Ladies and gentlemen, analysts, good morning to you. Welcome to the 2026 12 months ended 31st of March for Sun Art Retail Group Limited. Last night, we have sent you all the PPTs for all those we have registered. If you need it, would the online investors, please go to the company website to choose the online results announcement. A lso, you'll be able to get the PPT. With us today is the Chairman and the CEO, Mr. Hua Yunen g. Next to me is Ms. Wan Yiwen Desory, the CFO. Also, we have Ms. Gu Xiaobei, the Director for Investor Relations. Now, let us have the Chairman share with us some of the investment highlights and the progress of the company. Thank you.
Thank you so much, and welcome to this announcement. In the 2025-2026 financial year results, in this particular financial year, the EBITDA is CNY 3.1 billion. We always want our EBITDA to be better. Whatever it is, in this very difficult environment in the year, we were able to have this EBITDA, and it is an achievement. Going forward, we will be improving on our EBITDA. Now, as for the business development, you have to remember, last time when we communicated with you, there were some core points. Today, I will use the same framework. Next year, I will also use the same framework. Why is that? So that you can follow our KPIs, and this is very important. I will be responsible for you, and you can follow us on all the major metrics. There were four or five things that we really needed to achieve. One, our products.
Secondly, online, we have to grow that. Thirdly, we have to adjust our shops. Fourthly, to open new shops. Now, last year, I have talked about these four themes. Today, I will do the same, and also to tell you the target for the year, for next year, and also for the year after. In three years, for these themes, we will be achieving them. I want to say in the first year, we have been able to reach the targets we have set for ourselves. Next year, we have another target, and in 2028, we want to have achieved them all. First of all, in terms of our products. Now, you know that for our stores, we are different from the other stores. We want to have a very deep relationship with KA.
That's what we want to have, a very deep relationship and for our RT-Marts, so that we can have very good sales and achievement. Also, our self-owned brand, we want to grow that. In May and June, you can see that we have these brands that we have developed ourselves. They were from zero, that we have grown them. Also, from the point of view of products, we want Fresh to be growing. T his is an attraction point for our patrons. F or products, I said there are different metrics, and one there is the products. Products is important. First of all, for fresh foods, you can see from the PPT, page seven, that it is about 3% in terms of over sales volume growth. This is important because CPI in China is dropping. There is pressure with the population.
Competition is more fierce, and shops are getting more numerous. F or us, the improve, the growth had been overall 3% volume growth despite competition. Of course, we want this to be 12%, 13%, 14%, going up and increasing. For us in the company, we want to grow fresh food to improve on the quality and efficiency of fresh food. How do we do this? Through marketing. That is a very important way. RT-Mart, over the years, we do not have a marketing department as such, so this is something we have to do. Also, another thing we have to do is to make it more Chinese. That is, for example, our Chinese festivals will be tied in with our products. It is not like the entire year through we will be selling the same thing.
Rather, for the 24 special times of the Chinese calendar that marks the Chinese traditional calendar, we want our products to be in coordination with those. Including vegetables, fruits, seafood, meats. Also last year, we said our penetration rate was about 40%, and we want this to be increased to a higher percentage for our penetration rates. This is at the core. Last year, with a very tough environment, we have grown 3% of sales, and coming forward, we will be able to increase that. For gross profit margin, we, of course, want it to be further increasing. It's increased by 0.8 percentage points. Just now I said there are three points. One, bring in more traffic with fresh foods. That's one. A second one is to have in-depth, diversified partnership with premium brands and value creation via national joint procurements.
Now, we want to build up our national joint procurement as a sustainable, self-reinforcing business ecosystem. This is not to lower or compress the KA prices or outsourcing, but rather for the KA or the important KA, we want to grow their share. By so doing, we are relying on them more, and they on us, so that they, in their new products, when they first issue and first introduce their new products, they choose us. This is for RT-Mart, we are different from others or other competitors. We embrace the KAs. Today, in terms of FMCG, it's increased national joint procurement to 60% of our sales. In the financial year, going forward, we'll be increasing this point. At the end of the year, you can come back and ask me, have you reached your goal? Give me a score.
Well, for the national joint procurement, if you look at the lower right-hand corner, you'll be able to see our pork performance. We have about 40 suppliers for pork, and last year, with national joint procurement, it's been compressed to five. They 're all the biggest KA in the country, and they have increased their sales for us. As a result, it's a 20% growth in sales volume. This is because we are strong alliance. Compressing 40 KAs to five, they make more money, and also our growth had been 20%. Not bad for RT-Mart. It is a win-win achievement. This is what we want to achieve. It's not like it's a zero-sum game. No. Rather, we grow together, and we win together. Today it's pork, and in the future, it will be a series of other things.
Also, it will be so for FMCG as well as for fresh food. A third leg is our private brands. We have developed some private brands. On the other hand, we decided to go from zero, start again. For our PBs, private brands, in the financial year, it is about 3% in terms of sales penetration. In the next financial year, I want to be able to achieve 5%, and at the end of next year, 6%-7%. This is to say, one day we want our sales target to be 20% for private brand. Of course, that will take a number of years, but this is the overarching target. Private brand and KA, they can go hand-in-hand together because there are many brands in China. We have a few thousand brands, for example.
If we compress, like pork, from 40 to five, they are better, and we at RT-Mart, we are better as well. If we grow from 3% to, let's say, 5%, our growth would be increased by 100%. At the end of the year, you can ask me whether I've achieved the target we set out. These are the three things in products. The consumers will be able to get better KA products, better fresh food products, and better private brands from us. Apart from private brands, the other thing that we need to do is for store transformation. We have about 500 in three years, we have to transform them all. Some are major transformations, some are medium, some are small transformation. Within three years, all 500 stores will have to be transformed.
In the end of the financial year, it will be 50%-60% transformed. We are now on schedule, and we're following the three-year plan, and this is the three-year strategy that we have talked about. Now, with the store transformation, there are a few things. First of all, fresh food zone reset. Also, the display and also our commercial street, and also the supermarket format. Next year, you'll be able to see the results. The fresh food and the fixtures and display gallery, and also closing some of our underperforming store. We will continue to push ahead with that. For our supermarkets, we have 34. For the supermarket, as a format, is it a proven model? With this format, it had changed from a negative cash flow to positive. That was encouraging.
The second year, we have been opening new stores, and third year, we opened more new stores. Supermarket is an area that we will grow. To open stores, first of all, we have to transform them, open new supermarket, and also grow our online. It was only about 20% or so of our volume for online business, but it is now about 30% in terms of sales penetration for online business. Within three years, we want to reach 40%. I don't know whether we'll be able to achieve that, but right now, we are about 30% already, and this is the target that we have set for ourselves, 40%. What we tell you, within three years, we will want to have achieved those targets. Now, for online, we should be able to break through 40%. Why? It is because we have the front warehouses.
Last year, we had opened front warehouse, and there had been a period of trying and trialing. This year, for front warehouses, it has already become a self-sustaining model. Some are even profit-making. For opening front warehouses in the future, it will increase our 40%, or help us achieve the 40% sales penetration. First year was trialing, second year, growing, third year, growing in big ways for front warehouses. Opening new stores is also this three-step approach. Overall speaking, I hope you would want to know, we are working on the food products and also the stores and also with our front warehouses. For stores in the next few years, it will be a net positive number. We also want that for those stores which are not particularly profit-making, we might have to close them. This is something we might have to do.
In this year, we will continue to enhance the areas that I have talked about. Desory will come back to look at the financials, and then we will go through the second year and the third year for some of the details of our plans.
Thank you so very much. Next, we look at the overall achievements for the year. We have 507 stores in 2024. This year, overall, the competition had been keen. The industry is also changeable with split-second consumption, et cetera. Overall, to see, it is about the same as last year. Overall revenue is CNY 63,442 million, and it is a 0.1% growth from the year before. Also for our revenue, and especially from fresh food had increased, and also our private brands had also grown.
This is a reason for our gross product margin increase, which had increased, as I've mentioned, 0.1%. Adjusted EBITDA margin is 5%, and adjusted EBITDA is CNY 3,157 million, and this is a healthy financial performance. In the future, our strategic planning and our mid- to long-term planning will have this basis. As for our net cash position, we are in a very healthy and very ample position. Our net cash position is minus the CNY 1.8 billion in terms of our debt. It is still over CNY 10,000 million as our net cash position. Also, we had a bonus, and from minus that, our net cash position is still very healthy. Inventory turnover days. This year, for our turnover days, you have to look at it in this way. For 331, actually, in the Spring Festival of this year, it was on the 3rd of March.
In the past 11 years, this is the first time the Yuan xiao Festival and the Spring Festival was in March. After that, with some of the speed or pace of the returns, et cetera, it was because of the festival timing that it had been delayed. Therefore, the inventory turnover days was a result of that. In May, it has already come back to stability in terms of inventory turnover days. Also, CapEx is CNY 545 million, less than last year. It is because our Kunshan project, it is at the end of its project construction term. Also, in our integrated procurement, we had more action on our KAs, on also our stores transformation and also our front warehouses. There had been some smarter investments, lower investments, and therefore, the overall CapEx has decreased.
For these 507 stores, the number of stores, there are 507 membership stores and also 32 are membership. The hypermarket stores are 462, and 34 are superstores. This year, we are also making some transformations. We have closed nine non-profit-making stores. Our trend is the same in the future for some of the better regions, commercial circles, we will continue to put in our superstores and also our front warehouses and also our stores. We are in keeping with our overall store expansion existence. Now, for total revenue, it is CNY 63,442 million, which is a drop from last year, and it is 11.3% drop year-on-year. For our major reasons, it is because of competition in the market, and there had been for a lower expenditure and last year for the pop -and -mom stores, there had been competition and there had been pressure.
Therefore, compared to last year, there had been a 1.8% in terms of impact on the company. In the first half, we said that we will be making adjustments in the Central China region, and we have been doing that, restructuring that. Therefore, for our revenue impact, it is about 1.5% impact. Also, the CPI, as mentioned by the Chairman just now, it had been lowering, especially for livelihood factors and for pork and vegetables, the CPI and eggs, it had been over 10% drop. For this kind of impact from the revenue, it is about 0.8%. Overall speaking, it is about total 4% impact. In this kind of competition, on the one hand, there will be diversification from our traffic and our customers. In the beginning, we already said that, to see omni-channel compared to last year, it is stable, though.
In that process, online, we have been very strong and resilient. For B2C orders, B2 C channel, it is some 30%. From revenue, it is 26% share. B2C had increased 2.6% as share. Overall, the situation is controllable. Also, there had been some change to the overall order volume. Online orders is increased approximately 5.5% year-on-year. It is because of our voluntary adjustment from our company. We restructured our overall structure, brought in more food and beverage, and also, for some of our tenants, we have lowered the rentals to them. That is for our gallery. We prioritize lowering the vacancy rates to optimize the tenant mix, and we have been steadily raising the share, as mentioned, with our food and beverage format with our tenant portfolio. We are quite stable there.
For gross profit margin, it is CNY 15,372 million, which is a drop of 10.8%, as we have mentioned. It is also because of rentals from gallery lowering, but also gross margin is a rise for fresh foods optimization and also the product mix for fresh foods and also the operation for the fresh foods. They have increased the margin for fresh foods. PB, it had also increased in contributing more to our gross profit. Also, for FMCG, and especially for our private brand, FMCG will need time to adjust the supply chain. This presents short-term pressure. For expenses, it is a lowering , decrease of 5.5% being the expenses. It was CNY 16,005 million, representing a year-on-year decrease of CNY 936 million.
With our shops, it is over 20% in terms of our utilization, which is 3% higher than last year. Also, our headquarters, it is some 15% higher. Through the optimization and management, our costs have decreased. For us, it has the tenant rentals that also there had been negotiations with them. Also, this is a rental cost reduction negotiations across our all store networks. Also, we have better centralized resource coordination to drive cost savings. Now, for our adjusted EBITDA and also our property valuation and net cash position, page 18. For our property valuation and net cash position, we have ample cash reserves, and we have been supporting a robust financial structure. This is a very good foundation for us to go forward.
In the year, financial year, even though external, internal, there had been a lot of pressure and changes, but as mentioned, for fresh foods and also private brand strategy, it has come to some fruition. Also, for the super stores, it is also bringing in positive cash flow. Also, for our front warehouses, they are pilot points, and some of the warehouses have already reached very closely to our target. For this year, the second dividend, HKD 0.08 per share, given that we have already completed our dividend for the year. For our strategy of dividend, we hope to be able to keep our stable and consistent policy so that shareholders will have a steady and consistent income. For the next year, we will have new organization and new coordination efforts.
As the Chairman said, we will continue to materialize our three-year strategy, and in particular, in the experience of the consumers in our stores. We hope that we will continue to be stable, with slight increase in our performance. At the same time, we will continue to invest into the operation, into experience, and also in fresh foods, for example, and our resources will be investing and also to extend them. The entire year, we would want to be profitable. For our financial performance, we will have a positive profit or to achieve this balance. Next, I would want to have Julian come up and speak to us.
I just want to repeat the strategic side because I want you to be able to track us year on year. EBITDA had been CNY 3+ billion. This is a very important target, and this is something that we have to look at the EBITDA. The CapEx had been lowered significantly in the past year, so it is not comparing like with like from previous years. We are thinking about EBITDA all the time.
Every year I'm thinking about this every day, and that is EBITDA, and this is very important. Let us talk about the three-year strategy. What is our vision? Our vision is what? To be the most trusted, the most favored company for our consumers, and also a company that our staff can be proud of. All the things that we have done is for this, and that is, one day when our staff go out, they are very proud to say they go to work at Sun Art or RT-Mart. I want our customers to trust us, to rely on us.
All that we are doing have the single reason. We want our staff to be more efficient. This is something that we are looking at every day. This is our vision. We have a three-year strategy. Just now I talked about a lot of details. Why? Because we want to be an omni-channel company that is in the 3 km area, we will be the center. Why are stores so big? Because we are a community livelihood center. We 're not a convenience store. No. It provides solution with everything. S omeone wants a lunch, a fresh food, or wants to buy a pair of scissors, we are a one-stop shop. In Japan, it exists, this kind of format, i n U.S., in U.K., in Germany. This is a commercial model that is global. This is our three-year goal.
We want fresh foods and also our stores , et cetera. We have talked about the three-year strategy, so p roduct and supply chain, and also our channel deployments. We have talked about the categories, but overall, for product and experience upgrade. Product and experience go hand in hand. That's why we talked a lot about fresh foods, and also the total cycle time for our supply chain will be compressed. Also, we embrace our KA and also grow our PBs, private brands. With this, we will enhance experience. When the customers come to our stores, they will see, "Oh, better products. Oh, better display." Because the products, it is part of our store. It is a combo. You would understand, in order to achieve the three-year goal, our consumers' experience will have to be good.
This will be the comfortable environment in the store and good products. Digitalization. Digitalization is part of, or encompasses supply chain. It's all about machine learning, AI, basically, AI. Because without digitalization, you're not able to, at all, with this huge volume, increase efficiency and speed. For our online operation, it is very much AI in our design. Our IT team in the entire company is growing in size. It is 20% more in terms of our IT team. Next year, perhaps another 10% increase to our IT team. As we optimize our digitalization, we will definitely be going on to the path of AI and platform. This is something that's a mega-trend, and there's no turning back on that.
Now, for this year, for our supply chain, we put in a lot of time and energy, and it has grown 8% for each of the category. We are thinking every day about lowering our supply chain costs and also increasing its efficiency. It is not just about cost, but also total cycle time. This is something that we think about with a lot of time, and so experience and also digitalization and supply chain optimization. A third one is multi-format. Multi-format is all the different sizes of stores, and also online, and also our front warehouses. It will be a megastore and around that, superstores, and also front warehouses. It's not like we're covering the entire country, but we are using a kind of combo strategy. 45 minutes delivery to the home, this is our goal.
You can shop as you buy and also when in the store, you'll be able to enjoy very good experience. At the home, you can also place your orders online, and you can also enjoy it. The guarantee is about 45 minutes, 96% completion. That is delivery to the home. In China, there is no single format that can cover the entire nation. That's why we say multi-format. We always mention that. We always say, in the concentric circle, there is the megastore and then the superstore around them, and then also the front warehouses. It is a community livelihood center hub. That's what we want to build. In the year, in terms of our structure, there have been a lot of optimization within the organization. From purchasing team to senior management, there have been some 50, that's a number of change.
There have been major adjustments. 90% of the personnel adjustment or change will be completed within the year. There is a lot of staff optimization, and I would say it is 90% stable. With the existing staff, I hope they will lead the company on to the second and the third year going forward. The average age had been lowered by 10 years or 15 years in terms of age. New people bring on new energy, and also we have some more older senior people to bring up the younger ones, and this is a good combination. We have good strategy, we have good digitalization, and we have good format, and we have to find the right people. If it's the same team hoping that they will achieve different results, that's difficult.
We have to redefine our structure, bring in new people, and that is the reason why. Just now, I have talked about a lot of different products. We have to think about our core as well. What is at the core of it? This has to be on the six rights. What do we have to do right? First of all, it will have to be rich. All customers and all scenarios coverage. It's not like we're going to have just 5,000 SKUs. We want to be all-encompassing. That is our goal. If you want some other things, we want that you can buy online, 30-minute delivery. Also, we want safety, which is end-to-end reliability. Over the years, we as a company have not had any major incident.
Decades ago, when we first started the company in China, there had been certain incidents, but we have come a long way from that. We want safety. We will provide safety to our consumers. Also, price competitiveness. We want higher sales, based on thinner margins. Grow the volume and even with affordability. Everything we do from customers, fresh, et cetera, it is about the six rights. That' s why I also talked about total cycle time. Let's say a cabbage from the land to our store shelf, how long does it take? How many hours? I need to know that information so that we know that what we sell is fresh. Also processing. Processing, i f you buy a cabbage from our store, you can also try our dumplings, for example. It is not just selling something that's tasty, it is also selling experience.
It is a double effect. We want our store to be very visitable. It's a good experience. Also, we' re not Louis Vuitton , we're not Hermes. No, of course not. W e are a lifestyle leader nevertheless. What does it mean? That is what you want as consumers. It's summer, you want the best vegetables, and you want clothing. I give you the trendiest, but o f course, we are not selling high-priced clothing, but I want to give you something that's affordable, that is high quality. Wh en people think of our products, think about our fresh foods, et cetera, when they come to our store for experience, it is all about the six rights. Everything will be our six rights, which defines our standards and our customer experience.
W ith our staff, how can we bring everybody onto the same path? We base this on the six rights. I gave you a report just now. Also, every year when I communicate with you, I will use the same framework so that you're able to track us to know whether we're going on the right path. Just now, our EBITDA is CNY 3+ billion , as Desory said, and it is HKD 0.85 in terms of our dividend. W e will be keeping those stable going forward. Today, I will close my presentation here. I just want to know whether you have questions. We'll be very happy to answer your questions. Thank you.
Thank you, Julian. Thank you, Desory. This is the Q&A period. There'll be two parts to it. The on-site investors will raise questions, and then the online investors. First of all, the second row, the gentleman over there.
Thank you very much. Morgan Stanley, Dustin. I have three questions to ask. First of all, concerning competition. For competition, online had been impacted, but offline, there are different formats, small shops, and different products, which is competing with your hyper stores. From the latest trend, can you talk about this period and also the last period? Has there been returns, and what kind of a competition situation? Also, what about the front warehouses? What are some of the more aggressive things that you have done?
Also, for fresh foods, fruit stores, et cetera, is there a vertical that you'll be thinking about? For example, one-stop purchase. Are there some new formats that you will be considering? Also, for the operation and financial targets, what about the sales and EBITDA projections? I n particular, for the financial year, what are some of the assumptions and the factors that would affect it going forward?
The EBITDA last year, with all these factors in play, it had been stable, but there had been a lot of measures on it. For the margin going forward, what is your forecast? Also, Julian mentioned AI. Can you give us more examples? It is in the website or is it in the other areas? AI empowerment, how does it bring on better sales or efficiency, et cetera?
Yes. I will answer the first question. First of all, on competition, you asked a question. We have been close to 30 years operation in China. It has always been competitive. We have never had an industry in China which had been demand over stripping supply. This is characteristic of China. In pork, in milk, et cetera, around all the industries. This is a basic, a fundamental for the China market.
You never have something that only you have that is unique. That doesn't happen. That's why we have been thinking about our differentiation. One, our stores are very big. This is an advantage. H ow do we make it an advantage? It takes everyday thinking. It has to be a pleasant experience for our customers. We have to be thinking how we can transform our stores. How can we have fresh cabbages, better dumplings, mantou, et cetera? From competition point of view in China, it's never been that there's no competition. There's always been competition. It is about how we strengthen ourselves within that competition.
Second, last year compared to this year, o f course, we know that there are a lot of online stores burning cash, and some of them are giving out gifts or milk tea, et cetera, with just a small amount of food purchase. O n the other hand, people's stomach is only this big. It wouldn't be that I'm going to buy even more because you're giving me free gifts. This year, how do we see this year? Will the online operators still be burning cash like last year, like CNY 100 billion ? We need to continually to improve. As Desory said, we will continue to do so, and we have already prepared, and the burning of cash will continue because that is characteristic of China. Now, online and offline, you think about these are two different industries. That kind of understanding is passe. It's not anymore.
That is to say, online and offline are completely integrated. It's the same thing. In the past, we say, "Oh, he's in online. Oh, he's in offline." Those days are gone, and it will always be the same war going forward, O2O. It's like the Chinese martial arts novels. It has to be like that. In the future, there will be no segregation. For the offline stores, we find that there is something that's very interesting. The pop-and-mom shops are exiting. When we first started in retail, these stores were 80% of the market. Now it's 60%. In the future, it will be 30%. I don't know which day that will come, but the trend is definitely decreasing because the experience is not as good and they cannot go online.
When we first came to the market, the pop-and-mom stores' market share was higher. It's going to decline gradually. This is products and also channel. Desory also talked about some new stores, and yes, for some of the experiential stores, member stores, et cetera, or some mini stores, yes, we have all those formats as well. W hy do we talk about like it's a big thing? Because it's an experiment for this financial year. After trials, if it's successful, we'll do it. If it's not successful, we'll not do it. We still have about a dozen stores which are under trial. Going back to our omni-channel strategy, it's not like when you open a store, just right, you have a 2,000 sq m , 3,000 sq m space.
If they only have 1,000 sq m, then we have to open that kind of a store. On the other hand, the sizes of stores, we have different sizes, and also there are trials, there are experiments for the different sizes. Your third question was on AI. Ordering, for example, SKUs can be 15,000, 25,000. How do we predict that next year we need six of these, nine of those products? Right now, we have a few hundred people writing all this down. This will not be the case in the future. It's impossible. AI is not going to replace these people, but for our ordering speed and the accuracy of it will be higher. Let's say tomorrow it's going to rain, or three days later it's going to rain. Today, we are already going to be order appropriately with that prediction.
This times 365 days, the change, the factors that can change are huge. We have to use AI prediction given that. Using AI is a must. For fresh food, you also talked about using AI. For the national purchasing, that's one thing, and through AI, it will be even more accurate in terms of procurement and also inventory days. Two years later, it would have improved as well. This is something we're thinking about every day, and that also includes this AI utilization. For example, our delivery men, what is the route, for example? In the future, for our supply chain, the trucks, the routing, which route it should take in order to save some fuel. That is something, you say it's arithmetic, it's math. That's algorithm for you, actually. AI machine learning is already something that is a must.
I don't think that this is a differentiation, but something that every company needs to do today. I think every company does that. Who is not using that? I think this is almost basic now. Apart from the basic, what we're thinking is what else we can do. This is the next step of development for us. In terms of costs, you want to say something, Desory?
Yes. Until May, we looked at May, it is stable. Per order, we see a narrowing of compression. May compared to last year, it is a narrowing of mid to high single digit, as Julian mentioned, for online and offline, it 's dynamic, it's changeable. Today, our B2C order has changed from 30% increased. The room for increase is huge.
Also, compared to the past, Ele.me and Meituan cooperation with us, there had not been any decrease in this area. For the room for growth, we will realize this year. This will be mid- to high-single-digit growth of our total customers. With our products attraction mix of products, we want to increase our ASP and the expenditure or the consumption per customer. Also, our fresh foods had increased as a share. This year we want this to be a mid- to high-single-digit growth for fresh foods. Also, for our PB, for the fresh foods and also our PBs, there will be room for further increase. Together with our nationwide procurement, 60% of our sales come from these integrated national procurement.
It's not like I'm just locking in prices with the big brands, but rather, through this procurement method, we will have more ODM, new products launch. Developing ODM and also with some dozens of new brands introduced. It will be increase of 10% of brands increase. From our products, from our sales, it would be a increase in sales of a few hundred million RMB. Overall speaking, for instance, last year to this year overall, what has been under pressure, for example, in terms of cooked food and also for some of the new products in terms of daily sundries, et cetera, they will be introduced as new products and new brands in August and September. We'll be realizing these to take away or replace the old products. PB had increased by 60% this year, as mentioned.
If it is 5% of sales, then that would be like a CNY 2 billion increase. This will be in a number of products, including wines, including in clothing, et cetera. The response from the customers for PB had been very positive. For top line and also for gross margins for PB, we want to realize our whole year, at least balance the results.
Next question.
Thank you. Huatai Securities, Shi Di. I have three questions. First of all, it's been mentioned that four strategies, one is transformation of stores. What is the percentage of transformed stores over the total number of stores? Also, is there an increase of growth after transformation number? Also, Mr. Hua talked about the big size of the stores is an advantage, and also sales have been increasing.
Now, I would like to know whether there will be some decreasing of the size of some mega stores, and if so, what is the pace of that? The third question is in the future for the renewal of new generations of products.
For example, for some of the transformed channels, for some of the competitors, for example, there will be weekly new products or monthly new products, et cetera. As we consolidate our team for choosing products and renewing the products, what is the outlook so that there will be newer and newer experience for the customers with newer products?
For transformation of stores, right now it is about 25%. By the end of the year, it will be 60%. That is the direction. As for the exact ratio for the major transformation, the results, the sales have been increasing.
It's very difficult to just focus on the good sides. That would be unfair, because if you look at some of the other stores, they are going through different levels of transformation, so it's very difficult to quantify. Transformation, first of all, is in fresh, and fresh is increasing. W e will be replicating this in other stores. It will bring on PB and also processing goods. It is about what Desory talked about buying one more. This is the transformation strategy. Our direction will not be like knocking it down and starting from zero again. That had never been our company's culture. There will be a process for transformation, and that's why we say that it is a three-year strategy. Yes. Big stores have our history, and it is good. We have 14,000 sq m store as well. Will they become 7,500 m stores?
Yes, it is possible, but t hat kind of a store will not be decreased to only 3,000 sq m. W ould 7,500 sq m be the goal? Yes. T he extra space will be the gallery. It can be used for bringing in the outside in, warehouse that is no longer located outside the warehouses, but right there at the stores. Beside the stores, it is possible. T he sales per square meter will be lower. Why? Because we want to grow our sales. The large stores, it is a fact of life that sales per square meters will be lower. That's why we want to lower the square meterage so that the sales per meter will be higher. Now, as for your question, PB last year was zero. Now it's 600 SKU. Some of them have been taken off because they have not been selling well.
Of course, the cycle of replacement will be faster. It'll be fast. O f course, the operation would take time. In our hearts, our wish, of course, we want it to be faster, but the reality and operation will always be slower. O n the other hand, our pace will pick up for sure, because, as you mentioned, we want there to be a nice surprise, something new when people come to our store. It's not like every month it's the same as a few months ago. We want that as the experience. We don't want that as an experience of customers. It is important. I n this particular area, we have an algorithm company to help us track this. Y es, we will be speeding it up.
Next question.
Hey, greetings. I'm Anne Ling [inaudible]. I have a small question. For our relationship with the supplier, what is it? Because for our stores, we always have the back-end expenses, and that has always been part of our cost. I would like to know what is the relationship. Will there be any changes in this regard?
It is like this. Let's talk about the results first. That is gross margin results and the KA margin. It's the same. That is the end result is the same. That is a main principle. W ith the national joint procurement, we want the ratio to be better. Not to say that KA had lost, but rather, can we have better alliance so that we have more better new products. N ew products, the margin should be slightly higher, right? F rom this angle, we want to bring up the ratio.
It's not like you give me more this year, and with more this year, you will get best. R ather, we want it to be a win-win situation where they grow, and we grow as well together with them. As for the ratio between the front and the back end, we want that to change, because when you have a new product selling, the margin will be higher. Now, for ODM, for example, we have an up-and-coming product. When we talk to the KA, they will say, "Oh, you are going to be a joint brand party." T his is your Sun Art-only sale. W ill there be a day where there will be a gross margin decrease where there is none of such relationship with the KA? No, because national joint procurement is going to stay.
A lot of KAs, our competitors, don' t want to work with them because they want their own brands. O ver the years, we have worked with the KAs. We want this to be together, joining hands to bring on a better future. The joining hands, the cooperation will not change. Maybe the ratio would change on the other hand.
Are there any other questions? If there are no other questions on site, the online investors can ask their questions now. If you have any questions, can you please press star one? Before you ask your question, can you please introduce yourself and also the organization that you represent? Online questions, please. Online question from UBS, Viola.
Greetings. Thank you for the opportunity. I'm Viola from UBS. I have two questions to ask. First of all, on the CapEx for this year, can you talk about that? For the front warehouses, for the super stores, what is the CapEx? The second question about dividend policy, can you repeat the policy for this year and also the years going forward?
For the CapEx, for capital and from last period is more or less the same, with slight increase. After the Kunshan project repayment, it will be about CNY 400 million CapEx investment. For the stores and the warehouses, it will be CNY 60 million and CNY 100 million for transformation. We have already mentioned the transformation number of stores, and we want there to be increased sales from the transform stores. Also, gallery increase in savings in terms of investment and also the AI investment, et cetera. As for dividend policy, I've mentioned that just now, and the interim dividend is HKD 0.085 per share.
With this, we have completed our 2026 dividend payout work. We see that from last year to this year, the company, in terms of dividend, had been consistent. In the future, for dividend policy, it will be consistent and stable. That is our policy so that the shareholders will have a stable and consistent dividend return every year.
CICC, Wang Jiarui. Next.
Greetings. Very happy to have this opportunity. I have two small questions to ask. First of all, about our front warehouse. In terms of orders, et cetera, what is the situation? Also, going forward, what are some of the situation with the front warehouse? Also, for the national joint procurement, right now, there is a pretty good performance. Going forward, for the joint procurement, what is the penetration rate that you intend, and what are some of the product categories that you want to go for national joint procurement?
T he national joint procurement, our hope is to have it achieve 60% for pork, for instance. Even though the quantity volume had grown significantly, but we're surprised as well. If you sell pork, how can you actually increase customer flow like this and also the performance like this? If you want a projection, I cannot say for sure, but I think it will be even better in terms of sales. When we were selling this pork, we had not compressed the pork sales price significantly. No. I t's like our pork had been fresher, our products are better, and b ecause also with national joint procurement, we have a first-launch product advantage.
We want to have 60 KA to further compress. This is the work plan for the future. Now, for the front warehouses, it's hard to say, because at present, the stores concerned are not that many. We have some stores with 2,000, but some stores with only 500 orders per day, so it's difficult to give you the exact number. We have just over a dozen these front warehouses. It's very difficult to give you an average of the numbers. Also, per store is about CNY 80,000 or CNY 1 million, and now it is about CNY 400,000. I think we can continue to lower. If you talk about CapEx, it is already cut by half. I n the future, we will have to adjust again according to our assessment. For our cycle days, the good and the bad put together average, it is two and a half years.
However, we cannot look at the average because there are many stores which are a mistake. We have paid the tuition fee, but we don't want to repeat the mistakes. For the worst stores, let's say the 500 orders per day, and the first is the 2,000 orders per day stores. I will not be fixated in the numbers. I think this is a trial for our stores. Now the super stores are already successful, the trials, so there will be more of them. For front warehousing, we will be doing that, increasing them as well. Some of the things will be successful, some less. The front warehouses are successful. Also, for our member store and also for our small stores, the mini stores, we're still trialing. D ifferent formats, a different situation, and we continue to trial.
The range for front warehousing, it is 600- 800 orders per day. F or some of them are better performing, but it would be about CNY 55 order size. Overall, our product category mix is optimizing. Also, for some of the stores, they are better in terms of rentals. We have four major regions nationwide in different megacities and different commercial circles. We will make different trials so that we will find a product mix and cost-optimal structure for the front warehouses.
Thank you. Press star one if you have a question. I do not know whether there are further questions. Yes, there is a question online. Yes. CICC, Wang Jiarui.
I am sorry, I'm repeating. I just want to confirm a small detail and given the chance. A chieving the model, what exactly did you mean by achieving the model?
Achieving the model is break-even , EBITDA break-even . We say we are achieving what we want them to achieve.
[Dagong Capital, Zhao Nintao].
I would ask a question on organization and structure. In the past three years, the CEO of the company, the senior management team had changed significantly, and there had been significant staff cuts. With this kind of situation as a background, how do you maintain our frontline customers to live out and express our culture, our values, and the quality of our service? How do you achieve that through execution? Also, staff cutting, what exactly is the stage now? Is it like the senior management change, it's already achieved 90%? Also, going forward with the staff, will the cut be more or less the same pace? What about incentives? Last year, it's already been ongoing for a year. What is the outlook? What is the forecast in a three-year time or longer period? What is the plan for the company to have done?
Let's talk about the frontline workers. They are the most important part of the company. We are not hoping that we will be continually cutting staff. That is not the plan. We want to keep our existing staff size, but there will be adjustments. What kind of adjustment? That is to say, through algorithm for the back-and-front operations, we want to optimize that. That is to say, we want more people to be serving frontline. The overall staff size will not change, but the ratio will change between front and back. For foods and processing, it needs more hands, workers. We want less PPT, but more sales work. For the servers in the stores, that would increase. Backend will decrease.
There will be a balance to achieve the sales increase that we have as a target. Well, I think it is impossible that year-on-year, we will have the same pace of transformation. On the other hand, I think from our structure, from our organization structure, we have already made a lot of adjustments. Procurement, for example, there have been changes. Also, we did not have a marketing department, we will have that. That is already changes in organization structure, and that's been done, and there will not be any major change in the future. Senior staff, 90% change, that will not change further. Are there certain areas where there will be certain detail changes? Yes, b ut overall, it is already done, stable.
For machine learning's point of view, i f it's going to impact us significantly, w hat will the impact be for our staffing?
I really don't know. N ow, the change, as far as I can see, will not be the frontline staff.
If our procurement is more, ordering is more and more accurate, how would it impact the team?
I really don't know, b ut I can tell you, IT team had been bigger, but in our tens of thousands of staff, that's just a small team. For incentives, we changed the structure. Last year, in the different stores, we have tried out different incentive schemes, but has not reached perfection yet. I think we may have to design anew. We will be changing that. For senior management or mid to senior management, there will be a new incentive scheme so that for company value and expectations of the shareholder they will be more aligned.
From frontline staff to mid to senior management, there will be incentive structure change. For the next couple of years, it will be more stable compared to last year major changes. There will be further tinkering for the next two years, but no major changes.
This is, I would want to supplement, this is no longer about staff cutting, but about capability and structure. We will continue to do so. Like today, we say in terms of staff cost optimization, it had come from optimization of certain staff, whether full-time or part-time, in terms of their rotation, in terms of their flexible, part-time, full-time optimization combination. We will continue to explore these and within what is achievable for us.
Any other questions, online and offline? Press star one for online investors.
Thank you so much, everyone. The management have been very clear in their presentation. This ends our annual results announcement today. Thank you again for your participation. We have some snacks from our PB. Please bring back home some of the products that are on display outside. If you have further questions, would you please contact our Investor Relations team. We hope to see you next time. Thank you. Thank you.