year, sales and profit, which is very typical to the retailer in North America, we're not making money in H1 of this year. All the time, we count on H2 or even Q4 to have to drive the overall sales. In my prepared remarks, I have already shown you a slide that is a [indiscernible] profit rate.

You can also see that for 2025, you should take a look at the last year, as you can see that number was around 30% for franchise and agencies, which is already in line with what I have already mentioned, the sales 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 2 parts, including the North America direct sales, which was 10%. But at the same time, we also have the direct sales business that are still in the growth stage, for example, Europe, Australia and ASEAN -- Asia market.

And we're going to continue to optimize North America back office expenses. In H1 of this year, the back-end expenses ratio in United States decreased slightly. Profit margin will continue to grow, while at the same time, you can see that the adjusted profit margin will decline by 3 to 4 percentage points Y-o-Y. And we hope that 2027 would be a turning point of our profit margin.

Eason Zhang: Okay. Well taken. You will see, hope that in 2027, we're going to have a good performance and improvement on net profit.

Operator: Next question coming from [indiscernible] from Changjiang Securities.

Unknown Analyst: My name is [indiscernible] from Changjiang Securities. I have a question regarding your U.S. business. Some investors already asked the question. I'd like to ask you for U.S. merchandise strategy. You know that as we are 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 you are going to comment on the balance between the domestic, direct and indirect sales?

Guofu Ye: For U.S., refining the product mix is something we do continuously, particularly aiming the micro policy change. We are constantly adjusting our overseas profit product mix. In terms of the sales contribution, inventory is now our largest category in U.S. contributing over 1/3 of the sales, especially plush performing especially well. And you can see that the majority of that in the U.S. 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 spending. We bridged the sales gap through rapid direct sourcing.

As a result, due to the product planning, some of these products are out of the store. But that is not going to be our key. We're going to continue to differentiate the product. You can see that in U.S., the sales was declining from 60 to 70 in early 2024 to close 40 in H1, while the share of the direct sourced product rose considerably among those directed stores that have significantly improved conversion and attachment rate in store, where while U.S. is actually under pressure, we're still adjusting our product metrics and even we slowed down the store openings in the United States. So for U.S., our headquarter is now actually making huge investment on the merchandise.

Regarding the GP margin, the U.S. market GP margin was around 65% to 70%, part due to the tariff rebate, which will also give us some positive contribution in H2 of this year. But at the same time, the expense ratio is well under control with the 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.

Operator: Next question [indiscernible] from Guotai Haitong.

Unknown Analyst: My name is [indiscernible]. 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 the plan for the distributor market growth?

Eason Zhang: Okay. Thank you. I'm Eason. In H1 of this year, distributor slowed their restocking. However, it's been slowed down. So the revenue was growing. Looking to H2 of this year, you see that the distributor revenue was still going 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 RMB 10 billion. The CAGR was more than 10%, which was always robust. Excluding the ForEx reason, you can also see that the GMV still maintained a high single digit in H1.

We see the gap which you can see some of the channel after adjusting the inventory. In that way, the distributor restocking next behind their own sell-through, a normal phenomenon in inventory digestion process. Secondly, behind the negative growth, there were also external factors and own issues. Actually, some markets in Middle East and Asia were affected by geopolitical conflict, currencies, warnings and other macro factors, the inventory turnover in those markets came under pressure in H1. Latin America market also faced micro currency and natural disaster headwinds, but its inventory turnover improved in H1. We operated in the distributor market overseas with accounting for 80% of the overall business.

In H1, Inventory turnover in the top market was roughly flat versus last year and somewhat better than the directly operated market over, broadly speaking. Internally, as we have already candidly acknowledged. Your we can say that internally, we have acknowledge communication, and we just want to maintain long-term health of the channel rather than push inventory into short-term results. Terminal sales will be normalized today. And at the same time, we also further reduced the store number. For example, in New Zealand, in Philippines, but at the same time, in the Middle East, and also due to the healthy channel issue, we actually made the strategic investment closing down some of the low efficiency stores.

We look forward for international markets, and we're going to have another 100 to 110 in H2 net closure, where this decision make 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 that Latin America market is our key place. The local distributors are actually having very strong background and operation capacity and the retail location of those markets are actually seeing low single digit in H1. Terminal performance was steady. In Latin America, likewise, we will not treat short-term revenue for channel health.

You can see that Mexico market in Q3 and Q4 is going to celebrate the 10th anniversary. The market will also continue to roll out the improved format. And we're also going to have a meaningful land and Super MINISO in those malls in cities. In terms of the product and operation for distributor regions with established scale, we will deploy localized products. On IP products, 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 staged IP. And through this, we will be able to maximize the incentivize the sales momentum.

For category with growth potential, we will help distributor market reiterate their marketing plans, offering better brand situation and empowerment in scenario-based content, building the content gap lifting the sell-through of the high momentum category. For the overall product mix, we will phase out low efficiency, low-margin SKUs, adding value for value for money everyday product to make up the volume and also bringing high value for money local [indiscernible' et cetera to drive the sales.

Operator: Thanks for all the investors being interested in MINISO. See you next time here come to the end of today's call.

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