Gifts / Sports & Toys

A few days ago, MINSO.NYSE released the unaudited financial report for the fourth quarter of fiscal year 2021 (July 1, 2020 to June 30, 2021) and the full year of fiscal 2021.

From the perspective of full-year performance, MINISO’s performance is not satisfactory. Data shows that in fiscal 2021, total revenue is 9.07 billion yuan, an increase of only 1% year-on-year; a loss of 1.43 billion yuan, an increase of 439.53% year-on-year. Among them, in the fourth quarter of fiscal 2021, revenue was 2.472 billion yuan, a year-on-year increase of 59.2%; adjusted net profit was 145 million yuan, a year-on-year increase of 241.7%. Affected by this news, as of the close of the market on August 24, MINISO’s market value has evaporated by two-thirds compared to the high of US$35.21 in February this year, leaving only US$12.8 per share.

Its 2021 fiscal year's performance decline was mainly due to the setbacks in overseas business. The domestic epidemic has repeatedly affected the recovery of performance, and overseas sales are still in the adjustment period. In addition, the investment in domestic e-commerce innovation business and the trendy play business have not yet achieved breakeven, and the company's profitability has declined.

On August 20, US stock time, MINISO closed at $12.40 per share. Compared with the high of $35.21 per share in February this year, the company's stock price has fallen by 65%, and its market value has evaporated by nearly $7 billion in half a year.

Shop opening slowed down

Although MINISO has been expanding its online e-commerce business in recent years, as a channel player, offline stores are still its main source of revenue. In the latest fiscal quarter, MINISO’s business (offline stores + O2O + e-commerce) Revenue was 1.83 billion yuan, a year-on-year increase of 39% and a month-on-month increase of 7%. Among them, e-commerce revenue was nearly 200 million yuan, a year-on-year increase of 136%; e-commerce and O2O contributed 12% of total revenue.

The epidemic has repeatedly affected the speed of MINISO's domestic and overseas store openings, and the company lowered its expectations for the speed of store openings. The company expects that in 2021, the company will net more than 400 domestic stores and approximately 100 overseas stores. The original plan was to add 500 stores in China and 200 stores overseas.

In fiscal 2021, the company added 527 net new stores throughout the year, of which 406 and 121 net new stores were added in the domestic and overseas markets, respectively. More than 60% of the new domestic stores were located in sinking cities. In the latest quarter, MINISO has a net increase of 127 domestic stores and a net increase of 35 overseas stores. As of the end of the reporting period, MINISO had 2,939 stores in China and 1,810 stores in overseas markets.

It is worth noting that, in the latest quarter, MINISO’s direct-operated stores decreased by 2 and the franchise-like and agency-type non-direct stores increased by 164. Compared with the same period last year, the number of overseas directly-operated stores has decreased by 17 and all new stores adopt the third-party cooperation model or distributor operation model.

According to the financial report, the increase in domestic business revenue was mainly due to the increase in the number of stores and single-store revenue. In addition to the sales of goods, the source of income was also fees charged to franchisees. At present, the number of direct-operated stores of MINISO has been decreasing, and franchised cooperative stores have contributed to all the increase in store openings.

In the 2021 fiscal year, MINISO's revenue growth was only 1%, and its net profit fell sharply by 102%. Its 2021 fiscal year's performance decline was mainly due to the setbacks in overseas business. Of the total revenue in fiscal 2021, domestic business revenue was 7.29 billion yuan, a year-on-year increase of 20.6%; while international business revenue was 1.78 billion yuan, a year-on-year decrease of 39.3%.

Since the beginning of this year, the epidemic situation has improved. As of June 30, 2021, the number of MINISO's overseas suspension stores has dropped from 208 before the first quarter to a quarterly low of 205. In the fourth quarter of the fiscal year, domestic and overseas operating revenues were 1.95 billion and 530 million yuan, an increase of 42.6% and 179.0% year-on-year. However, the repeated epidemics since July will cast a shadow over the international business of MINISO.

It is worth noting that co-branding well-known IPs is also quite expensive. The cooperation contract between MINISO and the copyright party usually lasts no more than 3 years. In fiscal year 2019 (July 1, 2018 to June 30, 2019), the licensing cost of MINISO was 21.9 million yuan; in fiscal year 2020, this number has soared to 109.5 million.

Entering the tide to play new consumption can not escape the stock price cut

While MINISO’s plan to open stores slowed down, its trendy play brand TOPTOY continued to accelerate its development. Since Bubble Mart went public, the new consumption of Chaowan has received more attention. As a channel player, MINISO has entered the Chaowan market with the trend, and its subordinate positioning "Asian Chaowan Collection Store" TOPTOY brand in December 2020 roll out.

In the fourth quarter of fiscal 2021, TOPTOY added a net 24 stores, all of which are franchise-like models. As of the first half of this year, TOPTOY has opened a total of 33 stores, of which 2 are directly operated and 31 are franchised stores. At present, the total number of TOPTOY stores has reached 54. It is expected that the number of TOPTOY stores is expected to reach 90 by the end of this year.

As of the end of June, its Chaowan brand has 7 DreamWorks and 27 Chaowan collection stores. The monthly sales of DreamWorks stores have reached 2 million yuan, and the monthly sales of Chaowan collection stores are about 600,000 yuan. As of now, TOPTOY The comprehensive gross profit margin of the store has reached 43%, and the store has already made a profit. However, due to the input of labor, technology, and marketing in the background, the overall quarterly loss is about 10-15 million yuan.

In fiscal 2021, overseas markets with high gross profit were greatly affected by the epidemic, and the proportion of overseas direct-operated subsidiaries with higher gross profit margins declined. This resulted in a year-on-year decrease of 3.6 percentage points in gross profit margin to 26.8%, a year-on-year decrease of 3.6. The adjusted net interest rate was 5.3%, down 5.5% year-on-year. In the fourth quarter of the fiscal year, the gross profit margin was 25.8%, which also saw a month-on-month decline, mainly due to 618 e-commerce activities and the Guangzhou epidemic affecting inventory turnover.

MINISO’s offline store business accounted for a relatively high proportion of revenue, and overseas business revenue accounted for 20% of revenue. The domestic epidemic has repeatedly affected performance recovery. It will take time for overseas sales to recover. The overall offline business is still in the adjustment period. Coupled with the investment in domestic e-commerce innovation business and the unprofitable trendy play business, the recovery of the company's net profit margin will be a slow process.

After the financial report was released, the stock price of MINISO fell for two consecutive times. On August 20, US stock time, MINISO closed at $12.40 per share, a daily drop of 4.32%. Compared with the high of US$35.21 per share in February this year, MINISO’s share price has fallen by 65%, and its market value has evaporated by nearly US$7 billion. Recently, the company announced a cash dividend of 300 million yuan, with a dividend ratio of 62.5%.

However, some people in the industry said: “MINISO has the characteristics of a leading grocery retail company in China. It is crazy to open stores, open up trendy lines, and cross-border addiction. But now there are strong competitors like KKV collection stores. I have to face my own problems."