Luk Fook Holdings (International) Limited (0590.HK) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Luk Fook Fiscal Year 2022 Annual Results Announcement. Now I would like to pass the call to Koey. Please begin.

Good evening, everyone. Thank you for joining the call. I'm Koey from the IR team of Luk Fook. Today, we have the pleasure to have Dr. Kathy Chan, Executive Director and CFO of the group as speaker to talk about [ financial year 2022 ] annual results. We will go through the corporate presentation, which is already uploaded on to our corporate website, followed by the Q&A session. Now may I pass the time to Kathy for the presentation. Thank you.

Thank you, Koey. Good afternoon, ladies and gentlemen. Thank you for joining Luk Fook FY '22 Annual Results Conference Call. I would like to start with looking at our financial highlights, followed by financial review and then our future plans and strategies. Now let's look at Slide 4 about the financial highlights. First, Business revenue recorded growth of 32.5% to HKD 11.7 billion due to the low base effects, the encouraging recovery of retail atmosphere and the favorable concept. Our operating profit increased by 3.1% to HKD 1.6 billion, while profit attributable to equity holders increased by 32.1% to almost HKD 1.4 billion. And the basic earnings per share increased by 37% to HKD 2.37. Proposed annual dividend was HKD 0.565 per share with dividend payout ratio of 46.4%. During the year under review, the group asset increased 443 stores worldwide Luk Fook licensed shops in Mainland. As at end of March 2022, including the sub brands, the group has 2,609 shops worldwide altogether. The group's revenue recorded a growth of 32.5% to HKD 11.7 billion. The almost HKD 3 billion increase in revenue was 64% contributed by the increase in wholesale, mostly from the retail business. However, the gross margin for products declined as it gradually returned to a more normal level and together with the increase in wholesales mix, overall gross margin decreased by 2.1 percentage points to 27.6% and gross profit increased by 22.9% to HKD 3.2 billion. On the other hand, total operating expenses to revenue ratio decreased by 3.6 percentage points to 15.5%. Therefore, benefiting from the improved operating leverage, operating margin maintained at a stable level of 14% and operating profit increased by 32.1% to about HKD 1.6 billion. In addition, this increased net interest income and reduced effective tax rate because of reversal prior years’ over-provisions, net profit rose by which 36.6% HKD 1.39 billion and net margin was 11.9%. Our profit attributable to equity holders increased by 36.9% to HKD 1.39 billion and the basic earnings per share increased by 37% to HKD 2.37. We are now at Slide 7. We have declared a HKD 0.55 final dividend, together with the interim dividend of the same amount, dividend payout ratio is 46.4%. A special dividend of HKD 0.50 we paid from last financial year was mainly for the celebration of our 30th anniversary in FY '21. Therefore, no such special dividend is declared in this financial year. Let's turn to Slide 8. In view of allow our fast expansion in Mainland China, the inventory level increased by about 20% during the year and renewed to around HKD 8.8 billion. With the significant growth of retail sales, the average [indiscernible] turn date declined by 95 days to 356 days. On the other hand, the group's net cash decreased by -- decreased to HKD 1.5 billion, mainly because of the increase in inventory balance. ROE grew back to double digit of 11.5% after 2 consecutive years of single digit which 2.5 percentage points higher than last year. Let's go to Slide 9 now. The group's NAV per share at the end of March 2022 was HKD 20.57, 6.7% higher than last year. Now let's look at Slide 10. From this slide, you can see that our operating margin and net margin were at quite a stable level of 14% and 11.9%, respectively. While the overall gross margin returned to a more normal level due to the decline in gross margin for gold products in normal levels and the increase in gold estimates. Our record high revenue and profit occurred in the gold [indiscernible] of our financial year FY '21 Q4. Both our FY '2022 operating profit and profit for the year were actually fourth highest in our record, not too far away from a record high, right? Let's look at Slide 11 for our by market analysis now. Revenue from the Hong Kong, Macau and overseas markets increased by 41.7% to HKD 5 billion during the year under review, which accounted for 42.9% of the group's revenue. The segment profit increased by 1.5x to HKD 187 million, which accounted for 10.7% of the group's total, while segment profit margin was 3.7%. In the Mainland market, revenue increased by 26.3% to HKD 6.7 billion, accounting for 57.1% of the group's total revenue. The segment profit increased by 25.2% to HKD 1.6 billion, accounting for 89.3% of the total, and segment profit margin was 23.3%. Slide 12 shows our revenue and segment profit by business. The retail business was the group's primary source of revenue, as a result of the low base effect, gradual recovery of retail atmosphere and outstanding gold sales performance. The group's to the retail revenue increased substantially by 49.6% to HKD 7.4 billion, accounting for 63.1% of the group's total revenue. With increased operating leverage, the segment profit increased by 84.9% to HKD 362 million, accounting for 20.7% of the total, and its segment profit margin was 4.9%. The growth in sales to end customers in Mainland was mainly driven by gold sales. While the sales of diamond products recorded lackluster performance there. As a result, the group's revenue from wholesaling business is, which mainly comprised of the sales of diamond products despite the increase in the number of licensed shops increased by 3.9% only over the corresponding period last year to HKD 3.1 billion, accounting for 26.2% of the group's total revenue. The segment profit increased by 3.6% to HKD 424 million, accounting for 24.2% of the total. Event profit margin was 13.8%. On the other hand, licensing income increased by 32.4% to HKD 1.3 billion, due to the increase in the number of licensed shops in Mainland, accounting for 10.7% of the group's total revenue. The segment profit margin was 77%, while the segment profits increased by 34.2% to HKD 964 million, accounting for 55.1% of the total. Let's turn to Slide 13 now. Sales amount of gold and platinum products increased by 48.6% to HKD 5.5 billion, accounting for 52.7% of the over sales amount which is calculated by deducting licensing income from group's revenue. Our average gross margin returned to a more normal level of 17.7% as gross margin of gold products gradually returned to a normal level. Gross profit to gold and platinum products has increased by 19.9% only to HKD 981 million, accounting for 43.8% of the overall gross profit, which is calculated by deducting gross profit of licensing income from consolidated gross profit of the group. On the other hand, sales amount of fixed-price jewelry products increased by 18.2% to HKD 5 billion, accounting for 47.3% of oversales amount. Gross margin of fixed price jewelry products remained roughly flattish at 25.4%. Its gross profit as a result increased by 16.4% and 13.4% to HKD 1.3 billion, accounting for 56.2% of the overall gross profit. Now let's look at Slide 15 for performance in Hong Kong, Macau and overseas markets. During the year under review, low base effect, sound pandemic control in most of the year and gradual recovery of market sentiment, retail revenue from Hong Kong, Macau and overseas markets increased significantly by 50.4% to HKD 4.9 billion, which accounted for 97% of the total in these markets. The segment profit turned around from a loss of HKD 19 million to a profit of HKD 147 million, which accounted for 78.3% of its total. The segment profit margin was 3%. However in wholesale business revenue is decreased by 51.2% to HKD 127 million, as there was no sales of gold raw material this year. The segment profit is therefore decreased by 68.6%, HKD 15 billion, which accounted for 8.1% in total while the segment profit margin was 12%. As the segment profit of wholesale business included profit of inter-segment sales to self-operated shops, if including inter-segment sales in the denominator, its segment profit margin would be 1.2%. Furthermore, Hong Kong licensing income decreased by 46.7% to HKD 24 million because of shift of selling consultancy services to Mainland. The segment profit was HKD 25 million, which accounted for 13.6% of the total and its segment profit margin was 104%. Now let's look at Slide 16. During the year under review, results and then controlling most of the year in Mainland markets, there is a little bit strong gold sales, retail revenue increased significantly by 47.9% to HKD 2.5 billion, which accounted for 37.7% of this total. The segment profit was very flattish at HKD 215 million, which accounted for 13.8% of this total. The segment profit margin was 8.5%, a decrease of 4.1 percentage points because of drop in gross margin for gold products to more normal levels. Despite the increase in number of licensed shops, there was poor retail sales of diamond products as revenue of wholesale business in Mainland market which mainly sales of diamond products, rose by 9.2% only to HKD 2.9 billion, which accounted for 0.4% of the total. Nevertheless, the segment profit increased by 15.3% to HKD 409 million, which accounted for 26.1% of its total. The segment profit margin was 13.9%. Licensing income in the Mainland market rose by 36.5% to HKD 1.2 billion, as a result of the increase in number of licensed shops, which accounted for 18.3% of the total, the segment profit increased by almost 40% to HKD 939 million, which accounted for 60% of total expense its segment gross margin was 76.4%. Now let's turn to Slide 18. During the year under review, Hong Kong revenue -- retail revenue increased by almost 30% to HKD 2.7 billion, and then is mainly it's because of some pandemic control for most of the year and benefiting from the Consumption Voucher Scheme launched by the government and local consumption atmosphere, they are gradually recovered. Under the low base effect, Macau retail revenue increased substantially by 85.8% to HKD 1.7 billion. From the slide here, you can see that both gold and fixed price continued to performed well in Hong Kong Macau and overseas market, while Mainland's retail revenue was mainly growth driven. Let's go to Slide 20. Looking at our self-operated shops performance. During the year under ended review, the overall SSSG of the group has a turnaround to positive growth of positive 45%. SSSG for Hong Kong, Macau market was positive 43% and positive 40% for the Mainland market. The group's SSSG to gold and platinum products was positive 52% and then a positive 54% for fixed price jewellery products. With the successful strategy with offering focusing more on the high-end market, ASP of fixed price jewellery substantial products increased by 54% in Hong Kong-Macau market, led to substantial increase in retail sales market by 46% for fixed price jewellery product there, while it's continue to recover single digit drop. The retail business in Mainland market is mainly driven by the strong gold sales or the retail sales of fixed price jewellery process, let's say performance. Slide 21 shows the same-store sales growth figures for our self-operated shops and licensed shops in different tiers and regions in Mainland. Over speaking, gold and platinum products performed much better than fixed price jewellery in Mainland China in all tiers and regions. The overall same-store sales growth of licensed shops were positive 16%, which was lower than the positive 40% for self-operated shops during the year under review. This was because of the low base effect or self-operated shops remotely located and more probably massive regions under the pandemic last year. On Slide 22, you can see that SSSG for Q4 FY '22 for the group as a whole was dropped while the cases in 3 quarters enjoyed substantial growth under the low base effect. There was serious pandemic situation after mid-February to be in Hong Kong and after mid-March to Mainland. Together with the high base effect, Q4 FY '22 therefore we recorded a negative 8% in [ same-store growth ] for the group as a whole. And then let's look at Slide 24 now. We had TOE of HKD 1.8 billion, representing an increase of 7%, with the revenue growth of 33%, TOE ratios revenue therefore decreased by 3.7 percentage points to 15.4%. There are 44 shops in Hong Kong, Macau subject to rental renewal in FY '22, accounting for around 57 of the total number of shops, 9 out of which were actually brought forward from last year for a short-term lease of 1 year only because the landlords will [indiscernible] longer term is under the high rental reduction. The overall rental reduction during the year under review was around 35%, while debt for the previous financial year was 33%. Apart from the reduction on renewals, we have around HKD 14 million rental transactions from our lenders because of the pandemic during the year under review. All that was HKD 17 million the year before. In FY '23, there are 29 shops subject to renew out of which 12 are brought from last financial year's renewal. Based on latest developments, it's highly like that it would still be a drop overall speaking in financial year to '23 and such renewals. Let's look at Slide 26 now. In FY '22, the group incurred CapEx of HKD 558 million, which included the cost of acquiring offices in [indiscernible] of HKD 480 million of expansion of showroom areas for our suppliers. Let's look at Slide 27 now. During the year under review, the total of simulation from investments and operating activities in HKRH and the subsidiaries, slightly narrowed HKD 31 million. Now let's look at our group's future plans on strategies on Slide 29. The group to set up its brand new 3-year corporate strategy with Mainland market expansion, branding and operational efficiency as its three main focuses so as to foster its future growth and developments in the coming years. Slide 30 shows our expansion plan in FY 2023 Q3. At end of March 2022, the group had a total of 2,809 shops globally, including 2,736 in Mainland, 44 in Hong Kong, 15 in Macau and 14 overseas. As the Mainland government continuously measures to stabilize economic growth, with a particular focus on policies to promote consumption and investment here. The group remains optimistic about the mid- to long-term business prospects. Accordingly, the group will still focus its expansion in Mainland market, particularly the markets in fourth-and fifth-tier cities. In the coming year, we target for net addition of Lukfook shops in Mainland will be around 500 shops annually, mainly focusing on opening licensed shops in fourth- and fifth-tier cities, while the target for net addition new brands' stores in Mainland is nearly 50 shops, which will also be mainly licensed shops. We also started to add 2 new shop in Macau and overseas and reduced 2 in Hong Kong. In addition, the group results committed to further developing its e-commerce business and strengthening cooperation with various e-commerce platforms in Mainland. At the same time, will also establish its own e-commerce platform, aiming to sustain the growth in e-commerce revenue at a target of 20% sales growth in the upcoming year. In light of the enormous spending potential of young continues and online sales platform, the group will continue its endeavor to promote the sales of affordable luxury jewellery products to expand its footprint in the young consumer market. The CapEx budget for FY 2023 will be around HKD 400 million, which will be used for premises practices, shop renovation, Nansha Plant and office renovation, purchase of new equipment and premises. Slide 31 shows the achievements of our e-commerce [indiscernible] under review. The e-commerce revenue increased by 60% and accounted for 54% of retail revenue in Mainland with ASP increased by 15% to CNY 1,500, while accounted for 18% of [indiscernible] rate of revenue. The group will continue committing to further enhancing the synergy between online and offline sales channels. We have also cooperated the last streaming KOL to increase brand awareness and increase the sales. Let's look at Slide 32 now. In order to enhance its competitive edge, the group will improve its operational efficiency by revamping supply chain management, implementing full automation, big data management and data analytics system. The group will also strive to maximize employee productivity by cultivating and nurturing culture of continuous improvement and innovation. Now let's look at Slide 33. The group [indiscernible] establish and strengthening its brand enriched and positioning through leveraging of innovative approaches and make use of various online media. Apart from that, the group will also enhance its product quality assurance, optimize service quality, improve support for licensees and offer products that meet market needs. Moreover, the group will adopt holistic approach to seize the development opportunities in the middle-class, wedding and kids markets by understanding customers’ spending habits. It will also continue to attract customers and encourage local consumption by visual merchandising enhancement, cross-selling boosting and VIP promotional activities, so as to improve sales and profits. Given the importance of social media in product promotion, the Group will continue to allocate more resources on various online media and Apps to reach out to target customers and catch up with online marketing trends, including RED, Tiktok, Bilibili and e-sports. In addition, in light of customers' demand in new products, we introduced a New 365 concept to feature the launch of new products every day and endeavoured to design and provide more diversified products to cater for the needs of different markets. Beside we will ever explore the enhancement of offline shopping experience and possibility of crossover collaboration or the industry on plans to further enhance synergies between online and offline sales channels. The group also recognizes the importance of environmental protection and climate change and the increasing awareness of environmental protection among stakeholders, including consumers and the demand for products, and thus the group will set up a long-term goal of carbon neutrality and will implement measures to reduce the carbon footprint of its products to enhance the group’s contribution to environmental protection. Slide 34 shows our achievement of membership program. At the end of March '22, our total number of members increased by 58% to approximately 3.8 million. The members contributed 54% of the group's total in retail sales in FY '22 2Q and the number of lenders in Mainland increased 78% to Hong Kong to 3 million and 13% for Hong Kong and Macau and overseas market for around 800,000. The Mainland contributed 50% of retail -- Mainland retail sales and 75% of Hong Kong, Macau retail sales. Then let's look at Slide 35 now. The group tireless effort in escalating brand influence and spreading brand value have been recognized with numerous awards from the industry and market, which affirms our outstanding achievements in branding, corporate governance, customer service, community welfare and environmental protection. The group also continuing to capture the benefits of rapid growth of online marketing through various marketing activities in new media platforms. The main use of social to the media platforms including RED, Tiktok, and e-sports to increase our brand exposure and expand our footprint in young consumer market. We have also expanded online sales by live streaming by staff and KOLs. Enhanced CRM via instant messaging apps to reach and engage with customers. During the Chinese New Year, we have invited Chinese table tennis players, Xu Xin, to be the Chief Fortune Officer of Lukfook Jewellery. We're now on Slide 37. Xu Xin was invited to host a live streaming event, which recorded 5 million views and nearly 100 million views of the related topics and realised rapid traffic growth and improved interactions with customers, greatly enhancing brand penetration. How it is related to Xu Xin as the CNY ambassador of Lukfook Jewellery altogether gained a total of 255 million views on different major social media platforms. To celebrate the group's 30th anniversary, the group held a lucky draw to give away more than 66 taels of gold and launched an online game in Hong Kong, so as to share the joy with the public. On the other hand, we launched Captain Sweet Potato ornament for anniversary celebration as REDesign's first-ever crossover collaboration with jewelry brand. The group uses has been recognized with brand awards in current and bronze awards in content marketing category in the 22nd IAI awards and several awards in IP marketing category in the 13th Golden Mouse Digital Marketing Awards. Let's go to Slide 39 now. We launched a gold bar luck draw in major social media platforms, which have reported over 300 million engagements on anniversary promotion altogether against a total of 436 million views and 1.2 million discussions. All this helped to effectively enhance our brand visibility and created hot topics. We are now at Slide 40. Lukfook Jewellery showed a creative video on giant naked eye 3D screen in Chengdu to celebrate the birthday of our global brand ambassadors Li Ye Feng and kicked off the Share Love in Wedding 5201314 [indiscernible] campaign hope it is related to naked eye 3D video games a total of 200 million views on 2 major social media platforms. In addition, the topic #520 Secret Coding [indiscernible] by has recorded a total of 110 million views in Tiktok. The group has also kept up with the times to leverage latest technology by bringing the glasses-free 3D print various cities and holding Love is Beauty 3D Blinging Box roadshows, Pop Up stores and new product launch in Shenzhen. The basic 3 dimensional effect attracted large crowd to take photos are streamed on both Lukfook Jewellery's Weibo and Tmall flagship store, which recorded over 12 million sales. Besides, the topic attracted 31 million views on RED. Actually, we should look at Slide 40 as well. Most picture shows the pace that we see I think we have shuffled this, sorry. And then let's go to Slide 42. The group continued to hold a fixed Lukfook Jewellery Raceday and showcased a series of glamorous diamond jewellery to the guests and audiences. Slide 43 shows our market-oriented strategy. Targeting the mid- to high-end market, the group has adopted comprehensive marketing strategy and launched diversified product offering with exquisite design together with meticulous services to seize the development opportunities in the middle-class, wedding and kids markets. Riding on the wave of e-sports and animation comics boom in recent years. The group has traded the King Pro League champion rings for 10 consecutive season and have continued to craft the jadite-set phoenix medals for the Honour of Kings World Champion Cup. Stepping up brand [ practices ] and enhancing our brand penetration into market of younger generation. To conclude under the low base effect the same-store sales, the group had a turnaround to a positive growth. However, the resurgence of the pandemic in Hong Kong and Mainland in February and March 2022, respectively, the group over simple sales from March to April 2022 reported a decline again. Nevertheless, with the improving pandemic control and the help of a new round of consumption vouchers. The group recorded effective factory sales performance in the Hong Kong market since April 2022. As a result, the same-store sales growth for Hong Kong, Macau markets recorded a slight growth from April 1 to June 21 2022, while the overall sensor sales in the Mainland market, including both self-operated and licensed shops recorded a decrease of around 15% for the same period. In addition, the group's overall SSSG turned around to a positive growth again in May 2022. Moreover, subject to the pandemic development with further expansion of our retail network and the progressive relaxation of the lockdown measures in Mainland and the government's commitment to implementing economic push measures and consumption encouragement, policies. We targeted cheaper double-digit growth in revenue in the coming years and look forward to reaching record high profit in 3 years. This is the end of my presentation. Thank you for listening.

Thank you, Kathy. Moderator, please open the floor for questions now.

[Operator Instructions] Our first question is from Mavis Hui at DBS.

And thank you, Kathy, and congratulations on your very good results. I have two questions here.

You're welcome.

First, I'd like to follow up on the same-store sales growth for the recent months in April to June. Is it actually possible to give us a little bit more idea about the growth or the sales momentum for each month, please? Because we understand that Hong Kong, Macau was a slight growth, while China, perhaps we are seeing some improvement towards late perhaps May to June, I guess. So is it possible to share with us some more details, please? This is my first question.

In fact, actually, we are going to have our first Q announcement in mid-July. I actually, we talked about a drop in March and then in April as well, overall speaking. And -- but it's kind of a narrowing drop. And then for -- I mean, for Hong Kong market because of, as I just mentioned, because of the consumption voucher and the more effective pandemic control since April, that's why we experienced very high increase in same-store sales growth in Hong Kong market, talking about something like 40 to 50 something percentage point for both April and May, actually. And of course, in June, is it bit lower growth because the consumption vouchers to be utilized mostly already. And actually, we are waiting for the next round of consumption voucher to be launch in August. I guess, by then, that would still -- would be very good push for our inter-segment growth in Hong Kong again, in maybe August and September. For Mainland market, it's a bit tougher, but actually, the loss -- the drop of single sales, we're talking about narrowing actually month by month and up to -- and actually in June, is going back to a processes more already. So basically coming when you look at the self-operated and licensed shops altogether. So basically, that's the reason why we are still expecting a growth for the Mainland market for the upcoming year. And Macau, it all depends on Mainland, actually. So in Mainland it's getting better, Macau would be getting better as well.

And what about the sales momentum by product category. Could you share some more color, please?

Well, actually, it's actually mostly gold driven.

Right, I see. And in terms of our just announced results. For our group wholesale division, GP margin was actually 13.8%. And in fact, if we look at China, focusing on China, the wholesale division actually segmental margin has been improving. So I'm just wondering how much room do we see our wholesale margin to increase further ahead in the medium term?

Actually, for the wholesale part, it's mainly diamond sales. So basically, it's kind of a post [indiscernible] sales. So basically, we should not expect -- we've got a formula for that. So we don't -- we should not expect that to fluctuate too much, actually.

I see. I mean the margin, in terms of the margin. Incremental margin, right, for wholesale, right? So yes. And then I also had this question because the National Health Commission in China has just shortened the quarantine time for inbound travelers in China. So do you think this might promote more tourist consumption in Hong Kong and Macau as Mainland Chinese only need to spend a shorter time to guarantee themselves upon return to China? And what are our expectations in our performance, say, for example, in the coming 3 to 6 months?

Of course, no matter what kind of relaxation would be beneficial to the hope to Hong Kong, Macau market, especially Macau. So basically, one is the cross-border restrictions being relaxed or the quarantine time have been reduced, it will be beneficial to the Macau market. And actually, Macau markets performed quite well in [indiscernible] the month, at most of the year in last financial year, yes, I mean, in the early part of the year. So basically, we are still waiting for that to happen again in Macau market because we have opened more shops there. And I guess, other competitors open -- have opened new shops in Macau as well. Everybody is expecting the Macau market to perform well in the coming period of time.

Right. So finally, do we have some targets or guidance for this new financial year, please, in terms of like same-store sales growth or like segmental EBIT margin?

In fact, we actually are expecting kind of a double-digit growth or we should say that we target a double-digit growth in the upcoming year. Maybe something like reaching more something like 20%. That's what we are targeting at.

So that 20% over...

Annual revenue for the group as a whole. Of course, this will apply to same-store sales growth as well. And basically, actually, we've got very high base in the first 3 quarters in FY 2022. But given the growth we fall in June, in April and May in Macau, Hong Kong, even though we've got high as, I believe, given the latest development, we should have good growth of revenue in the upcoming months.

Right. And what about our profitability like in terms of EBIT margin. Are there any targets, please?

We don't have a target for the EBIT margin. But actually, we -- based on the past history, we should expect quite stable operating margin and net margin of double digits, low double digits.

[Operator Instructions] Our next question is from Chris Leung at Templeton.

I have two questions. One is on the licensees [indiscernible] from their inventory level. What kind of inventory levels have you observed for your licensees?

Well, actually, we don't really expect licensee inventory level as high as our own shops because normally, they are not as strong -- financially strong as our own I mean look. So that's why actually we give a cap for our self-operated shops for -- for inventory level. But we give a minimum to our licensed shops because we're afraid they don't have enough inventory rather than having too much. So basically, the licensees inventory level will be more healthy or will be at a lower level than our own self-operated shops.

Okay. I see. But if you compare -- I mean, just to get a sense of like the licensee inventory level versus maybe early 2020, it's not like I'm just wondering whether there's any [indiscernible] Inventory in the last few months.

Well, if we -- we've got staff looking after a shop, I mean, licensed shops, and we focus on those individual shop rather than looking at the overall picture of all of the licensees altogether, we don't really pinpoint on looking at that kind of information. So basically, we only look at that once in a while, based on the previous -- the last time there's quite some time ago, actually, they've got very healthy turnover period will be lower than ours, actually.

Got it. Got it. That makes sense. Good. And then my second question is on how should we think about the inventory level for the group in the next 3 years, given that would have adding 500 new stores in each year, more like more new stores as we are planning.

Yes. In fact, at the pricing level, [indiscernible] it's early announcing. I think is quite healthy already-weak much increase in number of licensed shops altogether. So basically, with the increasing the number of shops we should expect that the inventory level to grow further. But having the existing like 300 something turnover period would be. I think it's quite healthy now when we take the retail sales increasing much further, the [ transfer trip ] should be lower than the existing one. So I think it's fine for us at this recent level of inventory, and we should expect the inventory level to grow progress along with the increase in number of shops in future.

Our next question is from Lina Yan from HSBC.

Kathy, you mentioned about your double-digit revenue growth in this coming year. Can you break it down by regions? And looking for quarter-by-quarter trends, how do you think the same-store sales were trending up quarter by quarter? Yes.

We only set a target of double-digit growth for everybody, and then that's why -- but overall, we should expect something like mid-teens to 20% altogether for every region and every quarter.

Every region, every quarter, like by first quarter.

First quarter, definitely is below, harder for them. And of course, we'll push everybody to reach that kind of target. And of course, sometimes individual regions, one may do better or less than the target for that. Hopefully, altogether, or blended together, we'll still be able to get something like mid- to 20% growth for the group as a whole.

Okay. Got it. And you said, if I understand correctly, you said you're more confident in growth in Hong Kong than for China. There are more uncertainty there? Or you're equally confident for both regions?

Actually, we are quite confident in Hong Kong, especially we don't have real Mainland visitors here yet. And basing on the local consumption, I think Hong Kong is really doing well actually and exceed our expectation. And of course, for the Macau market, once the pandemic situation is more controlled, Macau performed very well -- can perform very well, too. So basically, when you look at the profit sticker for Hong Kong, Macau is altogether is still at a very low level. So with the recovery of the retail markets in Hong Kong, Macau, we should expect that to its profit to improve much better in the coming year.

Management, shall move on with the next question? Management, shall we move on the next question?

Sorry. Yes, yes. Is there a question?

Sure. Our next question is from Anne Ling at Jefferies.

Hello. Just a very general question here. Regarding the decline in terms of like the same-store sales so far for China market, like teams decline, right? So if your pricing look at -- like you just mentioned about the [indiscernible] some June recovery possibly a bit positive. Are you seeing like lower tier cities cannot be quicker in terms of like recovering those Tier I cities after all.. I mean, Tier I site has been assessed by the corporate outbreak. That's my first question in terms of like geographically, the pace of the recovery in terms of like whether there's any difference. Secondly, it there's been lots of checks about like of several -- consumer trading down in China, just wonder whether like from your operating data, are you seeing any obvious trends as ASP declining or people buying less in terms of volume. So this is the second question that we want to check. And thirdly is on the store opening, we tend to open 500 stores in China. So possibly to franchise in licenses. So on this part, if market is slow down there, are we seeing the -- our franchisees having enough financial resources to help our expansion plan over. And do you plan to like put new franchisees for achieving your 400-store target?

Actually, for the different tiers of cities or regions, actually, we thought a slide showing their performance in FY 2022. And actually, normally, they've got quite similar performance for different tiers of cities or different regions of -- I mean different regions in Mainland. So you can look at the Slide 21, they show that -- and actually, you always suffer a similar phenomenon in Mainland. So that's why even though we talked about recent development, actually, we should expect that the different regions or different tier cities would have not too far away kind of performance, especially sometimes you may see kind of a lockdown in certain regions as particularly. But when we look at the overall same-store performance for different tiers and different regions, actually, they have very similar SSSG same-store sales figures. And then it's talking about trading down in movement. Actually, for the -- we got the page that talking about, I mean, the ASP there in different regions. So when you look at Slide 20, you can see that actually, for the ASP in Mainland, we don't quite -- I mean, it's not really fluctuate that much, not like Hong Kong. So basically, we can see a slight growth actually in the ASPs [indiscernible] single-digit order. So basically, even though we talked about you may see in trading down the normal overseeing but for our business, we don't really see very much fluctuation in that because for the product we are selling in home and Mainland, it's actually not that high in value, we are talking about 2,000-something renminbi only. So visibly, I think it's fine for us. I mean, for our type of business in Mainland, it should be quite stable in terms of the selling price. And then the shop additions there, actually, when we -- at the beginning, actually, we set the kind of target of 500 some months before. And then when the pandemic situation condition was kind of more serious in the Mainland since mid-March 2022, and we have a time -- a period of time that talking about discussing about whether we should turn down our targets to a lower level. But after discussing with the licensees and sometimes when -- during the bad time, it's actually a better opportunity for them to open new shops because they have more opportunity to let better locations. So basically, it's fine. That's why we finally decided to maintain our target growth of 500 net additions in the upcoming year. And then for those license fees that are partnered with us, normally, we should expect them to be wealthy people because they have -- we've got some things like average investment of CNY 4 million to 5 million. And it's hard for them to get the financial support for that. They have to pay cash for all those -- for that kind of investment. That's why we always say that for becoming licensee, they have to be kind of rich people themselves. So we don't really worry too much about the rolling down of economy leading to inadequate resources for licensees to open for expansion pattern.

Our next question is from Tiffany at Citigroup.

Yes. I'm speaking. Can you hear me?

Yes, yes. Yes, now.

Okay. Okay. Sorry. I have a very general question. How do you think about the competition and store opening room, especially in the low-tier market because there, we are seeing your competitors are also very aggressive in adding new stores.

Sorry, I can't hear you very clearly. Are you asking -- can you repeat your question again? Sorry, I can't hear it clearly.

Sure. What do you think about the competition and the store opening room, especially in the low-tier market because your competitors are also very aggressive in opening new stores.

Yes. Actually, up to now, we don't really expect experience in kind of obstacles in opening new additional shops in lower-tier cities. And for -- actually, sometimes you may see that we've got different types of licensees because for our licensees for those that like more freedom or want to do business like entrepreneurs, it will preserve for more than major competitor. They can have the freedom to change the product portfolio from our offline suppliers, and we always have a kind of communication with our team to see how to improve the business. So basically, that's why we are quite confident in the addition targets given the past experience we have with those if the licensees are in different areas.

Okay. By adding 500 stores per year, what do you think about the potential leading for your store network?

Sorry, potential what? Potential?

Seeing, the maximum store. Yes.

In fact, when you look at the number of shops or combined shops are having now, we are just about half of the size. So basically, I think we can at least double our numbers in Mainland. So you have kind of 500 additions every year, we should have at least 5 more years to go with such kind of expansion.

Next question is from Darren at Fitch Investments.

Hi, Kathy. Are you able to hear me?

Yes.

My question is quite similar to the previous question. Just wondering, in the medium term, how many new licensee shops are you looking to expand beyond financial year 2023?

Actually, we have set our 3-year corporate strategy with our targets of net additions of at least 500 shop every year. So that's why given the existing scale of our major competitors, we should be able to have that kind of expansion in the next few years, I mean, maybe 3 to 5 years more.

Understood. Then the follow-up question is a couple of competitors also expanding the lower-tier cities from Mainland. Can you share with me how is the management trying to differentiate your products and services to your -- relative to your competitors to appeal to lower-tier cities' consumers?

Actually, for lower-tier, licensees of lower-tier cities is mainly recruited by our existing licensees, and then they help in assisting those licensees to do the business. Of course, we will offer kind of knowledge sharing and training and kind of form discussions with them as well.

[Operator Instructions] There are no questions on the line. I'll pass it back to management for any closing remarks. Thank you.

Thank you, Kathy, and thank you very much for joining the call as well. Have a nice evening. Bye-bye.

Thank you. Bye-bye.