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Wu Yu: [Audio Gap] we continue to stabilize the business. You can say that now, besides the price, we can also see that value has already become a key focus of majority of the consumers, whereas you can see that we also continue to see the emerging of the new consumption scenario, which is accelerating the evolution of the consumption structure to some extent. We believe that good products need compelling stories to support them. We also need effective presentation method and the life cycle management to truly convene the value of the brands and products. Currently, industry opportunities still exist, but seizing those opportunities has become more challenging than before. Against this backdrop, Topsports has remained committed in advancing our core strategy and actively adapting to changes in market conditions and consumer demands. Externally speaking, we continue to expand our brand partnership ecosystem and evolve our capacity metrics. Internally, we persistently refine our omnichannel retail agility as well as operational efficiency. Despite the challenging external environment, we'll still be able to achieve our planned performance in H1 of this year. Look ahead, of the second year, we will remain a product business approach while keeping a resolutely optimistic attitude. We will gain market insights from core diverse perspectives, respond to external challenges with great agility and continued to enrich Topsports role and value within the industrial ecosystem. Next, I will hand over the floor to Rebecca, please.
Rebecca Zhang: Thank you. Please allow me to update you on the financial performance for H1 of this year. Overall speaking, we achieved our planned performance as expected, which has been mentioned by Mr. Yu, which also exceeds the market expectations we observed from the capital market. Well, from the revenue perspective, affected by the weak consumer demand and offline traffic fluctuations, overall revenue declined 5.8% to RMB 12.3 billion. By category, retail business declined by 3% Y-o-Y in H1 of this year. Wholesale business declined by 20.3%. By brand, core brand sales revenue decreased by 4.8%, reaching RMB 10.8 billion, where other brand sales revenue declined by 12.2%, reaching RMB 1.4 billion. The performance of other brands was primarily affected by lifestyle sports brands. Though overall performance of the specialized vertical brands remain the best, comprehensive sports and live sports category. At the GP margin level, specific affecting factors including, one negative factors and two positive factors. Regarding the negative factors, we have a deeper discount rate Y-o-Y, which have a negative impact on the GP margin, which is also indeed the same as what we mentioned to you. There are a few factors leading to the interaction. As you can see, that still, we have an ever-increasing number of the business. And especially in China, the online sales discount is more than what we have for the offline channel. So that's the reason the online channel sales continue to go up, which will indeed have a negative impact over the GP margin as a whole. Well, at the same time, as we have already mentioned, the deeper discount is being further ramped up, but still compared with the second half of fiscal year 2025, there's a narrow down. Meanwhile, we can see the revenue from the retail business contribution started to go up, whereas you can also see that the brand partner support that can also be supportive to our GP margin with the 2 positive factors to some extent, is diluted the negative factors burden. So in other words, resulting in the overall GP margin declined only by 0.1 percentage, reaching 41%. At a percentage ratio perspective, during the period, revenue declined by 5.8%. Total expenses decreased by 5.5%, with expense ratio only increasing slightly by 0.1%, reaching 33.2%. In the challenging environment, we hope to alleviate offline operating expenses pressure through the omnichannel deployment and the refined cost efficiency management. Overall estimated rental expenses from the value perspective, is being decreased by 12.1% on a Y-o-Y basis. Rental expense ratio declined by 0.8 percentage points, which was the biggest contributor to the overall expense ratio control. First of all, for the offline channel, we continue the structured optimization in offline channels to reduce losses and improve efficiency, where with operating as well as openings and renovation efficiency improved on a Y-o-Y basis. The second point is channel mix changes. The online and offline channel indeed performed different for GP margin and cost. Online channel has a lower expense ratio, where we have more revenue from the online channel. It also helped to further lower the overall expense ratio. Well, regarding the employment, we maintained a staffing line with omnichannel deployment needs, building an agile and efficient Thailand supply to consolidate our cost efficiency advantage. Overall, employee head count decreased by 16% Y-o-Y. Total employee cost decreased by 5.2%. The expense ratio has been quite stable, only increasing 0.1 percentage reaching 10.5%. They are mainly due to 2 reasons. First of all, we aim to provide long-term development support to quality talents where average productivity improved during this period, while at the same time, we also made organizational efficiency optimization work in H1 of this year, which will be demonstrated in cost efficiency going forward. Other expenses increased by 1.6% on a Y-o-Y basis, mainly including property, plant equipment depreciation, platform service fees, logistic service fees, where you can see that with rapid online business sales growth during the fiscal year, the corresponding platform operating expenses also increased. From an overall business progress perspective, negative factors mainly include operating negative leverage impact from the offline traffic situation, where this impact was partially offset by continued optimization of the offline network and increased proportion of the online rental business. Let's also take a look at the net profit changes. The trajectory from the net profit trend chart on the left, you can see the main factor affecting the net profit are decline in GP margin and impact of other income. Well, the remaining items, including total expenses, the net financing cost and the tax expenses provided a positive contribution. Well, you can also see on the right side of this slide, the GP margin deduction along with the decline in GP margin, a slight increase in the expenses ratio and the decline in other incomes were negative factors, where net financing costs and tax expenses provided positive contributions. Excluding the impact of other income, net profit declined by 6% over Y-o-Y basis. Consistent with 5.8% Y-o-Y basis, while our net GP -- our net profit rate was only being reduced by 0.3%, reaching 6.4%. And continue to further improve the negative leverage that may impact our overall business operation. Coming next, let me just discuss our working capital efficiency. During the fiscal year, inventory management has been our key focus. We adhere to the principle of maximizing merchandise efficiency, conducting omnichannel inventory circulation management. Inventory amount decreased by 4.7% with increased turnover days increased slightly from 1.7 days to 100 -- reaching 150 days. Trade receivable reduced by 1.5%. Turnover days declined by 3.5 days, reaching 12.6 days. Trade payable decreased by 64%. Turnover days declined 6.5 days, reaching 8.2 days. Payable related to the merchandise procurement reduced, which will also lead to the inventory reduction at the end of August. Regarding the working capital efficiency, the revenue decline continued to be seen, but average working capital as a percentage to revenue remained flat. We continue to maintain essential efficient working capital management. Let's now move to the cash generation capacities. Net operating cash flow was RMB 1.35 billion, down by 48.2% due to a few factors. So let me just share with you those factors. There are 2 reasons. The change was mainly due to the different -- the Chinese New Year timing between the 2 years, which actually have RMB 1 billion of the receivables and tradeables. And first of all, let me see, regarding the receivables. In H1 of this year, we need to calculate the Y-o-Y difference from February to August of this year regarding the operational capital. So it's actually a 6 months comparison. So performance in February has been essential, but at the same time, for February, the performance will be impacted by the Chinese Spring Festival. In 2024, the Spring Festival was in February. So the peak sales reason, the cash collection happened in March of 2024, but actually in 2025, the Spring Festival was in January. So the peak cash collection happens in February of 2025. So that's the reason the month-on-month perspective, you can see that receivables by the end of 2025 February is lower than what we have for the same period of 2024. So indeed, for receivables, different Chinese New Year timing between the 2 years, affecting the Y-o-Y comparison of the sequential changes in receivables, while at the same time, we also see impact from different procurement cadence on payable changes. Payable changes has everything to do with products we procured, we have reduced inventories, so as the payables. The second point is regarding the brand support and collaboration. It's more like a synergy between brands and us, including the rebates and also payment period and product refund. As we can see for the past few years, all those factors are not going to perform the same on a yearly basis, where we always continue to maintain good communication with the brand company to have collaborations to make strategies according to the landscape we have by them. So I was talking about the 2 factors impacting our operation cash flow. Free cash flow was RMB 1.22 billion. During the period, dividend payments were RMB 868 million, representing 34% of the beginning cash. Period end cash was RMB 2.538 billion, down by 1.9%, essentially flat. Net cash was RMB 1.27 billion. During the period, we maintained robust cash generation capacity. Last but not least, I'd like to talk about our dividend payout ratio. Based upon our cash generation capacity, there are 3 ways for capital allocation. First of all, supporting organic business growth; second, investing in scale expansion opportunity; third, excellent shareholder cash returns. We have constantly maintained this approach based upon the actual cash position of the fiscal year after funding requirement for the first 2 items, we still remain substantial cash reserve to support future business growth. During the period, our free cash flow was RMB 1.22 billion, representing 1.5x of the net profit for the same period, which provide a solid foundation of our dividend payment. Therefore, the Board has resolved to decline the interim dividend of RMB flat or consistent, maintain the same with last year. We hope we can leverage our high-efficiency operations and continue to provide a positive cash return through our efficient operation, creating sustainable shareholder return value. Coming next, let me just welcome Rebecca Zhang to -- Mr. Zhang to walk you through the business review section.
Qiang Zhang: Thank you very much. Review H1 of this year. Micro retail market demand fluctuate. Social retail data show that textile and power industry grew by 2.5%, slightly faster than last year, but recovery pace was lower than the growth rate of the total social consumer goods retail sales. Industrial growth is no longer universal. It extend from the specific scenario and the demographic. In omnichannel retail, we now have instant retail, the broader and deeper channel deployments. The experience economy has risen with consumer purchasing not only product, but also service, content and emotional connections. Technology innovation also play a crucial enabling role in both back-end operation and front-end interactions. Where for sports industry, consumer segmentation has been more subdivided and be more diverse, shifting from general sports population to specialized vertical interest communities. Professional functionality has become the key direction for product upgrades with consumer pursuing high performance and scientific support. Meanwhile, while domains have been deeply integrated, sports has been connected to lifestyle, social interactions and the technologies. Facing such environment, industrial leading company generally focus on core strategies, invest in product R&D to build technology barriers, capture segmented demand through brand and category metrics expansion, advanced operational lean management, improving resources conversion efficiency. We are facing the external challenges. Topsports adapts to trends, refine internal capacity and enhancing our corporate resilience through forward-looking strategy positioning and agile execution. Against the backdrop of coexisting opportunities and challenges, we have made 2 reinforcement, reinforcing expansion into emerging scenarios and high potential area. Our brand metrics covers the comprehensive sports, lifestyle sports, professional sports and IP culture, and we continue to expand the brand deployment in running and outdoor. Committed to become an omnichannel one-stop operational partners for more partners in China's market on the diversified sports landscape. We also have 3 major iterations. In omnichannel retail, we comprehensively focus on continuous lean improvement of the offline and online efficiency. In talent strategy, we have released Topsports talent philosophy of ambitious, self-driven, disruptive, self-reflective, responsible and mutually achieving, focusing on building a growth-oriented team with both innovation and practical capacity. In technology upgrades, we continue to advance our digital intelligence strategy, optimize and expanding application of diversified tools, improving multichannel digital operational efficiency. During the period, facing continued evolving consumer habits and scenario demands, we expanded and optimized our omnichannel retail capacities based upon the offline and online synergy plus differentiated channel operations. We proactively drove traditional stores to breakthrough single growth to comprehensively deploy one plus and diversified operating models. While physical store as a core, extending to online consumption scenarios through the middle school expansion, embracing new platforms and method of connecting with consumers. By period end, our offline store has extended to online operational touch points covering multichannels, including constant e-commerce, private domain operations, local lifestyle and instant retail, leveraging the multipoint deployment and merchandise advantage. With coordinated support from merchandise management, user service and digital intelligence, we will be able to capture differentiated demand across various consumption contacts, building a flexible and efficient online operational system to support the high-quality growth of the online business. Where in terms of the store layout, facing the market environment with fluctuating offline traffic, we use operational efficiency as our core anchor, prudently advancing optimization of underperforming stores, adapting to the demand changes through flexible layout adjustment. We adhere to the optimize plus principle, optimizing and deploying one brand, one strategy retail store structural adjustment strategy based upon brand partners differentiated characteristics, target consumer profile and product attributes. More importantly, by building an integrated omnichannel retail network, Topsports has provided consumers with seamless connected full scenario service experience. At the end of August 2025, we operated 4,688 directly operated stores with store count down by 19.4%, sales area down by 14.1%. Compared with February 28 of 2025, store count down by 6.6%, total sale area down by 4.6%. Average sales are per store increased by 6.5%, consistent with 4.8% trend from the same period last year. Due to our more focused resources allocation, capital expenditure decreased by 36%, selling and distribution expenses ratio decreased by 0.2 percentage. Frankly speaking, we recognize the essential role a physical store play in sports industry. We upgrade the store with potential value. We're also actively expanding offline store online capacity, seeking ideal alignment between experimental value presentation and the store performance. Against the backdrop of complex and the variable retail markets and consumer behavior, Topsports remain strategic foresight, continue to work with our upstream and downstream partners to explore diversified offline value, providing Chinese consumers with rich experience and good product recommendation across all scenarios. This year, we jointly let and implemented NBA Star China tour activity with major brand partners covering the key CBD in Shenzhen, Chengdu and other cities. Fan enthusiasm was high at the event value, further highlighting our value as an active co-contributor of the diverse culture. Meanwhile, we launched new concept stores with multiple brand partners. Serving as exclusive collaborator and leading facilitator, we're working with brands on localization strategy creating fresher and more cutting-edge product and the store experience for young consumer groups. We also deeply practice sustainability concept, partnering with emerging pet brand [indiscernible] to launch the used closing recycling charity initiatives in stores, advocating circular economy principle and engaging more than 10,000 consumers. Regarding the online business, we advanced refined channel operation, optimizing overall metric strategy based upon the scenario characteristics. During the period, retail online business sales, including both public and private domain achieved a double-digit growth Y-o-Y. Let's take a look at operational factors for each channel. For e-commerce platform, we focus on store cluster metrics, omnichannel expansion, leveraging multi-brand advantage to enhance efficiencies through merchandise support. In content e-commerce, we use account metrics and building product synergy, and to build a heat product to penetrate into target demographics through interest-based approach. Private domain operation deepen user connections through precise and customized community service. The newly added instant retail during the period leverage our store network to provide instant need, instant purchase and instant fulfillment consumer experience. By period end, we have 800 Douyin and WeChat video accounts, more than 2,300 Xiaohongshu accounts with more than 3,600 mini program stores and 3,700 stores participating in instant retail. During the period, we continue to maintain first place on Douyin Sports and outdoor ranking. Our private domain mini program also maintained first place on Tencent official WeChat popular mini program sports and outdoor category rankings. Through the above deployment, Topsports online business can now comprehensively cover consumer 4 major purchase scenario as brand interest-based, recommendation based and instant need purchase achieving effective extension and the systematic organization of the online business. That concludes my sharing. Let me just pass on the floor to Ms. Zhang Huijing to review our initiatives and achievements in user operation and digitalization.
Huijing Zhang: As many of you can already see, Topsports is committed to building a diversified user value system. We're deeply mining user potential value to form a virtuous circle development ecosystem to continue to deepen the user relationship. Where in user acquisition, we have a very targeted focus. We focus on omnichannel expansion, combining the omnichannel scenario-based interactions, engaging marketing and cross-industry collaboration to engage new users. While at the same time, we also drive multi-platform user information integration and consolidation, improving omnichannel user profile to ensure users enjoying consistent benefits across all scenarios. In existing user operations, we upgraded and refreshed the naming and benefits of Topsports membership tier system, deepening emotional connections with users. Meanwhile, we also built an omnichannel integrated operational closed loop using product, content and coupons as entry points to continuously enrich and cultivate user value. Whether users are in-store or after visit, we maintain omnichannel operation thinking, closely following characteristics of each stage in user life circle, achieve success reach and efficient conversion, further enhancing user belongings and brand affinity. Well, till now Topsports user base has steadily grown to 89 million. We focus on refined deployment managing and continue to give my user value. We deeply integrated our original membership IP, TOP Run Free into city scenarios like travel shopping and Q&A. During the May Day holiday, online active activities awakened more than 1 million private domain users, contribute more than RMB 100 million in sales beyond regular membership activities. We launched money-saving season cards for high-frequency members addressing their high-frequency consumption effectiveness pain points. Results show that card purchase a significant repurchase rate than regular users. Those above initiatives can allow the user to maintain consistent high stickiness and loyalty across all scenarios. Total member accounts reaching 92.9% of the sales in offline store and WeChat mini programs with repeated purchase member contributing to 60%. We also achieved positive result in high-value member operation, though they only represent a mid- and single-digit percentage of the total consuming member, but their value contribution is approaching 35%. High-value member average order value constantly and significantly exceeds the membership average, reaching 6x of the average member order value, demonstrating strong consumption potential and user stickiness. While at the same time, we also build a digital platform as our key strategy. In H1 of this year, our digital platform evolved towards a more intelligent strategy. We constantly guided by precision plus efficient inking combined with business strategy to focus on scale expansion and cost reduction and efficiency improvement across omnichannel dimensions. We refine and strengthen efforts across 3 themes, including omnichannel integration intelligence and panoramic view, building Topsports smart retail ecosystem. To be specific, omni-channel integration comprehensively connects business processes across 5 dimensions, including product members, marketing, service and data. In product dimension, we focus on building a system that can maximize inventory sharing, ensuring omni-merchandise visibility, stability and fulfillment capacity. In members, we drive universality and value maximization of the traffic acquisition and operation, enabling members to achieve consistent and quality service across different touch points. In marketing, we actually provide strong momentum into business development through diversified coupon and combination, supporting user value mining and sales conversion. In service, we achieved the consistent efficiency in consumer service tickets, significantly improved the user service response speed and quality. We achieved our mid-wall upgrades and migration, improving system utilization and operating speed while delivering efficiency optimization. While at the same time, we are also improving our sales efficiency. As you can see, in omnichannel intelligence, we continue to further improve the on-shelf efficiency, while at the same time, we will be able to continue to improve the inventory listing and utilizing of efficiency through end-to-end supply chain timeless control. Intelligent marketing and sales, we drive dynamic upgrades in product delisting while forming automatic process communications with AIGC content creation and copy AI-assisted product selection recommendation. At the intelligent operation and the decision-making, we complete the leap from the passive analysis to proactive intelligence, advancing store operations towards automation and precision. In omnichannel ergonomic views, we rely on digital intelligence capacity to achieve deep constructions of the user ecosystem and value enhancement on the AI-powered ecosystem. By building user operational model support that match user value growth curve, we support the development of the user ecosystem across all time period scenario and life cycles. Meanwhile, accelerated AI technology penetration also bring new momentum to -- the Chinese consumer cautious where consumption motivation shifted from a purely practical to pursuing emotional value and on the multidimensional aspects -- combined with the rising running enthusiasm, consumer demand for sports equipment has been upgraded to dual requirements of professional and quality, value in both segmented scenario enhancement experience and resonate with brand value, making the vertical segmented sports brands more favored. Based upon this, we can seize market opportunities by further expanding our freight cycle with a focus on deepening deployment in running and outdoor. We have successfully launched a partnership with running brands, including Norda, Soar, Ciele and outdoor brand Norrøna, to meet differentiated vertical demands. Additionally, we expand our own capacity circle as exclusive operational partners of those brands in Chinese market. Topsports is responsible for end-to-end operations, including brand strategy, content, communication, omnichannel operation and community cultivation, working with brand partners to tap the market potential, achieve effective connections with the target user and sustainable healthy brand environment. Currently, those brands are proceeding with orderly expansion based upon their distinctive features through a differentiated approach and plans. They attract new users through the major events and circle activities building social media metrics with leading style products to achieve cross-scenario brand mature cultivation and process demographic service. In channel, they adopt a multichannel development strategy, successfully opening the offshore online flagship stores. We're also flexibly utilizing the offline pop-up stores and buy stores to meet the Chinese consumers. In deploying those brands, we continue to explore to bring consumer with more diverse and distinctive experiential value across all domains. During the period, the Norda brand operated by Topsports debuted at the 2025 Yunqiu Mountain Trial race, creating a scenario-based independent retail space, emphasizing on try-on experience featuring with minimalist artistic and a strong design, attracting numerous runners for the on-site inductions. Sequentially, Norda successfully held the first brand event in China at Aranya, Jinshanling, the Mountain Breeze as Escort, Wild Trails into Zen, connecting with domestic running communities to accelerate their presence in China market. As an innovative attempt to invest in more heavily in running shoes and retail formats. We help to connect the runner brands and cultures through running lifestyle brands. Recently, we actually have our running concept store, Ektos in Shanghai, reconnecting the traditional offline retail language with runner needs as a core, emphasizing our integration into community and runner lives to increase user stickiness. The store social infrastructure provides runner with one-stop services. In product selection, we emphasize on professional logic using professionalism to resolve consumer pain points. We're introducing the unique product to maintain user freshness, where we focus on the community operations and content co-creation, transforming the store positioning from a single run equipment sales venue to become Ektos, a platform or spreading running culture and promote exchange and growth among the running enthusiasts. We hope to achieve good products and service through Ektos building reputation and influence in domestic and international running industry, making Ektos an independent operational platform for understanding Chinese running culture, therefore, engaging more brands to open their new stores in China. Going forward, we are optimistic about the running subdivision, and we'll have more deployments in this regard. Currently, the sports consumption industry are facing the opportunities and the challenges amid the intensified competition. Facing such situation, we will actively adapt to the trends and confront market challenges. We refine our competitiveness in sports retail industries through forward-looking strategy as well as ensure execution. Looking to the second half of the fiscal year, we're going to focus on the 4 parts. Focus on omnichannel scenarios, user innovative formats and service positioning for long-term growth. Continued focus on consolidating efficiency, forging fundamental resilience of the retail platform, optimize precise plus efficient digital intelligence empowerment support, practice ESG principle, building sustainable pathways for ecological co-construction and value co-winning. So that's all for the presentation. We're now happy to start the Q&A session. We welcome the online investors to ask questions. Thank you.
Operator: [Operator Instructions] Coming next, let's welcome Wei Xiaopo from Citi.
Xiaopo Wei: Can all of you hear me?
Unknown Executive: Yes, please.
Xiaopo Wei: I have 2 questions. My first question is regarding your key partners. A few weeks ago, your U.S. partner, Nike, has make some very interesting comments of the China market in their quarterly report. They specifically emphasized they're going to have a major investment in China market. Mr. Zhang, in your presentation, you already mentioned, Topsports continue to actually refine our omnichannel operation and also to help to tap into the online value of the offline stores. Just as was being mentioned by Nike, for Nike global directed e-commerce, the Chinese partner dilemma facing the offline operation dilemma. So Nike's online retail business is not 100% aligned with the China market needs. So in other words, as far as I believe that Nike is going to invest more for the offline channel, is it possible for the Topsports management team to comment on what would be the future of the Nike in China? Or what about the partnership strategies? What about the order and the product you see from Nike? But at the same time, my second question, in your interim report, your GP margin residence is much better than what we expected. You have already mentioned, part of the reason is because of the brand support, but how sustainable the brand support would be? This is my first question.
Unknown Executive: Thank you, Mr. Wei. I clearly noticed for Nike Global, it has already disclosed its comment for Chinese market. It was measuring its business structure product in China. Its business recovery in China is much slower than its business development in other countries. In Nike's statement, it was mentioning the online platform and online business in China has been quite chaotic. People are all competing over the price. So that's the reason that Nike started to roll out its management and plan for online channel, and they are going to further reduce discounted product for e-commerce sales, which has been mentioned by Nike, where we are being supportive to Nike's initiative. We are helping them. We are, at the same time -- and it also mentioned it's going to invest for the offline channel, because sometimes if you operate a single brand store, the churn would be pretty long, including store selections, GFA decisions, the shelving, listings and product presentations, all the offline store operations be further challenges with more adjustments being needed. We are in the process with Nike for negotiation. Some has already generated a good further results or some are still in negotiation. Let me just give an example based upon the existing sales and the market landscape. Topsports already narrowed down the GFA for many of our own stores because you can clearly see the offline traffic has been changing. So that's the reason we are actually narrowed the GFA for many of our stores, which would also be aligned for the future new openings and renovations we have for our stores. While at the same time, we also continue to further reduce the accretion cost. Let me just give you an example. For Category 1 Jordan store, for a single store, the traditional -- the decoration criteria cost being reduced by 45%, where for STORE 750, actually, the decoration cost being further reduced by 42%, which can also help to further reduce offline store operation expenses, which can further improve the operation of the physical stores, where there's another improvement on the product or merchandise by embracing the sports brands, we already see 2 significant improvement on 2 categories. The first 1 is a running category. And you can see that our product continue to perform above industry average. Starting from Q3, we invested in [indiscernible] and its single month sellout is close to 50% to 60%. In other words, it has already been taken as the best-selling products, which actually further improved the selling rate of the new product. In winter, we actually have the [indiscernible] with just 3 months after the product debut, the authorization is already more than 40% or the sell rate is already more than 40%. We do see for the running shoes, some of the new products and functional products are actually having very good sales performance. For the basketball category, copy product sales rate was also outstanding. So you can see for the functional product sellers, no matter for running or for basketball, the key flagship sales all see very nice selling performance of the new product and highlight of the new product, while at the same time for Topsports in order to make sure we can respond to consumer needs in a more efficient way. As we are working with Nike for their next highlight of flagship product and that is outdoor ACG product. For outdoor ACG product, its independent brand. For Topsports, we are also an important partner of the independent outdoor brand, ACG for Nike. Till now, we have already nailed down the first 5 stores. The first 1 is the Beijing Sanlitun store. It's being operated by Nike, but the top 2 to top 5 stores were all being operated by Topsports. Stores being located in Nanjing, Chengdu, Guangzhou and Changchun. The location has already been selected. And the commence time has already been confirmed. We are actually working with the brand to further explore their offline potentials.
Xiaopo Wei: I have the second question regarding your brand metrics. Especially for the past 1 year, we say your brand metrics being further expanded with accelerated pace. For example, the management mentioned you are engaging more brands for partnership and the cooperation was being more innovative, for example, Norda. So I really would like to know with those new models, for the emerging brands besides Nike and Adidas, for example, like Norda, Soar, Ciele and Norrøna, what would be your future target? Do you have any qualitative or quantitative target that can share with us?
Unknown Executive: Thank you, Mr. Wei. This is also a very good question. Let me just respond to your question from different perspectives. If you have any ongoing questions, please send me more message. First of all, for the past 1 year, as many of the friends already see, we are accelerating our pace for brand metrics expansion. You see it from the results we shared with you, but actually, it's not a short-term action. It's been a long-term commitment. Many of the brands, especially the emerging brands, we have already engaged with them for 2.5 or even 3 years. It happened just been released within the past 12 months. We have already have a long engagement and commitment or negotiation with those brands many years ago. For my second point, let me just share with you how I comment on the brand metrics and the brand family. If -- you are the one follow our company for many years. You probably still remember when we go for IPO roadshows, we tell people we are more like a combination fund or just like the portfolio that you may have. For many of the ETF shows, we're going to talk about tracking error. Tracking error can actually reflect whether you can effectively tell the market changes. We are also bringing the tracking error thinking to see whether our brand metrics would be able to tell the brand, the future development, market dynamics or showcasing the segment with new potentials. By having such a thinking in our mind, we continue to think about and review what are those brands we can work sustainably to bring them into our brand metrics. So generally, for our brand deployment, to a great extent, it also shows the changes we have to the market dynamics, our focus on segmented areas with new highlights. If we believe there's any segment with good short-term, long-term development value, we'll continue to add into this segment to make a continued investment to showcase our confidence. To be more specific, for example, in the secondary market, you may actually have the circulations, no matter for consumables or industrial products or technologies. We hope that in the areas, we're supposed to have our presence, we then would like to have more leadership in that segment. Especially for Topsports, we are a platform having the omnichannel presence. We need to continue to leverage our advantage. We indeed have the platform and scale up capacities to work with different brands for partnership. So that's the reason from this perspective, it can also help you to truly understand why we continue to expand our brand metrics. Mr. Wei, I remember, you also have the second part of your question regarding our vision and our targets. Well, for vision, you probably have been already inspired by what I mentioned, how you understand our brand metrics and the market development. What we do now is to leveraging our partnership with brands to continue to support them. Besides retail operations, we also provide brand management support and initiatives to the brand. I hope that the capital market could be more patient because at a new stage, we'd like to take baby steps to make every step counted to consolidate our business. For any new business transformation, we also keep an eye on the new model besides transitional retail operations, truly hope to have a more refined product or business model. A new business model provides more promising opportunities to us and to brands to tap into more market potentials. So 3 points from a response. You can understand our brand combination and the product portfolio, which showcase the market dynamics, our confidence and our investment of the market. Secondly, we hope that by having the ownership and leadership in our key areas, the brand we're working with is also emphasizing our business shift from traditional retail operations to brand management. But still, we are focused on the product, making the business model right to lay a solid foundation for our future sustainable growth. Hope I helped to answer your questions.
Wu Yu: Thank you. Thanks, Mr. Wei. I find out, there are 2 questions you may need some answer from me. So let me just share with you how sustainable the brand support is going to be, and then what about the order. Let me see for support sustainability. The market is not performing well. We get more support from the brand partners. We're looking into the future. I truly believe as the largest and the best partners with the brands, we're surely going to have more support more than others get. Regarding the product order for the past 2 quarters, you can see that the order has been decreased on a Y-o-Y basis. Majority of our brands are adapting the flexible supply chain. In flexible supply chain, there are opportunities for us to have more order placement. You can see in the actual seasonal sales, our actual sales or product arrival is actually higher than the order were placed. So that is my answer to your question.
Operator: Coming next, let's welcome Ding Shijie from Guosen Securities.
Shijie Ding: Thanks for giving me the chance to raise a question. I'd like to ask the company, what would be the outlook you have for H2 of this fiscal year or even next fiscal year? And we also noticed the wholesale revenue for Nike in China market was declining for the past few quarters, but the decline has been further narrowed down. So as someone ordered from Nike, will Topsports share with us what would be the breakdown of the new product or the old product you ordered from Nate? Whether any updates you may have on the discount or product sales from Nike? My third question was supplementary Ektos project. We see that we have more consumers who's been deeply engaged in running. But still, there are some pain points for shopping, for example, the brand preference and know-how of the salesperson, we are very interested in Ektos. Is it possible for you to share more the product Ektos, how is future developments being planned?
Unknown Executive: Let me just respond to your question regarding H2 of this fiscal year. Well, as you can see from our presentation, communication or what you can see from the industry. You noticed, the industry still faced challenges even in recent weeks. In such a challenging macro environment, in this fiscal year, what we are committed to is to fulfill our full year guidelines that we provided in May of this year. In other words, in fiscal year 2026, we hope the net profit could be flat. Net profit rate could be improved on a Y-o-Y basis. This is also the commitment, we still outlook now. Well, regarding fiscal year 2027, as many of you know, we only give the outlook when we hold the annual release. So it's too early to provide the fiscal year 2027 outlook. Let me just ask Mr. Zhang to respond to the inventory metrics to you.
Qiang Zhang: Thank you for Nike products, around 70% to 80% of the products on the new product, which is healthy and which is also the level we are keeping now. We're going to keep it in the near future. Where for the key brands, what the key brand is doing now is that they are actually leveraging 3 strategies. For example, we control the volumes to maintain the discount rate. So actually, the discount rate has been quite stabilized. Where you can also see that the sales of the running-related products will continue to go up, which is indeed supporting the new product sales, which can also benefit our GP margin to some extent. This is what we are having now.
Wu Yu: Thank you. Thanks for the questions. All the questions are quite professional and well targeted. That really makes me truly inspired. Those questions are quite good. So please allow me to share with you some of my ideas by responding to the questions. Let me just try to give a few comments on the questions I heard before. For Ektos. Ektos indeed is a business or a more accurate manifestations we have for our commitment into this business. So Topsports' investment or commitment in running has been further manifested by Ektos. For Ektos stores, what is happening for the project and to our stores? What are those content business going to be presented by Ektos? Well, from the physical format, Ektos is more like a multi-brand retail space in the physical channel. But when we started the trial operation from the 1st of October to now, it's around more than 20 days. So besides selling the exclusive product ready to be seen by the market, Ektos has already become and evolved into a hub that can connecting the people who are in love of running. For example, we have KOLs who come to the store for visit. We have the runners who come to the store to talk to us. In our Ektos, we call ourselves as a social infrastructure. It's a social infrastructure concept. What do we mean by saying social infrastructure? For example, there's 1 corner in the Ektos store, they are going to open to our membership. In Zhongshan parks in Changning district, we do have a coastal running pathway. Our store can provide the storage locker and the 24/7 vesting service to our runner, hoping that we'll be able to have direct reach to the runners for more communication and interactions. But at the same time, for Ektos, we also have some top runner from Shanghai. They are not coming to Ektos for store visit or shopping. They just take Ektos as a place for their appointment or engagement, just like the social space, we have in Europe, just what Starbucks presented to the community, is actually a connection hub of the community. I think for Ektos not only bring more product sales, engaging more brands. For the past 2 to 3 weeks, there are more sports brands connecting us, hoping that we can have some co-branded events or running their brand communities in Ektos. We're helping them to show more content. So actually, Ektos is a diversified harbor rather than being limited on the physical space. It's already go beyond its physical format. Then how Ektos is going to develop in the near future? I think it was not contradictory with what we have already mentioned. When Mr. Wei was reading the question, I have already shared with you, we're not only going to limit ourselves for the retail operation or omnichannel deployment. We are now shifting into brand management, too. So all those initiatives when we combine together, we are, in other words, continue to embracing brand management with a physical platform and ready-to-go strategies. So in other words, Ektos is indeed our store, a physical store or manifestation of our commitment for the branding sector, where it's going to be parallel to our single brand business and more emerging business or more connection service would be available at Ektos. In other words, let me just use 1 sentence to summarize my comments. Ektos is not only a new store of shopping the new brands or new products. If you have any further questions, I welcome you to raise the questions now or after the meeting. Thank you.
Operator: Coming next, let's welcome Dustin Wei from Morgan Stanley, please.
Dustin Wei: Recently, trend update would be my first question. Double 11 has already been started, and I know you have many good online sales. Do you have any trend to update us? My second question is a long-term question. For retail market in China, offline and online has been changing all the time. Right after COVID-19 in 2023, offline traffic has been recovered. But in 2014, 2025, offline traffic has been kept at a very low level. I know you closed some underperforming stores, but still the offline traffic continue to go down. I see it's actually structural changes of the consumer behavior. I'm not sure whether I'm making the right statement. Now your online sales is already 40% to 45% in 3 to 5 years, it's going to be 70% of your overall sales. From our membership data, can you indeed see that majority of the young consumers on the age of 30 still purchase online rather than go for offline store. If such thing happen in the next 3 to 5 years, then for Topsports, where we already taking the right strategy to improve our digital capacity, whether this is going to generate some good opportunities or setbacks to our GP margin or business model? My third question is regarding your new business models. For example, you have exclusive partnership from a few nice emerging brands. Let me just ask you, for example, like Norda, Norrøna, are you contracting those brands for exclusive partnerships or may within that agreement term, you help them to take care of all the commercials in China, for example, distributions self-directed stores. Does exclusive partnership look like this? I know that the company has a very strong cash flow capacity. If you really would like to engage those brands in long run, did you consider JV or equity investment as a way of being part of the emerging brand operation?
Wu Yu: Thank you, Dustin. Let me respond to your questions. The first question is regarding the market landscape now, where you can see the market data or market sentiment. I think you can already observe that as a consumer or even you talk to other peer company, you probably already feel what the market may look like. I see there are more challenges are in the market, where from Topsports, especially from our fiscal year Q3 to mid of October. In other words, from the beginning of September to the mid of October, in just 6 weeks, the sales is very much in line with the Q2 performance of the previous fiscal year. I mean, from June to August. Online offline performance are also quite consistent with before. I was talking about the sales. Well, regarding the discount and inventories. Let me see that for inventories. Topsports still maintained a very stringent control over inventory. The inventory level is pretty healthy and controllable, which has already been mentioned by Mr. Zhang in his presentation. Regarding the discount rate, for the past 6 weeks in Q3, discount rate has still been deepened. The attitude of the deepening has been narrowed down compared with what we saw in Q2. So these are the latest observation updates. Well, regarding the overall market, still we see the challenges. But for Topsports, we always maintain our own cadence in H2 of fiscal year, we're going to be more priority-oriented, right after moving into H2 of the fiscal year. Our business or the actions we take are still going to be in line with our overall road map and the expectation. Let me just ask Mr. Zhang to respond to your question regarding the evolving landscape of online and offline business.
Qiang Zhang: Thank you, Dustin. I noticed the observation you mentioned in your question. We see the challenge for the offline channel is truly huge. This is how we comment on the online opportunity. First of all, the traditional channel expansion used to only focus on the store number, but now we focus on the omnichannel operation. For example, one physical store going to have a 10 online stores. So for one store, it has 1 physical store and 10 online stores. That is to make sure the offline store can develop their online capacity, especially when we have the traffic drainage for the offline channel, we have to find a self-rescue strategies. First of all, we need to build our private domain. By having a private domain to engage the traffic, we will be able to find a way for the offsetting the traffic drainage in the offline channel, retain the consumer, continue to enrich touch points and conversion. Besides the private domain, we also have the content e-commerce. That is basically restored with Douyin and Little Red Book. And we are also going to have the key stores and the flagship stores on the social platform, engaging more public traffic to this opportunity for sales. And the third part is Dianping.com or TikTok localized, and then they can actually direct the traffic to the stores. We also have our store presence, sales coupon, interaction with consumers, supporting them to come to our physical store for consumption. The fourth part, or should I say the most emerging and also 1 of the most important part, that is the instant retail. Instant retail can actually leverage the offline discount, providing more convenience to the online consumers. It's just like the food takeaway service of delivering Topsports product to consumer hands, which can have a fast fulfillment by providing the localized solution. Those are all indeed the strategies we have in order to support our offline stores to divide their online store capacity to offset the traffic drainage in the physical channel. Those are indeed the initiatives we are adopting now.
Wu Yu: Okay. Dustin, let me just respond to your final question. I think you have already made a very few important points. Same as you mentioned, for the contracting relationship within certain geographic regions, for some brands are partnering with us in Greater China or even in Chinese Mainland area that is exclusive partnership we reached with the brands. But just 1 more comment I'd like to make on that. We never excluded the possibility of having some equity cooperations with those brands. But let me just point it out, being an equity investor is just a tour rather than the final objective. What we are going to do is to share the interest with the brand to have a deep collaboration. We hope that when we were working with different brands, each brand has a very different background, the history, development milestones. If equity investment would be a way to deepen such a partnership, if other parties stay open for negotiation, then for sure, we are happy to have the negotiation. But if the timing is not right, we are still quite patient and be fully committed of supporting the brands to prove to each other, we are the right partners for long and sustainable growth.
Operator: Ladies and gentlemen, due to time constraints, let's welcome the final question. Let's welcome Samuel Wang from UBS to raise the final question, please.
Samuel Wang: I'm Samuel Wang from UBS. I have a question for the management team. The sales revenue decline is kind of significant in H1 of this year. Would you mind to elaborate on the reason? My second question, you now have 89 million users. You must have generated some good insights from the user. Did you see any new trends? For example, outdoor and running categories still registered fast growth, where for other categories, whether basketball has been pressured or is it being remitted or for other sports, for example, like tennis, like badminton or like golf, do you have any trends or dynamics updates with us? My final question is regarding the new brands. What about their sales contribution to your overall sales? And what about their profit or even the net profit contribution to our overall business?
Wu Yu: Thank you, Samuel. Let me just try to answer your question. I mean the first 2 questions. I will then ask my colleague to respond to a final question regarding new brands. My first response to your first question, wholesale revenue decline in H1 of this year. First of all, has been planned for the full year. This is also within our expectations. You know that for wholesale users, they are in the top-tier cities or Tier 1 cities. From the management perspective, I mean, if we consider efficiency, if the efficiency is not in the right timing, we may have some wholesale users or consumers. You know that for wholesale, the offline are the key for wholesale. Majority of our wholesale consumers, they have many offline stores. The offline traffic has been heavily impacted for this year. So our wholesale partner, I think their revenue is being heavily impacted. When we are dealing or handling with the wholesale customers, we would like to focus on the sustainable and healthy development. This is the strategy we have with our wholesale partners. Let me just complement on that because the overall micro environment is not looking right. Wholesale consumer confidence being impacted, order continue to go down, where there's another reason we have to notice, the market is facing various competition. The online product price and the sport product price has been quite chaotic. I mean the pricing system. For some of the wholesalers, they actually order less from the wholesale channel. They believe they will be able to get a better discount by having temporary small batch orders. So that's the reason the wholesale business was going down. Samuel, I didn't get your question very clear. You were asking about the insights from the membership to new brands. Are you asking me to comment on the new brands? Or are you asking me to talk about new brands deployment and the strategy? Would you mind to repeat the question again?
Samuel Wang: No problem. My question is that you have 89 million users. You might have some user insights data. Did you see that the category difference, for example, running outdoors, the growth rate was looking pretty right. Basketball used to be pressured, whether the pressure is being elevated or for some of the niche sports like badminton, like tennis, like gold, do you see there's any brand who have a promising future with nice growth or any category who may have similar performance as outdoor in the near future? My second question -- third question regarding new brands. What about the new brand sales contribution and profit contribution or the net profit rate?
Wu Yu: Thank you. Actually, first of all, sales contribution from new brands or niche brand, you see Topsports is a large company. So here now, the niche brands contributed less to the profit. You can almost neglect that. But running those niche brands or emerging brands is our strategy or our business pilots for future growth opportunities. Well, regarding profitability, you can see all the brands we are working with are having exclusive partnership with us. For those niche brands, we hope we can help them to have a good and high quality debut in China, consolidate their future growth opportunities in China. So profit and the discount control over those emerging brands being -- will by done by Topsports. So those are the 2 response I have regarding your new brands question. Well, let me just be brave in showcasing the promising verticals or the categories. I will ask my colleagues to give you more comments. First of all, as we can see, sports industry is being highly integrated, no matter from sports or from brands. While with these preconditions for the past 1 decade, you can see that we have domestic and international brands continue to show up. But to some extent, it was showcasing differentiation, people's interest and the preference being further sparked. This is actually 1 thing for your reference. Well, based upon that, you ask me what are the categories, what are those niche sports can grow? First of all, some of the so-called non-niche segment may not be niche in the near future. It may engage in more consumers in the near future. Well, based upon that, you see what would be the category that may likely to become the outdoor category. Just like the secondary market, you need to have the alpha and beta. Alpha shows the sports developments. And beta actually means the market dynamics that may lead to the brand growth in short run. You have to consider both factors together. Well, regarding the alpha, there are some niche market or sports, who have a very strong momentum for future growth. We have already made the corresponding resources allocation. Where for data, it's more like marketing campaigns, you just follow that, keep it on eye and be a part of that. That's my response. Let me welcome Mr. Zhang to say a few words.
Qiang Zhang: Thank you. Responding to your question on category. In the category we are operating now, we see demographics and the consumption data is truly aligned. The largest category is still running. Running is still the best and still growing segment we see. It's also a category that all brands in competing with. For running shoes now, I mean for the light-weighted running shoes, people just want to make it less than 200 grams. Adidas made a running shoes weighted less than 200 grams. It's going to be a onetime marathon running shoes. Performance being extreme. The surface is quite breathable and thin and making sure it have very good elasticity. So in other words, all brands have been competing over technology innovation and material progress. So all brands have been working for running market. It's still the largest application with every growing market momentum. It's still a place with a new product on a daily basis. All brands are actually taking running as a focus area of development. Well, let's talk about outdoor segment. Outdoor category is more like a high rising -- and even if it was rising fast, but still this market is still a vertical market with focused demographics. No matter like North Face or other brands, they actually made a substantial growth in the outdoor categories, which is truly well demonstrated with very nice growth. There are other segments, including basketball. Basketball is more like the inventory market. For basketball, we actually focus on the junior high school and the senior high school or even sometimes primary school students. Many of those target users are the on-campus students. The brand allocation in the basketball won't change that much. Nike probably be the trial taker where other brands are taking the corresponding shares. So it's actually a relatively fixed market with nice inventories led by Nike. Mainly the basketball market is being led by Nike and other brands just take of the rest part of the market shares. For the niche market, tennis registered very nice growth, especially Nike tennis series, where Nike sponsored Jannik Sinner, were in the tennis global competition, we have many new rising stars from China, which actually be a great momentum among the public. We see such growth momentum from Tennis, but the contribution and volume is quite limited. I see the growth momentum from tennis is looking good. Well, for football. Football don't have too much promising potential for the professional product lines. For viewers of the football or the people who play football, in other words, we have more people watch football games rather than play football. But the football lifestyle products do register nice growth for the past 2 years. That would be the category dynamics, I'm happy to share with you.
Operator: Okay. Due to the time constraint, ladies and gentlemen, here comes to the end of our presentation. Our management and IR team will continue to engage our friends from the capital market. Thanks for your time, and thanks for supporting Topsports.