MINISO Group Holding Ltd
NYSE:MNSO
Earnings Call Analysis
Q1-2024 Analysis
MINISO Group Holding Ltd
The company's persistent pursuit of growth and efficiency culminated in a remarkable quarter, reaching a turning point with total revenue soaring to RMB3.79 billion, a 37% increase from the previous year. Contributing to this success was an exemplary gross margin performance, which surpassed 40% for the first time, landing at 41.8%—a 6.9 percentage point escalation compared to last year. This fiscal fortitude was echoed in the adjusted net profit, which rose by 54%, indicative of the company's sustained momentum in translating revenue growth directly into profitability.
The domestic arm of the business, particularly the MINISO offline stores in China, maintained robust growth with a 5% increase in Gross Merchandise Volume (GMV), reaching RMB3.6 billion. The company's strategy of expanding its store network, while maintaining a prudent closure rate of only 1.4%, supported the opening of 198 new stores in the last quarter. The forecast envisions 350 to 400 new stores in China for the net calendar year, signaling unwavering commitment to deepening its local market presence.
Overseas revenue registered a significant uptick, approximately RMB1.3 billion, marking a nearly 41% year-over-year increase, testifying to the brand's global appeal. The buoyant overseas performance is also evident in the GMV per store, which increased by over 27% year-over-year. The brand's strategic partnerships, like the one with Disney, and new product categories like disposable travel items have both been greeted enthusiastically, enhancing the brand's portfolio while building upon its IP strategy.
Gross profit saw a substantial increase to reach RMB1.6 billion, elevating gross margins to previously unattained levels, thanks to a mix of China's performance and international growth, with significant strides in market segments like big beauty, IP, and toys. Operating margin in September showed an impressive performance at nearly 21%. Looking ahead, the company expects to continue enhancing margin profiles through strategic growth and operational efficiencies.
The company's innovative approaches, including distinctive store formats like MINISO Blind Box store in the U.K., and themed stores like Sanrio in Indonesia, have reaped exceptional sales, demonstrating the potency of their superstore strategy and IP-focused products. This creative direction, combined with a diversified store format, portends a broader influence and sustained performance upticks for the brand worldwide.
The strategy to deepen local market integration points to an expected transformation of more distributed markets into directly operated ones. Currently, with about 700 stores in the direct operating sector, of which around 200 are directly operated, significant progress has been made with mid-teens operational margins, showcasing a notable improvement from the breakeven point a year ago. The company's long-term aim is to balance store network expansion with sustaining solid same-store sales.
In an encouraging sign, the U.S. market demonstrated more than 180% year-over-year growth in GMV during the September quarter, with promising prospects for a fruitful holiday season and opening of the 100th store in the U.S. This signifies not just a strong quarter but a solid foundation for ongoing expansion and growth in North America.
You don't have any saved screeners yet
[Presentation] Ladies and gentlemen, thank you for standing by, and welcome to MINISO's earnings conference call for the September quarter that ended September 30, 2023. [Operator Instructions] And be kindly note that this event is being recorded. We have announced our quarterly financial results earlier today. An earnings release is now available on our Investor Relations website at ir.miniso.com. Joining us today are our Founder and CEO, Mr. Jack Ye; and our CFO, Mr. Eason Zhang.
Before we continue, I would like to refer you to the safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-IFRS financial measures today, which we will have explained and reconciled to the most comparable measures reported under the international financial reporting standard in the company's earnings release and filings with the U.S. SEC and Hong Kong Stock Exchange.
In addition, we have prepared a Powerpoint presentation for today's call, which contains financial and operational information for this quarter. If you are using Zoom meetings, you should be seeing it right now. You can also revisit it on our IR website later. Now I would like to hand the conference over to Mr. Ye, and the operator will translate for Mr. Ye. Please go ahead, sir.
[Interpreted] Hello, everyone, and welcome to MINISO Group's September's quarter 2023 Earnings Conference Call. Our overall performance once again reached new highs during this quarter as both of our revenue and profitability maintains high quality growth based on the breakthroughs we achieved in previous quarters. Total revenue hit RMB 3.79 billion and set a new record, increasing by 37% year-over-year. Gross margin exceeded 40% for the very first time, reaching 41.8% with an increase of 6.9 percentage points compared to the same period last year. Our adjusted net profit exceeds RMB 640 million, representing a year-over-year increase of 54%. Adjusted net profit margin reached 16.9%, increasing by about 2 percentage points compared to the same period last year.
Now I will walk you through business updates for our 3 major segments: MINISO China, MINISO overseas and TOP TOY. Let's start it with MINISO China. During the peak season of summer vacation, GMV of MINISO offline store in China achieved RMB 3.6 billion refreshed its historical report compared with a year-over-year increase of 5% in domestic retail sales of the customer goods, according to National Bureau of Statistics of China. On a per stock basis, average transaction volume increased by over 70%, and average transaction value increased by more than 3% year-over-year. During the first 10 months in 2023, GMV per store of MINISO China recovered to 100% of 2021 level and around 85% of the pre-COVID level in the same period of 2019, consistent with our expectation at the beginning of the year. Entering into the fourth quarter of calendar year 2023, some investors worried about the weak domestic consumption environment. However, MINISO has maintained resilience as always. According to our weekly sales data, improvement in per store sales since July today this year was consistent with the normalized pattern in the same period of 2019. No weaknesses was noticed. It is more about seasonality. We will keep tracking this strength and staying alarmed and taking positive measures to cope with the macro headwinds.
The operating total of 198 new MINISO stores on a net basis in China during September quarter, continuing on the trend of our store expansion, including 80 new stores in Tier 1 and Tier 2 cities and around 60% new stores in Tier 3 and lower-tier cities. While the numbers of store is growing rapidly, we continue on a focus on unique economics of our operating stores, driven by the healthy closure rate of MINISO stores of only 1.4% in this quarter, below history average. As of September 30, we have accomplished our target of opening 350 to 400 stores in China on a net basis in calendar year 2023. Meanwhile, we celebrate a milestone of 6,000 MINISO store worldwide in this quarter. We do value both space and quality in growing a healthy global store networks for MINISO brands. Going forward, we continue currently expect to add another 100 and 200 new stores in China in the remaining calendar year 2023 on a net basis.
Moving on to our progress on the international front. Firstly, overseas revenue was about RMB 1.3 billion, representing a year-over-year increase of nearly 41% from [ applied ] basic loss year and setting a new record. Notably, revenue from directly operated markets increased around 89% year-over-year, contributing around 46% of overseas revenue compared to around 34% in the same period last year. Secondly, GMV in overseas markets increased by 48% year-over-year, including an 80% year-over-year growth in the directly operated markets and 39% year-over-year growth in the distributor markets. Overall, GMV per store in overseas markets increased by over 27% year-over-year and average store count increased by about 13%. Major overseas markets maintained rapid growth momentum, including a 160% growth in North America, a 60% growth in Latin America and a 50% growth in Europe.
Firstly, we are encouraged that GMV per store in overseas markets during September quarter recovered to 103% of 2019 level and achieving 27% year-over-year increase. The distributor markets recovered to 107% of pre-COVID level in 2019, while the directly operated markets recovered to 93%. In our major overseas markets, GMV per store in North America nearly doubled that in same period in 2019. GMV per store in Latin America and Europe recovered to about 110% and over 100% of 2019 net levels, respectively. Let's focus on key overseas markets. 80% of overseas GMV were generated in top 20 markets, hence their performance largely represents the overall business performance of our overseas markets.
Let me tell you 3 things about it. Firstly, in terms of GMV, per store sales in the top 20 markets increased by an average of 34% year-over-year, outpacing the average of 27% year-over-year growth for the overseas market as a whole. Compared with the same period in 2019, per store sales in the top 20 markets have recovered to 98%. Secondly, 18 of the top 20 markets achieved positive same-store sales growth in this quarter with an average growth rate of about 38%, outpacing the average growth rate of 32% for the overseas market as a whole. Among top 20 markets, 15 had comparable stores in 2019. Among them, 6 markets, including the U.S., Mexico, Canada, Spain, Kazakhstan and Vietnam have recovered to more than 100% same-store sales. For Southeast Asia countries such as Indonesia, India, the Philippines and Thailand, same-store sales numbers were better than per store sales numbers.
Thirdly, top 20 overseas markets account for nearly 70% of the total overseas stores and contributed nearly 75% of the new store year to date. Entering second half of calendar year 2023, store openings in overseas markets have accelerated. During September quarter, we added 126 stores in the overseas market on a net basis, making this the best quarter since 2020. As of September 30, 2023, we accumulated 198 new stores in the overseas market on a net basis. We will strive to deliver our target of opening 350 to 450 stores in the overseas market.
In September, MINISO cooperated with Disney to create Disney themed train to celebrate 100th anniversary of Disney, by decorating the carriages with the Disney's world famous IPs and integrating MINISO's super symbol, MINISO wink to create immersive environment to the passenger. We also launched a market campaign to promote awareness of our flagship fragrance and perfume products, which combined a master fragrance series product with the traditional festival culture to cater for social behaviors and consumption preference of our young target customers. As an industry-leading IP powerhouse, the key difference between our IP strategy from other company's lies in our continuous effort in developing IP products to elevate our brand equity and capitalize on cultural phenomenon or influential trends by featuring their elements in our product design and adding exciting diversity to our products which is different from the occasional marketing efforts of other players.
Meanwhile, with more favorable margin profile of IP products, we are positioned well to leverage their huge fans base to grow both our top line and bottom line. Meanwhile, by leveraging our capability in capturing customer insights in our fast supply chain, our highly refreshed assortment and continuous innovations have created huge sales opportunities. During this quarter, we have witnessed a growth of 100 million sales products and a new batch of best selling products with more than 10 million sales. For example, we ceased the trend of offline travel recovery to quickly launch a new disposable travel categories, generating more than 100 million sales in this quarter. In addition, about 60% of our best-selling products comes from strategy categories such as our interest driven products with improved hit rates. This quarter, MINISO also made progress in superstore initiative. Our newly opened [indiscernible] all-day mall stores and [indiscernible] stores is getting positive response from customers.
In the future, we will were encourage and prepare for more superstores to test different store formats and improve store unit economics. With initial success in China, we test the water in some overseas markets. In this quarter, the very first MINISO Blind Box store in the U.K. readily opened in Chinatown. With more than 50 kinds of IP-related blind boxes, cobranding with Disney's, Sanrio, Winnie the Pooh and other popular IPs. Although only 30 square meters, its total sales and sales per square meters on its first phase far exceeds our expectations. MINISO's first Sanrio-themed IP store opened in one of the most popular shopping centers in Indonesia, featuring a spacious Sanrio IPs co-branding display area. The sales on its first day set a new record in Southeast Asia. We'd expect that with the implementation of the superstore strategy, it will strongly promote overseas performance and enhance the global influence of the MINISO brand.
Let's move on to TOP TOY. Quarterly revenue achieved a 46% year-over-year increase with an about 30% year-over-year strong growth in GMV per store and a 70% year-over-year growth in average store count. TOP TOY will celebrate its third anniversary next month. Although, most of the past 3 years was covered by the COVID pandemic, TOP TOY managed to be the unicorn with an annual GMV approximated to the RMB 1 billion and in large influence in these sectors. During its partner conference in September, TOP TOY renew its collaboration relationship with important partners such as Bandai Namco and 52TOYS, which lay a solid foundation to future optimize its product structure. Meanwhile, the grand opening of TOP TOY store in Shanghai Disney, becoming the only new customer brand to settle here in 2023. I will now turn the call over to Eason for a review of our financial performance in September quarter of 2023.
Thank you, Jack. Hello, everyone. Thank you again for joining us today. I will walk you through our financial results for the September quarter. Please note that all numbers are in Renminbi unless otherwise noted. And I will also refer to some non-IFRS measures, which have excluded share-based compensation expenses. Revenue was RMB 3.8 billion, representing an increase of 37% year-over-year. Revenue from China was RMB 2.5 billion, up 35% year-on-year. The increase was driven by: number one, a growth of 41% in revenue from MINISO's offline stores; and number two, a growth of 46% in revenue from TOP TOY. The 41% Y-o-Y growth of MINISO offline business was a result of [ 14% year-over-year growth in ] average store count and a 24% growth in per store sales. The 46% year-over-year growth of TOP TOY was a result of high-teen growth in average store count and mid-20s growth in per store sales. Revenue from overseas market was RMB 1.3 billion, up 41% year-over-year, driven by an increase of low teens in average store counts and a growth of mid-20s in personal sales in overseas markets. Revenue from distribution market was RMB 304 million, an increase of 16% year-over-year. Revenue from directly operated market was RMB 592 million, an increase of nearly [ 90% ] year-over-year, accounting for 46% of overseas revenue as compared to 34% during the same period of last year. Gross profit in September quarter was RMB 1.6 billion, up 61% year-over-year. Gross margin was 41.8%, increasing by about 6 percentage points in the same -- from the same period of last year.
The year-over-year increase was due to three reasons. Number one, GP margin in overseas market increased as we made meaningful progress in optimizing our product structure and saw revenue contribution from IP products increased from less than 30% to more than 40%. In addition to that, GP margin in overseas markets in this quarter also benefited from increasing revenue contribution from our directly operated markets, which contributed for 6% of revenue. As we enter the peak season of our directly operated markets, we may expect its revenue contribution surpassing 50% for the first time in the coming December quarter. And number two, GP margin in China increased by low single-digit percentage points, thanks to our continuous growth of merchandise GP margin and a better control of promotional discounts. Number three, GP margin of TOP TOY continue to increase as planned.
SG&A expense as a percentage of revenue was around 20.8%, up from 19.3% in the same period of last year. Selling and distribution expense were RMB 220 million, increasing by 67% year-over-year, driven by: number one, increased personnel-related expense; number two, increased marketing expenses related to brand upgrade projects as we mentioned in our last earnings conference call. As we are executing our brand upgrade strategy both in China and overseas markets, we expect to see marketing expenses increase a little bit for a while, but this is totally controllable. Marketing expense as a percentage of total revenue just increased by 1 percentage points in this quarter compared to the same period of 2021. And number three, increased IP licensing expenses. Licensing expenses more variable costs as we offer more IP products. IP licensing expense as a percentage of revenue increased by less than 1 percentage point in this quarter compared to the same period of 2022. G&A expenses for RMB 167 million, flat year-over-year.
Turning to profitability. Operating profit in the September quarter was RMB 788 million, representing increase of 55% year-over-year. Operating margin was nearly 21% compared to 18% in the same period of last year. Adjusted net profit in September quarter was RMB 642 million, increasing by 54% year-over-year. Adjusted net margin was 16.9% compared to 15% in the same period of 2022. On a quarter-over-quarter basis, our margin profile improved because we enjoyed a significant foreign exchange gain in June quarter. If we exclude foreign exchange impact, adjusted net margin in this quarter would be 7.1% compared to 15.5% in the previous quarter.
Turning to cash position. As of September 30, we have strong cash position of RMB 6.7 billion. September quarter has once again witness breakthroughs and new hits in major aspects of our operations. Looking forward into the December quarter, we expect our sales continue to grow strongly on a year-over-year basis driven by better store level performance and store network expansion. Meanwhile, our margin profile will continue to optimize on a year-over-year basis. Thank you, and that concludes our prepared remarks. Operator, we are now ready to take questions.
Your first question today comes from the line of Michelle Cheng from Goldman Sachs.
[Foreign Language] Well, I have three questions for management. First one is regarding the GMV store versus same-store sales growth upside. Given this year, we already benefit from the -- post the opening. So how should we think about the 2024 and long-term same-store sales growth? And secondly, regarding the overseas store expansion. Given we are a little bit lag behind in the first half, but we still target to achieve the guidance for the full year, so can you share with us what -- where do we see the improvement? And how should we think about the focus for expansion overseas next year? And thirdly, on the product, so we have a very good progress on IP and fragrance products, et cetera. So how should we think about -- or is there anything we can expect for next year's quarter?
[Foreign Language]
Okay. Thank you, Michelle. This is Eason. I will translate for Mr. Ye, and then I will make some add up. So first, Mr. Ye introduced the latest update of our same-store sales. So for this year, year-to-date, in China, our same-store sales has recovered to 93% compared to 2019 level. So compared to 2021, same-store sales has increased by 9 percentage points. And compared to 2022, same-store has more than 20% of year-over-year increase. And for overseas market, as we mentioned on our prepared remarks, the same-store sales has recovered to about 94% as a whole in overseas market, among which top 20 overseas market has also -- has positive same-store sales growth. In the long term, our major target here is if we want to have a sustainable same-store sales growth, I think there are a few several key factors here. Number one is the traffic. Our business performance is positively related to traffic.
Take this year as example, as I mentioned, in China, we reached 93% of same-store sales recovery. But this recovery varies among weekdays, weekends and holidays. So in this year, in weekdays, the same-store sales was 90%. In weekends, it's a little bit higher at 95%. But when we have public holidays such as Labor Day, National Day and so on, our same-store sales have low single digits positive growth compared to 2019 level. The reason behind this is that when we have public holidays, we have more traffic, we have weekends. The traffic is obviously higher than weekdays. So that is why we promote -- we launched the superstore strategy. I repeated a lot of times internally only by opening superstore can we make better performance. So with the brand upgrade of -- brand upgrade strategy, we want to improve and optimize our store network by continuous introducing more superstores.
And second, I think the key here is -- lies in the innovation of products by brand, by the -- introducing brand upgrade. During the past year or so, our ASP has improved a lot where we had a stabilized cross-selling rate. So this has been very key in supporting our same-store sales growth. And the third is all about the branding. Only by becoming a super brand, so we can get more market share from the traffic under the background of the reducing traffic in China's shopping mall.
So -- and I also want to add one point that just now Mr. Ye talked about same-store sales growth. But before that, Michelle, you know us, we disclosed our GMV per store. So GMV per store is more an average, but the same-store sales is more related with comparable sales. So if you look at year-to-date, the GMV per store in China recovered to 85% of pre-COVID level because we have opened a lot of new stores in lower-tier cities in China, which has some dilution to our average store performance. But if you look at the comparable sales, our same-store sales have recovered to 93%, and which is very encouraging to us.
[Foreign Language]
[Foreign Language] For your third question about the product innovation. So in this year, I have traveled around the major overseas markets of MINISO. And I bring out -- brought out an idea that we should focus on 3 strategic category that is big beauty, big IP and big toys. For these 3 strategic categories, we are now contributing about 60% of overseas sales. And hopefully, we may see it increased to more than 70% in the near future. And for these 3 categories, I think there are 3 products, SPU products -- 3 products can represent them that is Blind Box, flash toy, fragrance and perfumes. So our next step is that we want to cooperate with more famous IPs, more big IPs to enhance our ability in product development in these 3 areas. So hopefully, next year, you can expect we -- our new cooperation relationship with a lot of new IP partners.
Among these 3 categories, flush toy has always been one of our best sellers in overseas markets, and we shall continuously enhance our leadership position. And for blind box, during the past several quarters, no matter in China or in overseas market, it's increasing is fabulous. So our key strategy here in blind box is that by cooperating with this established IP licenses, we are gaining market share. And Michelle, this is Eason. Let me answer your second question about the overseas store expansion. Yes, we have mentioned -- talked about the overseas store opening strategy. So for the first half of this year because when we just reopened when our people, our team come to overseas market, we realized that in some overseas markets need to some upgrade of their operations. So we paused a little bit of our store expansion plan. But during the past September quarter, we have been accelerating our store expansion in overseas market.
And hopefully, in the fourth quarter, in the December quarter, we will strive to achieve the 350 to 450 year-beginning plan. And then next year, hopefully, because the directly operated market has been a key driver, not only in overseas business, but also for the whole core MINISO business, so we will see strengths in regions like North America, including the U.S., including Canada. We also see Indonesia beginning gaining strength in opening new stores because we are kind of -- penetrating more into large cities in these countries. So next year, in general, our big opportunities will lie in overseas directly operated market. But that doesn't mean our distributor market will not open new stores. We still see a lot of chances in direct -- in distributed markets because we have so many markets. We have so many distributed partners. So in next year, we, hopefully, we are very confident that we will open more stores in overseas market than this year. Thank you.
So the next question is from the line of Lucy Yu from Bank of America Merrill Lynch.
[Foreign Language] I'll do the translation first. So the overseas distributor revenue this quarter growth is lagging behind the direct sales growth, partially because of the slower store opening in the first half of the year. So with the third quarter store expansion started to accelerate, how should we expect the growth in the fourth quarter for distributor market in the overseas market? And secondly is about the product GP margin in China. Could you please give a little bit breakdown by category and how should we think about the GP margin in China going forward? And lastly is on the selling expense, which has been increased a lot on both Y-o-Y and Q-on-Q basis. Could you please elaborate the breakdown?
Okay, Lucy, this is Eason. So for your first question about the upcoming growth of distributed markets. I'd say, hopefully, we can see an improvement in the December quarter compared to the past 2 quarters. At this moment, I cannot comment too much because for the first half of this year, the distributor market as a whole, it's net new stores was apparently fewer than our expectation. So we will wait and see how the distributed market, how the need from our distributors ramp up during the fourth quarter. But hopefully, we can reasonably expect that it will improve on a quarter-over-quarter basis. And for the GP margin by categories. I'd say we now have more than 11 product categories, but we categorize them into 3 words: The first is Big beauty. The second is big toys and the third is a big IPs, as we mentioned. So for the IP-related products, so it's high single digits and the average of -- the average of GP margin.
So our average GP margin is like 60%. So for toys, it's the same case it's just same case basis with this IP products. And we have a small part of our products, we call them merchant -- general merchandise. General merchandises, the products, including home cleaning, seasonal food, snacks, stationary and the gifts, some small electronics and lifestyle products and so on. For this general merchandise products, it now accounts for about 40% of our total sales. And apparently, its GP margin -- merchandise GP margins lower than IP products and toys. And now we also have about 40% of our sales in China comes from Big Beauty. The Big Beauty's GP margin is low single digits higher than general merchandise. And our Big Toys accounts for about 20%, including blind box, including flash toys, including children's toys and so on. So these 3 together accounts for about 20% of total sales. And its GP margin is low single digit, it's higher than the previous 2 categories.
And for your questions about the selling and distribution expenses. So in this quarter, S&D expenses was about 60% of our revenue. The major part of our selling and distribution is staffing, so which is about 5% revenue, next by marketing expenses, about 3% and then depreciation, another 3%. In license expense, it was about 2% to 3%. So the year-over-year increase in S&D expense was related to 3 business updates that is noticeable. The first is our rapid growth of our directly operated markets. So we have increases in staffing in terms of store staffing and so on and including hiring more people in overseas directly operated stores, and bonus accrual an increase in depreciation and amortization related to these new directly operated stores.
And the second is related to our brand upgrade. So we invested a little bit more in branding, but it's total controllable. And the third is our IP offering. So it's with IP licensing expenses. This licensing expense, as I said, is more reliable, and it will increase with the increase of our IP sales. So going forward, if you look at the next few quarters, as we open more direct stores in overseas, some expenses will increase such as staffing, such as depreciation of OU [ in PPE ] and so on. But in general, as we promised, we are confident that the total S&D expenses is controllable because overall, we are still enjoying a significant operating leverage. So thank you.
So the next question is from the line of Samuel Wang from UBS.
[Foreign Language] So I will translate briefly on my questions. My first question is regarding U.S. markets. So could you update on the U.S. market's profitability for September quarter and also introduce about the strategies how to improve in the future and also the store opening plans next year. And my second question is regarding TOP TOY. What's the management's target on profitability this year for TOP TOY business? And also what's the strategies going forward? I saw that in September quarter, the own brands' mix has been a little bit lower than June quarter. Also, I saw cooperation with other brands like 52TOYS. So is there any strategy changes on self-developed IP percentage point in the future? Thank you.
Samuel, this is Eason. So for your first question about the U.S. business. I would say everything is evolving very fast and is very encouraging. For example, in the September quarter, we saw GMV in this market increased by more than [ 180% ] on a year-over-year basis. And the best part, personally, I think that it's accelerating from 120% year-over-year growth from the June quarter. And entering in the holiday season for the past several weeks, we still see this market maintained its triple-digit growth on a year-on-year basis. So we can expect a fruitful holiday season this year in the U.S., and we also just celebrated the 100th new stores in the U.S. market. Of course next year, although we are still making -- internally, we are making plans and budgets for next year, but we do believe that the major driver of the overseas business will come from DTC market and the DTC market is the major driver will be in North American market, including the U.S. market. And we also include the Canada market here.
It's more like U.S. market 1 year ago. So it's in the door of ramping up and everything is very promising. And for TOP TOY. To be frank, last year, TOP TOY, it was loss-making in CY '22, right? If you can remember, its net loss margin is nearly about more than 20%. So for this year, I would say TOP TOY is -- hopefully, it will close -- very close to be breakeven or significantly reduced its net loss status. So if you look at CY '23, as Mr. Ye just mentioned in his prepared remarks, TOP TOY in the past 3 years has become a unicorn with annual sales of RMB 1 billion so increasing by nearly 50% compared to last year. And if you look at the bottom line, hopefully, the net loss for TOP TOY this year will be like 1% or 2%, something like that.
And you are right that in the September quarter, the exclusive products of TOP TOY decreased a little bit. When we talk about exclusive products of TOP TOY, we mean our in-house designed China bricks or our in-house developed blind box and so on. We have -- we are in the middle way in building an internal designer team and product management team and so on. So it takes time for this whole team to get mature, to get more connected. So we have enough patience to wait this business to get more mature. And we do not have any adjustment in terms of our self-branded strategy in TOP TOY. In the next couple of quarters, we are planning to launch more exclusive products. Thank you.
The next question is from the line of Anne Ling from Jefferies.
[Foreign Language] So I'll translate in English. First question is on the overseas market. If we are looking at the overseas direct operated market, are there any additional markets that we have for this quarter? And like can we also provide us -- provide a breakdown in terms of like within the direct operated markets, how -- what is the sales mix between the franchise sales or wholesale sales versus the direct operated store sales? Secondly is on the operating margin side. Is there any like revenue trend in terms of like how this quarter performed for Mainland China's OP margin versus the overseas market? And then my last question is on the year 2024 calendar year '24. In terms of the sales per store or same-store sales, what should -- what sort of growth rate we should be expecting given the fact that we are likely to still opening more stores?
Thank you, Anne. This is Eason. So for your first question about the DTC market, is there any new members, I would say no in the past 2 quarters. So there is no recast between the distributor markets into our DTC market in the past 1 quarter or 2. So the 80% year-on-year growth you have seen in this quarter was substantially all organic growth. Of course, in this year, we have some small markets such as Hong Kong, China recast from the distributor market to our DTC market, but its revenue contribution is insignificant. But going forward, as we talked a lot in general, we believe, if we want to penetrate more and do better in overseas markets, we should evolve more into local markets. So one of the ways to turn them into direct operating market, the other is to invest in them or get ourselves more involved into their operational decisions. So I'd say I'm not surprised if we are going to see more distributed markets turning to DTC market in the upcoming few quarters.
And for the revenue contribution of our directly operated stores in overseas market, I'd say, now we have about 700 stores in our directly operating markets. Among them, about 200 stores are directly operated. So considering the average store performance, there's no such a significant difference. So you can calculate the contribution is about 30%. We do not have the exact number. That's my rough estimate. And for the OP margin of overseas market, I see investors, big concentration is for our overseas direct operating markets. I'd say its margin profile has been improving in this quarter. So in this quarter, the OP margin for our DTC market, it was mid-teens, so on OP level. So compared to last year, 1 year ago, it was just breakeven, so it's a significant improvement.
And compared to last quarter, it increased by low single digits on a quarter-over-quarter basis. And in long term, I think it's too early at this moment to decide to project the OP margin of our direct model. So it's all dependent on our store model in the DTC market. i.e., if we adopt more franchisee model or if we adopt more directly operating model, so it's too early to project. And for the first question about the same-store sales growth in next year in China. I would say, as we answer Michelle's question, in long term, our target should be maintaining both store network expansion and reasonable same-store sales. So we will strive to achieve that goal.
Now the conference call comes to an end. Thank you all for joining our call today. We look forward to seeing you in the next quarter. Have a nice day and goodbye.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]