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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to MINISO Group Holding Limited's Earnings conference call for the third quarter of fiscal year 2021 that ended March 31, 2021. [Operator Instructions] Please note, this event is being recorded. Now I'd like to hand the conference over to your host speaker today, Mr. Eason Zhang, Director of Investor Relations. Please go ahead, Eason.
Thank you, Jason. Hello, everyone, and thank you all for joining us on today's call. The company has announced its quarterly financial results earlier today. An earnings release is now available on our Investor Relations website at ir.miniso.com. Today you'll hear from our Chairman and CEO, Mr. Guofu Ye, who will start the call with an overview of our business. He will be followed by our CFO, Mr. Steven Zhang, who will address our financial results in more detail before we take your questions. 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 measures today, which we have explained and reconciled to the most comparable measures reported under the International Financial Reporting Standards in the company's earnings release and filings recently with the SEC. During the Q&A session, please repeat your questions in Chinese [ if you ask ] in English. The management will answer in Chinese, and I will translate into English. With that, I will now turn the call over to Mr. Ye to give you a business update. Please go ahead, sir.
[Foreign Language]
[Interpreted] Good. Hello, everyone. For the March quarter of 2021, MINISO recorded revenue for RMB 2.23 billion, up 37% year-over-year and in line with the company's guidance. Our domestic business delivered a combined revenue of RMB 1.79 billion, up 75% year-over-year and 12% compared to the same period of 2019.
In today's conference call, I show the major developments we have achieved for both MINISO and Toptoy this quarter.
[Foreign Language]
[Interpreted] For MINISO, our domestic operations continue to deliver an encouraging recovery this quarter, while occasional cases of COVID-19 in early January resulted in shutdowns for certain stores. We took a number of measures and launched a series of new products in the following months to achieve a healthy recovery. As a result, domestic operations of MINISO brand recorded revenue for RMB 1.72 billion, up 71% year-over-year and 12% compared to the same period of 2019.
[Foreign Language]
[Interpreted] We added 44 new MINISO stores in China during the quarter, with more than 90% of new stores located in tier 3 and below cities. During the past 12 months, we've made significant progresses in executing our strategy to penetrate into lower tier cities, with 70% of new stores located in tier 3 NPL cities. We noticed that all key operating metrics for MINISO stores, such as average ticket, conversion rate and cross-selling rate are similar in lower-tier cities with tier-1 and tier-2 cities, while rental expenses are more attractive, providing a better ROI for our retail partners in the long term.
As of March 31, less than 40% of our stores were located in lower tier cities. As lower tier cities account for more than the 70% of China's consumer spending, nearly 60% of GDP and [ contributed ] 2/3 of the country's economic growth. Going forward, we see a lot of opportunities in the lower tier cities and we'll continue to unlock new client opportunities there.
[Foreign Language]
[Interpreted] As for overseas operations, revenue was RMB 441 million, down 28% year-on-year and 5% quarter-over-quarter. During the same period of previous year, COVID had not fully erupted. However, during this quarter, many countries have experienced major setbacks on path to pandemic recovery, especially in Southeast Asia and Latin America, where many of our overseas stores are concentrated. In these areas, many countries have continuous reported new records in case numbers and have adopted stricter control matters. By the end of March, 228 overseas stores were temporary closed, and many others were forced to reduce business hours due to the impact of COVID-19, resulting in the year-over-year revenue decline.
[Foreign Language]
[Interpreted] Other than that, we have made encouraging progress in our overseas market expansion. The number of overseas stores increased by 29 in this quarter, surpassing the net increase of 20 in the same period in 2020, demonstrating our overseas partners' confidence in MINISO's long term competitiveness.
The net increase in new stores came mainly from countries in the Middle East and Europe, where the pandemic recovery went well. This includes Spain, where we opened 6 new stores during the quarter. In January, MINISO opened its first stores in Porto, the second-largest city in Portugal, which is the 94th overseas market we have entered.
[Foreign Language]
[Interpreted] The mission of MINISO is to provide global consumers with high-quality and affordable lifestyle products. In this quarter, we continue to focus on product and innovation. So I'd like to share additional details on this front.
[Foreign Language]
[Interpreted] First of all, in product development, we focus on strategic new categories. In this quarter in China, sales of strategic new categories such as toys and snacks increased significantly year-over-year. Specifically, sales of toys were up nearly twofold year-over-year, in which building blocks were up more than threefold. Sales of snacks were up 104% year-over-year, in which sugar candy sales increased by 168% year-over-year.
[Foreign Language]
[Interpreted] We kept innovating our business. Take our first theme store, Fashion Mask Store, as an example. Its sales in a single day exceeded RMB 10,000, which is a very encouraging number for a vertical retail store and provided us with confidence and experience in expanding theme stores in other categories. And we'll transplant this new successful business to other cities in the near future.
[Foreign Language]
[Interpreted] Let me give you another example. During the pandemic, we proactively leveraged innovative ways such as live streaming to distribute merchandise to overseas partners. That's been proved to be quite effective in promoting the recovery of the overseas business, with 2 live streaming events in this quarter generating revenue of RMB 150 million.
[Foreign Language]
[Interpreted] Third, we strengthened our IP advantage by successfully launching products with new IP partners such as Chip and Dale, Tsum Tsum, Heaven's Official Blessing and Bilibili during this quarter. So far, we have fully covered 6 major IP sectors such as Global Trendy IPs, ACG IPs, Chinese traditional IPs, creative art toys IPs, sports and gaming IPs, and have solidified MINISO's position as a leading IP player in the industry.
[Foreign Language]
[Interpreted] On the operational side, we have been dedicated to improving the efficiency of MINISO's stores by introducing information systems and detailed tactics during the past several years. For example, average number of employees per store in China dropped from 10 a few years ago to 6 in last quarter, and dropped further by nearly 10% during the quarter, effectively reduced the cost burden of our retail partners.
[Foreign Language]
[Interpreted] MINISO's all new channel strategy continue to be well executed during this quarter. We continued reaching and activating members through various ways, such as private traffic operations and giving incentives such as coupons in WeChat Mini Program to improve retention and repurchase rate of them.
As of March 31, members who had made at least 1 purchase during the past 12 months were about 30.2 million, an increase of 2 million sequentially and nearly 8 million from end of June 2020. As a result of the above-mentioned measures, revenue contribution from online channels exceeded 10% for the first time in this quarter, with e-commerce contributing RMB 171 million or 7.7% of net revenues and O2O contributing about RMB 70 million or 3.1% of net revenues.
[Foreign Language]
[Interpreted] Now I'd like to share more about Toptoy. As the first new business incubated on the X strategy, this is Toptoy's first full quarter. We continue to see healthy trends in each [indiscernible] of the operations, including optimization of its economic model, expansion of product categories, improvement of omnichannel strategy and positive initial results of IP strategy.
[Foreign Language]
[Interpreted] The first DreamWorks store of Toptoy has been operational for 5 months. Our team has been refining its business model. So far, we have opened 4 DreamWorks stores, each of which has created a very good opening performance among peers, giving us great confidence in the success of DreamWorks stores. At the same time, we are also testing smaller stores such as collection stores as well as flash stores, and we'll continue to review Toptoy's operations in a dynamic basis. And we'll provide more update on next quarter's call.
[Foreign Language]
[Interpreted] Toptoy is committed to building the world's largest and most comprehensive collection shop of art toys. To achieve this, it has been adopting a multiple-category strategy to expand addressable market of art toys, while reducing reliance on any single category. In this quarter, we added sculptures as the eighth category of Toptoy to enrich its product line. Garage kits, building blocks and assembly Gundam, were 3 rising categories favored by consumers during the quarter. And their revenue contributions continue to increase. So far, Toptoy has about 2,500 SKUs, increased from 1,500 when it got started.
[Foreign Language]
[Interpreted] In terms of channels, Toptoy has been building its omnichannel capabilities since day 1. Today, it covers 15 cities in China region and 25 online stores. Meanwhile, it plans to open roboshops and the first overseas store within this year. In terms of online channels, it has accumulated more than 300,000 members in its WeChat Mini program. In addition, it opened its Tmall flagship store in late April and will cooperate with other e-commerce giants such as JD.com and Douyin to open more stores.
[Foreign Language]
[Interpreted] On April 28, Toptoy held a themed branding event in Shanghai to introduce its proprietary IPs such as Twinkle, Tammy, and Yoyo. I'd like to take this opportunity to share Toptoy's IP strategy. We estimate 30% of Toptoys products will be through self-owned IP or through cooperation with IP partners. And the other 70% will be through the third-party IPs. Proprietary and exclusive IPs, because of its originality and uniqueness, [indiscernible] are much easier to communicate with fans. They have higher gross margin and enable Toptoy to build competitive advantages. To focus on IP development, Toptoy has cooperated with nearly 300 designer and supplier partners, including talented designers such as Kow Yokoyama, Japan's top designer.
[Foreign Language]
[Interpreted] The March quarter was MINISO's first full quarter as a public company. We have experienced accelerating recoveries in domestic operations and profitability as we continue to focus on product innovation. Toptoy continues to achieve new milestones as we continue to sharpen our business model, product, sales channels and proprietary IPs. Looking forward in 2021, MINISO will continue to penetrate further into Chinese lower-tier cities by opening more stores and capture more greater market share in these high ROI regions. Meanwhile, we will continue monitoring the pandemic recovery in overseas markets carefully and rapidly adapt our expansion plan as necessary to embrace its recovery.
[Foreign Language]
[Interpreted] This concludes my part of business update. I'll now turn the call to CFO for financial results.
Thank you. I will start my remarks with a view of March quarter financial results and then provide additional color regarding the June quarter. Please note that I will be referring to non-IFRS measures, which have excluded share-based compensation expenses. Revenue was RMB 2,229 million, representing a year-over-year increase of 37% and the quarter-over-quarter decrease of 3%.
The year-over-year increase in revenue was driven by the recovery of our domestic operations, which increased 75% to RMB 1,788 million. Within our domestic operation, revenue of MINISO offline stores were RMB 1,544 million, increased 69% year-over-year. Revenue of e-commerce was RMB 171 million, increased 86% year-over-year.
In overseas markets, revenue declined by 28% year-over-year as compared to a decline of 51% year-over-year in the previous quarter. The quarter-over-quarter decrease was mainly due to seasonality and influence of the pandemic.
Our business is subject to seasonal fluctuation, typically with a strong performance in December quarter than in March quarter. However, we took several effective measures, such as launching more popular products, to boost the sales and penetrating further into low-tier cities in China in this quarter.
The sequential decline of revenue was only 3% compared with the sequential decline of 11% in March quarter 2019, which represented a normalized seasonality before pandemic.
Gross profit was RMB 627 million, increased 19% year-over-year and decreased slightly quarter-over-quarter. Gross margin was 28.1%, the highest in the past 4 quarters since the outbreak of pandemic, showing a positive sign of our continued business recovery.
Gross margin was 32.4% a year ago and 28.0% a quarter ago. As we have explained in last quarter, the fluctuation in gross margin was due to a change in our revenue mix.
The year-over-year decrease was due to a decrease in revenue contribution from our more profitable overseas operations, which was 19.8% of net revenue in this quarter as compared to 37.3% a year ago. The significant increase in gross margin was mainly attributed to an increase in revenue contribution from our high-margin online channels such as e-commerce and O2O in this quarter despite the decrease in revenue contribution from our overseas operation, which was 20.1% of net revenue a quarter ago.
Selling and distribution expenses was RMB 275 million, increased 18% year-over-year, but decreased 10% quarter-over-quarter. The year-over-year increase was attributed to increased logistics expense, which were in line with the recovery of our business during this quarter, and the increased marketing expenses as we continue to strengthen brand recognition for MINISO and Toptoy. The quarter-over-quarter decrease was primarily due to the decrease in marketing-related expense and personnel related expenses such as payroll and travel expenses caused by seasonality.
G&A expense was RMB 157 million, increased 29% year-over-year, and flat quarter-over-quarter. The year-over-year increase was primarily due to increase in personnel-related expense and IT expenses. We took measures to reduce G&A expense when the COVID-19 pandemic broke out during the same period of 2020, such as trimming down the personnel-related expense and IT expenses, resulting in a low comparison base for these expenses.
Turning to our profitability. Operating profit was RMB 161 million, increased by threefold year-over-year and twofold quarter-over-quarter. The year-over-year improvement in operating profit was primarily due to our business recovery in China, while the quarter-over-quarter improvement was due to the deduction in operating expenses and other net income or loss, which was a loss of RMB 55 million in the previous quarter, but an income of RMB 8 million in this quarter.
Adjusted net profit was RMB 149 million, increased by 10% year-over-year and 77% quarter-over-quarter.
Adjusted net margin was 6.7%, the highest in the past 4 quarters since the outbreak of pandemic compared to about 8.3% a year ago and 3.7% a quarter ago. Basic and diluted earnings from continued operation per ADS were both RMB 0.40 a compared to RMB 0.76 a year ago and RMB 0.08 a quarter ago. Adjusted basic and diluted earnings per ADS were RMB 0.52 compared to RMB 0.44 a year ago and RMB 0.28 a quarter ago.
Turning to our balance sheet. As of March 2021, the combined balance of the company's cash, cash equivalents, restricted cash and other investments were RMB 7 billion compared to RMB 6.9 billion a quarter ago. The increase was primarily due to the cash flow generated from the operations.
Coming to working capital, the turnover of inventories and credit receivable remained flat sequentially. Looking ahead into June quarter of 2021, we expect our total revenue to be between RMB 2.3 billion and RMB 2.5 billion, which representing an increase of 48% to 61% year-over-year.
As we continue to operate in a time of significant uncertainty in regards of the timetable of pandemic recovery in our overseas markets, we remain cautious in our sales outlook in this market. However, we are encouraged by our efficient working capital management, steady recovery of gross margin, disciplined investment and expense in the new business, all of which has laid a solid foundation for us to deliver consistent, strong financial performance and long-term shareholder value.
This concludes our prepared remarks for today. Operator, we are now ready to take questions.
[Operator Instructions] Our first question is from Michelle Cheng from Goldman Sachs.
[Foreign Language] [Interpreted] I have 3 question for management. First one is the company introduced a new retail platform strategy, and we successfully developed Toptoy. So can management share the thoughts about the future development, and also past experience we can learn from Toptoy development.
And second question is about the overseas recovery. So on one hand, we control the inventory and also the expansion. But have we like reviewed the overseas distributors' financial situation and the business environment and how this will impact our expansion in the future? And thirdly, for the domestic business, we have been expanding aggressively in the lower-tier city. And can you share with us, for those stores opened in the past few quarters, the operational situation? And also how do we see the business opportunities in the lower-tier city going forward?
[Foreign Language]
[Interpreted] Okay. Michelle, thank you for the questions. For your first question on our X strategy, we certainly have some ideas and thoughts about new categories, and Toptoy has gained preliminary success at this moment. And we are actually in the planning and preparation process of our new categories and we will
[Technical Difficulty]
[Foreign Language]
[Interpreted] Okay, Michelle, for your second questions, for the overseas. I think these questions need to be analyzed case by case. Now we had more than 1700 open stores in now. And in terms of overseas distributors, the top 10 distributors accounted for more than 50% of our overseas stores. So the concentrated is quite high and stable.
Please note, for these big distributors, they have -- they absolutely are comfortable at this moment. But outside the very strong cash position in shareholder structure and our cost control abilities. So our judgment is that there's no big risk for these big distributors. For the smaller ones, absolutely, some of them will face even bigger difficulties. And as we shared before that, we now have 80 distributors in our overseas market. Certain distributors' financial difficulty will not influence the whole big picture of our overseas market. And if you look at the past 4 quarters' performance of our overseas business, no matter in revenue or in net income, I think the most difficult time has passed and we even see some -- in some of overseas markets, some distributors are accelerating their pace of expansion, such as Italy and Portugal, which we have entered during the first quarter and second [ quarter ] this year. And for example, Spain, this country alone has opened 6 stores in the first quarter. So that answer for the second question.
[Foreign Language]
[Interpreted] For your third question on lower-tier cities, first of all we think MINISO's product and our business model are very competitive in lower-tier cities. As Mr. Ye mentioned just now, the key operating metrics such as average sales price, cross-selling rates and conversion rate, they are very similar with the higher-tier cities. And in terms of addressable market, as for today, MINISO has entered about less than 300 cities in China. But if we look at the tier 3 and [ tier 2 ] cities alone, there are 270 more in China [Technical Difficulty] in China. So the addressable market is big enough. In terms of [indiscernible], we have been continuously monitoring during the past year, and as we talked before that for stores in lower-tier cities the revenue is maybe not as high as in the first-tier cities, as these stores on average generate sales of RMB 3 million to RMB 4 million annually. And the rent of each store can be controlled within 8% of sales. So the payback period tends to be as short as in 6 to 8 months in MINISO's early stage between 2013 and 2015.
The next question is from Lucy Yu from Bank of America.
[Foreign Language]
[Interpreted] The first question is about membership. So we have accumulated members for awhile. So what we have learned from this big data? And how are we going to more utilize this data to help with our operations? Second question is about the GMV recovery in China and overseas market in April and May, and how should we think about the recovery trajectory for the second half? Third question is about Toptoy. So what's their store opening plan for this year as well as more operating metrics?
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. Lucy, thank you for your question. For your question on members, as we shared that by the end of this quarter, and we have accumulated 30.2 million members, and we are using various ways to outreach and activating things. So we have some [ nice ] figures to share. In terms of average sales price, the members were double of that of nonmembers. And in terms of repurchase rates, ordinary customers of MINISO, on average they come and buy for 1.5x each year versus 3x of our members. So -- and Steven even added that we have realized the important role that members have played in our improvements of our [indiscernible], so our understanding of the importance of members has been improving during the past year,
and we'll make more efforts to improve that in that way. So we have -- for example, we have managed our members in different stages in their life cycle, and so that we can carry out more targeted marketing to outreach and keep them and increase the retention and repurchase rates of these members.
[Foreign Language]
[Interpreted] Let me give a quick update on our business in China and overseas markets. In April and May, we have 2 public holidays in China, so we can see very strong sales increases during the 2 holidays. But after the holidays, we can see a quick decrease and get to normalized of the sales. So we believe that in China the pandemic influence is still there so the overall recovery is still at 95% or so.
In overseas market, by the end of last month, by April 30, the overseas market as a whole is a bit -- a little bit worse than we were in the end of March. We had more than 300 stores were temporarily shut down because of the stricter COVID-control measures, control measures by the regulated countries. And for those -- for those stores in business, the recover -- surge recovered business average were lower -- over 5% lower than they were in the last month.
If you look at the second half of this year, we see stable growth and stable recovery in China and unstable situations in overseas. And the pandemic recovery for overseas market is still wait-to-see. For example, in India, where we have 150 stores, as for now, 90 of them are not open. And for some developed countries such as the U.S. where the vaccine injections is quite , we actually see a good recover the sales trend. But in the U.S., we now have only more than 30 stores, so the influence is quite insignificant for the overseas market.
[Foreign Language]
[Interpreted] Okay, in terms of Toptoy, in terms of the expansion plan, we have no big change with our update. We maintain our guidance of 90 to 100 stores by year end -- calendar year-end. In terms of economic model, it is continuously being refining and I want to share in our DreamWorks stores, the 4 DreamWorks stores. The monthly sales of each has been quite stable at RMB 2 million in a month. And we are also testing our Type B stores, in which sales -- monthly sales can be stable at RMB 600,000 per month.
In terms of the retail partners, we also held a quite big roadshow of our retail partners by the end -- at the end of April, and we saw strong willingness of our renewal partners to open TopToy stores. And we have been receiving positive feedback and quite positive proposals, active proposals from them.
There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.
Okay. Thank you again for joining us today. If you have any further questions on MINISO, please feel free to contact MINISO's IR team, and our contact information can be found on today's press release. We will see you next quarter, have a good day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]