Good morning, investors and analysts. Welcome to Sun Art Retail Group Limited's financial year 2023-2024 annual results announcement and briefing. This meeting will be conducted in a hybrid mode. The PowerPoint has been circulated to all the registered analysts and investors. For the online investors, if needed, please feel free to go to Sun Art's website. Under the investor relations section, you will find our PowerPoints today. Please allow me to introduce the management present today. We have CEO and Executive Director, Mr. Shen Hui; CFO, Desory Wan; and Head of Investor Relations, Xiaobei Gu. First, we would like to give the floor to Mr. Shen for a statement.
Good morning. I am Shen Hui. This is the first time I am here today to meet with all of you.
Before the presentation from the CFO, I would like to say a few words so that you can have more understanding of our results. Personally, I have been in the retail business for many years, and I am very passionate about retail. I look forward to a lot of opportunities to exchange ideas with you because retail is a very interesting domain. I worked in France before, so I have some understanding of the market insights in France and North America. I hope to have more opportunities to talk with you in the future about retail. For Sun Art, I think that RT-Mart can perform better. I did not hesitate for a minute after I got invited to come back to the company. For the financial year 2023-2024, we have encountered some challenges. As the CEO of the company, I felt apologetic because we had made some errors.
Therefore, I would like to share with you some actions that we have taken or actions that we will take. For financial year 2023 and 2024, I would like to say a few words, which is about the sales drop is much faster than the expense saving and cost saving. But now we are back on track. Later, I would like to share with you more details, and also, during the Q&A session, we can have some exchanges of ideas. Thank you.
Good morning. I would like to present to you the performance of Sun Art in financial year 2023-2024. First, about the financial highlights. We have realized a revenue of CNY 70.5 billion. If you look at the core business, which means that we exclude the impact of the supply chain business, the same-store growth declined by 6.6%. Gross profit around CNY 18 billion.
Gross profit declined by CNY 2.6 billion. Gross profit margin 24.7%, up by 0.1 percentage point. We suffered CNY 1 billion loss for our operating profit, but if we exclude the impair loss, then it is positive, which is around CNY 339 million. So you can see that we suffer a CNY 1 billion loss for operating margin on our balance sheet. For store expansion, as you can see that we have opened new stores. We have new opening of six hypermarkets, 14 supermarkets, and three membership stores. In our pipeline, we have secured four hypermarket sites, 13 supermarket sites, covering 207 cities. We cover Wuxi, Changzhou, and Wenzhou for our membership stores. In the future, we will continue to expand our coverage in advantageous regions and cities. Total revenue, as I have mentioned, CNY 72.5 billion.
Compared to last year, we have seen an CNY 11 billion of year-on-year decrease or 13.3% decline. The impact on the store expansion is around CNY 7 billion . For the whole year, the online business experienced a low single-digit growth, and we can see the traffic recovering for online business. For offline business, our business decline was around high single digit, mainly because of the decline in ticket size. The core factor is the decline in ticket size. We were still under the impact of COVID for the first half of the year. Under such circumstances, you will see that rental income reaching CNY 3.1 billion . After absorbing the impact of the store closing, our rental income was flat compared to last year.
We will continue to optimize the rental mix and tenant mix, and our vacancy rate is around 3%-4%, which is still the best in the industry. Gross profit margin, around CNY 18 billion. As I have mentioned that there was a decline of CNY 2.6 billion. There were several reasons. First, we have seen the revenue decline for offline business. Secondly, the supply chain business contraction is also a factor. Thirdly, in the first half of the fiscal year, we had invested a lot in the marketing and price subsidies, which has impacted our gross profit. Our gross profit margin 24.7%, and we have seen a 0.2 percentage point decline. In the future, we will continue to drive sales growth with a price advantage so that we can ultimately realize a gross profit increase. In terms of the expenses, around CNY 20 billion for the fiscal year.
If we exclude the impairment loss, the expense would be around CNY 19 billion . We save around CNY 1.4 billion if we exclude the impairment losses. For expense ratio, it was around 26%. Compared to the same period last year, we have seen a 17% decline in terms of the expenses. Our overall revenue declined much faster than the expense decline, and that's why we have not reached our target for the gross profit.
For the coming year, the control of the expenses would be our top priority, and this is something that we must achieve. In terms of EBIT, we suffered CNY 1 billion , and there was a CNY 1.2 billion of losses if we exclude the impairment losses. In terms of the working capital days, 72 days. Inventory turnover days are 53 days, quite stable. CAPEX, CNY 1.2 billion , and investment will go into the store expansions.
Net cash position, CNY 16.5 billion . We have a quite stable cash flow. Our own cash flow is around CNY 5.5 billion. We have been faced with some pressures in terms of business growth. However, our balance sheet is still quite robust and sound. That's a presentation about the financial highlights. Next, I would like to pass the floor back to Shen Hui about the outlook for the coming year.
I'm happy to have this opportunity to share with you our business strategy for FY 2025. I took the position two months ago, and I feel that I have gone through a much longer period here because we have taken multiple actions. As I have mentioned, we would like to take some actions to rectify our mistakes. We want to go back on track for retail, and this is our top priority in the short term.
I will share with you some of the actions that we have taken and some of the actions in the pipeline. What makes me most happy is that our productivity has been released. We have saved a lot of time and shifted our focus back to retail. Everybody was highly mobilized with good morale. We had poor performance last year, and I think it is a good thing that the morale is back. We would like to return to the initial aspiration of the RT-Mart. What is our initial aspiration? The chairman mentioned that we want to save each penny for our consumers. This is the initial aspiration of RT-Mart. We have great retail professionals and business operation model, which is based on the brick-and-mortar stores. But now we have not only brick-and-mortar stores.
I believe that all the best, most outstanding retail professionals in the Chinese mainland are here in RT-Mart. RT-Mart operating model and system are perfect. I am not bragging. We can discuss our operation model, but of course, it involves some business secrets. But Mr. Huang has designed a perfect business operating model for RT-Mart. We have a very important KPI, which is the same-store growth rate. Why last year our performance was not so ideal? Was mainly because of the decline in the same-store growth. That is why we need to go back to the same-store growth rate. If we can realize the increase of that, our expense ratio will decline. We want to sell more and more high-quality products to more and more customers at lower and lower prices. I came back to RT-Mart, and I have visited different stores.
I spent one-third of my time in visiting the front-line stores. I had a really good impression about our front-line people's work. I always tell them that we want to sell more and more high-quality products to more and more customers at a lower and lower price. Everybody responded with a very loud voice to me. So this has been our aspirations from the beginning. We want to focus on the revenue growth and return to profit, which is our target for the fiscal year 2025. We want to focus on the traffic in the offline stores. The overall environment, I would say, is more rational. We want to reshape the core advantage of our price competitiveness. I said that we were off track. We lost some low-price SKUs.
Some of the old brands know that our big sum products went away, and it will return to the store. Some people also tell me that our merchandises in RT-Mart are more expensive now. We now need to rebuild our price competitiveness. We will also review the products offerings of different price quartiles to enable customers' needs. We service the whole community. Some people want to position our RT-Mart. I would say our position is a community market. We can supply to the essential needs and products to the citizens, residents of the community. For example, the shirt I am wearing now is a private label that we develop ourselves. We can cover everything that the residents needs in the community, especially the products of a lower to medium-price range. We have top quality, higher priced products, but we will offer discount.
And certainly, we will return to customers' perspective and enhance refined operation management service and experience. You will hear this statement over and over again. If you are a customer that would like to purchase a pair of chopsticks or a bag, or vegetables, what would be your perspective? As an operator, it is very important for us to focus on refined operation management, and we need to save every penny for our customers. I ask the head of the store, "If this is a franchise store, what would be your perspective?" Your philosophy would be quite different for the management of the store. We need to manage hundreds of stores, so we need to think from a store perspective, from a customer's perspective, and an operator's perspective. We want to focus on revenue growth and cost reduction. Our cost is too high.
Our cost saving is not as fast as the decline of our revenue. We need to find the space for cost saving. Actually, we have already started these cost reduction measures. Why our target for this year is to turn the loss around, I will tell you that we will definitely realize profitable growth. We will realize same store sales growth, and at the same time, we will control the expense rate and lower the expense rates. Some of the actions have been taken, some of them are still on the road. We need to realize profit in different channels. We have hypermarket, supermarkets, online channels. We have a 2B business. We will realize omnichannel profitability. Before I took office, I read a book about the Japanese airline, and I was inspired by the book.
Secondly, we need to improve efficiency throughout the entire chain by reducing inventory and bettering product turnover, and enhance efficiency regarding human products and square meter. We have different management measures for us to enhance our efficiency. Our B2C ticket size had seen great growth. For B2C, you need to pay delivery cost. If the ticket price increase, then the expense ratio per ticket will decrease. Our inventory turnover days has been quite stable, but my experience and the data tell me that we can keep decreasing the inventory turnover days. Last point, which I have mentioned earlier, is to enhance the profitability of individual stores. We need to manage our company based on each store. The store would be our main granularity to manage the company. We need to see how we can continue to improve the store and how the headquarters can support each store.
At the same time, we need to keep growing. There are several key points for the development of our company. We have the membership stores and super stores to be our second growth curve. We are now reviewing the business model for our super stores. We have set up a new committee for that. They have already started the work before I took office. The cash flow for supermarket in April was positive, which is a good sign. But of course, we are still fine-tuning our business model and profit model for our super stores, so that we can roll out the stores more flexibly in the future. The second key point is about the membership stores. Now we have three membership stores. We are a latecomer for membership store. We need to learn from Costco and Sam's Club.
I know very well that Costco globally performs much better than Sam's Mart, but Sam's Club actually performs much better than the Costco. Now we are on the road. We will open the four additional membership stores, and we would provide more values to the members, including our products and services. The target of our membership stores is positive cash flow in the second year and profitability in the third year. For the Wenzhou membership store, there is no problem for us to realize positive cash flow, which we have already done in April. We will have the same directions for the second and the third membership stores. The third point is we will develop multi-channel of online business and drive growth and profitability. We have made some strategic adjustment for Taoxianda. Recently, we have added in more channels, and we have made adjustments for our strategy.
Our overall business for online segment did not decline. We also want to focus on 2B. We have the capabilities to be able to service the business clients. I want to tell you that the most important thing is the same store sales growth. This is the tool that we already have in hand, and there is a lot of room for us to improve. We were inspired by the performance in April and May so far. Our CPO asked me if I am confident to develop RT-Mart. I was asked about the vision for RT-Mart. My answer is that I want RT-Mart to become a thriving and prosperous entity, allowing customers and employees to work and live a healthy and happy life. I would like to share with you our results for April and May.
Firstly, so far, our revenue and growth is positive. I believe that this kind of momentum can be carried on, and we have realized a 1.6% business growth, and 6% growth for May. This is a very inspiring and positive sign for me and for my team. This is the result of several months' effort. We haven't seen such positive results for several months now. Our net profit exceeded our expectation and budgeted amount. Our budget was to turn the loss around. I would say that the May result would be better than the budget. Personally, me and my team are very confident about the profitability for the whole year. For me, I'm a person that would like to have some solid proof for my forecast. I'm not a speculative person. That's why we do a lot of business review.
We plan out the marketing activities for the whole year. That's why we are very confident to turn the loss around for the whole year, and also to realize a certain level of profitability. There are still two months left for us to make improvement. I would like to spend more time in the store to discuss with them, and also I would invite the head of procurement to go to the store and see what improvement we can make further. That's all for what I want to say, and I welcome any questions from you. Thank you.
Thank you, Desory and Mr. Shen , for the presentation. Now we will start the Q&A session. First, we will have the questions from the investors and analysts online, and then we will receive the questions from our online investors. If you have any questions, please feel free to raise your hand, and we will pass you the microphone. Please also state your name and organization.
Hello, I am Christine Peng from UBS. I would like to thank Mr. Shen for the inspiring opening talk. You have reviewed a lot of information with us, but I would like to go into the details of some of the comments. First, you mentioned that you want to realize profitability for all channels. Can you please share with us the breakdown of your targets? Because for Sun Art, you would like to realize a gross profit margin target of 1.5%-2%. Is it still viable? When will you be able to realize this target?
I know this target was proposed by the previous management, and after Mr. Shen, you took office, is there any change in the management of company? Secondly, about the number of the stores. I did not see the number of your hypermarket, but actually, the total number has decreased from 480 to 470 stores because you have closed down some stores. This question might be for Desory . From the closing of the stores, is there any room for closing of the stores? This kind of closing must be favorable to the management of the company. Can you please share with us the logic or the rationale for the store closing? What would be the target in the future? The third question is more about the perspective for the whole industry.
The community retail growth is around maybe mid to low single-digit growth, and they have double-digit growth target for online business, which means that their offline traffic probably have shrunk. For Mr. Shen, how do you face such a reality? What would be the impact on the structural revision for RT-Mart?
Thank you for your questions. For your first question, which is about profitability and budget. It's true that the original budget target was not set by me, but we have reviewed the budget again, and the budget was conducted in a bottom-up approach. It's not from a top-down approach. In March and April, we did a review of our budget by the new management together with the original team. Our conclusion is that we can turn the loss around this year. You mentioned about the 2% net profit for the industry.
If you take a look at the retail business in the whole world, the profit is around 2%. China is a very special market because the online business investment is larger than offline business. Normally, I would say that profitability level is not the same as the retail business in overseas countries. If the normal situation is 1.5% or 2%, but for Sun Art, we are still trying to return to the normal track. As I have mentioned that our same-store sales growth and operating revenue growth and expense ratio are now being rectified. We would not reach our target in one stretch, but we will do it in a progressive manner. It is very hard for me to pinpoint the exact level for this year, but we will get there. About the closing of stores, it's true that we have closed down some stores last year.
But this is a systematic work. First, we will review whether we can still save the store. We are learning from the outstanding peers in the market. We will review what we can do for the failing stores. We will also review the cash flow of the store. If it is okay, then we will look at the impact on the closing of the store in the mid to long-term to do the final closing. The third point is about online and offline business breakdown. I would say there is one point that is favorable to us, which is the very reasonable consumption sentiment. At a time, we were seeing money being burned to increase the market penetration.
But now I would say that we are all kind of shy in terms of this kind of investment funding, and that is why we are very happy to see growth for our online business. Because it was out of our expectation. We had to make some adjustment. But for RT-Mart, we have grown quite well. I have mentioned that we want to shift our focus back to offline business. Now we are returning to stable development for our offline business. This is the trend that we have seen since the beginning of the year, and this is also one of our important KPIs. Thank you.
Good morning. I am from Macquarie. My name is Linda. I have several questions. I also have a question regarding the closing of stores. You have closed around 20 stores. Among all the existing stores, how many of them will be closed down, and when?
Among the 20 stores closed last year or the losing stores this year, do you see any shared features? Maybe they are all located in certain cities? The second question is about online business. For the ticket price for online business, is it the same as before? What is the reasonable profitability for online business? In the past, the online business was profitable, and that is why you continued to make investment. But now, do you have any strategic adjustment to enable the sustainable profitability? The third question is about the membership store. You have the first store in Yangzhou, and now you can see the renewal expense, right? What is the renewal expense ratio? If you exclude the membership fee, is your membership store in Yangzhou now profitable?
The first question about the closing of stores.
We do not have a specific target about the closing of the stores. As I have explained earlier, we need to have a comprehensive analysis of the store. Maybe this store is performing very poorly, but we will see whether we can still make improvement. Last week, I visited a poor performing store. The competition was quite fierce in the neighborhood. But after the visit and investigation, it was a store in north part of China. So we sat down, and we believe that this store still has hope. So I was encouraged by that. We will see how we can improve, and we will also review the cash flow. If the cash flow is still positive, but it was negatively impacted by impairment or amortization, then there is still hope for the store. Therefore, we will analyze each store case by case. The second question about the online business.
Internally, we have some analytics. I would say that the online business is still quite promising, and the growth momentum continues, and the ticket price continues to increase. If that is the case, it will push up our profitability. The cost allocated to online business is now higher, and the profitability this year is also better than last year. This is very encouraging for me. It gives me great confidence for the online business. Soon, we will have the cross-border retail for our online business. Our manager responsible for online business are very positive about the momentum. For membership stores, I would like to talk about the industrial perspective. We have two professionals managing our membership stores. The first year of the membership renewal would be around 50%-55%. We just started our Yangzhou store, and the renewal rate is around 50%-55%.
For the second year, around 90%. That is the statistics. We are in line with such curve. Of course, we want to continue to improve that curve. For the membership store, we are still just a beginner. For RT-Mart, we have the resources from the company to support the healthy and sound development of our membership store.
Thank you, Mr. Shen.
Thank you for the opportunity. I am from CICC. I have three questions. First, Mr. Shen , you mentioned that you are not so happy with the cost reduction. What about this year? Where would be the major source of the cost reduction? Is it supply chain or procurement or logistics? How do we balance that with the customer's experience, especially for offline business? Everyone wants to retain the offline customers.
The second question is about the encouraging result from April and May, including the sales growth. Where does the growth come from? Is it the same store sales growth? Also, what was the breakdown of the online/offline business? The third question is about the gross profit margin. We have seen minor growth for the gross profit margin. Under such a fierce market competition, do you think that the gross profit margin will continue to grow moderately, or do we have any strategic adjustment? What is our perspective on the stable growth of gross profit margin?
The first question is about cost reduction. We have made a lot of adjustment last year. Some, I would say, the adjustment would be a bit too much. For example, for our processing department, was also adjusted to reduce the cost.
I would say that we need to be more strategic in cost reduction. For example, for the processing department, we will need to hire back some people. It is very important for us to focus on our fish products. For example, RT-Mart used to sell a lot of bakery products. We cannot just cut the cost without any backing of the rationale. Also for the scale system department, are making some technical adjustment and process optimization, which can help us to save cost. There are other costs related to back office which can be optimized. Customer experience is our top priority. With process optimization and technological advancement, I believe that there is still a lot of room to cut costs. We are not just talking about labor cost.
Of course, it's one of the most important thing, but there is still other room, other aspects that we can save costs from. Another thing that I want to mention is that, last year, we have invested a lot in expenses. But these expenses did not lead to revenue growth. Why I mentioned that our profitability growth in April was better than expected, is because we use price and products to do our business, to enhance our business. Our customers now can buy the lower price products in the mart. My friends tell me that it's cheaper to buy at RT-Mart. My front line manager told me that, "I'm very happy because we are now doing the real retail." The next question is about the growth in April and May. As I have mentioned that we are now returned to the retail business.
As I have mentioned that we have invested some expenses, but did not see any results. But if we invest in the products and services, the customers can feel it. The customers come to our store, they can buy and smell the good products, and they can feel that our washrooms are cleaner than before. This is the essence of our retail business. That's why we continue to see the traffic recovering, business recovering, as I have mentioned that the market competition is more rational now. The third question is about the gross profit and gross profit margin improvement. First, I would like to say this is South China is the first market that I visited after I returned to Sun Art.
Manager told me that our profit would be better if there is a price war. What I want to say is that our gross profit must be enhanced first. Sometimes our gross margin is lower. That's okay, but we need to make sure the robustness of our gross profit. We must be the cheapest in the community. There is a saying in RT-Mart, I would like to remind you. I used to work in Auchan. Some of the peers and friends and families told me why I can take office right after my last job is because we have the same philosophy. We offer the best price to our customers with the products that they desire. Our focus is expense ratio and gross profit. If the gross profit increase and the expense ratio decrease, our profitability will increase ultimately.
Thank you. Mr. Shen. Another question here.
Thank you for the opportunity. I'm Dustin from Morgan Stanley. I have several questions for Mr. Shen and Desory. The first question is about the mistakes that you make in the last two years. If we have a review on your business and also the supply chain adjustment. Compared to the peers, your performance actually is not so bad, but maybe you're too modest. You have mentioned several examples, but I believe it's not so in-depth.
For example, the products was gone. But in the last financial year, one of the important strategy is the private label and also to develop high quality, cheaper products. Can you please break it down for us? Your current strategy compared to the previous ones, what would be the major difference? I also don't feel that you have raised the price last year, and you continue to mention the priority would be the price.
Two months ago, you returned to the company. Can you please share with us what adjustments that you would like to make? Maybe I will stop here first.
The mistakes and the comparison with the peers, not so bad, you mentioned. I want to tell you that we are not comparing ourselves with the low-performing ones. I have a lot of experience in France, and also, I have some knowledge about the retail business in North America. I told Desory, our profitability would be around 2%, but in China, the situation is a bit special. We should be profitable. We are not comparing with the low-performing retailers. We need to compare to the best-performing ones. How do we realize profitability? As I have mentioned that our same-store growth declined. Same-store sales declined. This is terrible. Carrefour declined by 10% each year. This is unbelievable.
This company would not survive. Our comparable same-store sales must go up. This is our most important KPI. There are many examples in China and abroad that we must be profitable. We are not comparing with the poor-performing retailers. For PB, we attach great importance to that too. Our PB, the positioning of PB is good products, high price. That is what I have heard from the management. For RT-Mart, also for Walmart. If Walmart in the U.S. announces better goods, their strategy is better goods. Most of the products would be below $5. They provide affordable products to the consumers. For us, we want to realize advantage and price with good products. For the Super Saver products, is the lowest price of products. For our PB products, we are the cheapest in the market.
We are in line with the national standard, but we are the cheapest in this product line. Last year, this product line is gone. I can give you another example. For our groceries, we have a cutting board of CNY 19.8. We ran out of stock. Chopsticks, that is of the cheapest price. We should give it the best shelf space. It was placed at the bottom of the shelf. The best-selling item was placed at the bottom of the shelf. Customers are very wise. They know what they want. You need to stand from the shoes of the customers. The same for PB. We believe it is very important. Our positioning is problematic, and that is why we want to make some adjustments. We will continue to see adjustments, and you will see that in the market soon.
The second one is about PB, but also related to supply chain, and the products are from the third-party suppliers. I am not sure if you still have such statistics of what would be the percentage of the third-party suppliers' products. For example, perishables or other products, and what would be the most promising product categories. For example, more SKUs or better price? Can you please share with us your perspective?
We have more than 20,000 SKUs, roughly. For some product categories that is essential to people's life, then we have more SKUs. There are lots of tricks and trade secrets here. Perishables and fast consumer goods account the biggest part in our hypermarket. We have the space to offer more choices to the customers, and that is why we can differentiate ourselves from other supermarkets.
For example, for the cutting boards and the woks and pans, we offer a full price range merchandise to the customers for these categories. For the textiles, some might go to Uniqlo to buy, but a lot of people now go to RT-Mart to buy. We have a lot of good products, but some of the good products are not shown to the consumers. For example, the shirt that I am wearing, it is quite comfortable to wear. Every time I visit a market, I would buy them to try it. So far, I do not see any negative feelings from the textile merchandise that I buy from the shop. Next month, we will review again our price structure.
It is very important that we are very selective in the SKUs and how we present the merchandise in the supermarket and hypermarkets, so that our customers can see it, are also very important. We have good products, but we need to let them be seen. We have a lot of actions that are on the way.
Sorry, I have two last questions. First, about April and May. Can you break down the online and offline business, the traffic, and the ticket price improvement for me? The last question is also about some financial statistics. Is there any one-off impact? For example, closing down stores, supply chain adjustment. For example, for financial year 2024, there was a CNY 7 billion impact on your performance. Will that be repetitive again in the next year?
I have the impression that you are more discreet in terms of the closing of the stores. Just now, you mentioned that you adopt a bottom-up approach when it comes to the decisions with closing down stores. Is there any changes for such a strategy?
First, about the performance in April and May. As I have mentioned, that we have shifted back our focus on doing the real business and offer the good merchandise and low price of merchandise to our consumers. For example, the durian that we have sold during the May 1st holiday. We now focus on performance enhancement. As I have mentioned, we have seen the recovery of offline traffic, and it has been stabilized in May, and we have seen growth in offline business. For online business, we have expected some negative impact on our sales volume due to some strategic adjustment.
However, we have already gone through the challenge of the platform adjustment from some e-commerce platforms. At the same time, our ticket price has gone up. This is quite encouraging, and that is why the accumulative performance for the year is quite ideal, and that is why I told my teams that we should celebrate. We should celebrate even with the smallest achievement. It is worth it. In terms of supply chain, the adjustment would be quite small.
The impact would be very limited. Okay. For the closing down of stores, this is dynamic. I would not say that we will close several dozen stores. But I would say this is dynamic. For online, offline business, same-store growth or closing down stores, everything is dynamic. Every actions that we take is to make sure that our development is more healthy and sound. As I have mentioned that we will review case by case.
If we want to take an action, this action will make our company more healthy, we will make that decision. Thank you.
Thank you. In the interest of time, we will accept one last question from the online audience.
I have two questions. I am from Jefferies. The question is also about the same-store sales for April and May. I have not seen the positive statistics for a long time. That is why I would like to ask some questions. You have taken office for two months after seeing the 6% growth for same store. Is it because of the low base before or because that you have more offerings for the essential services and goods? The recovery of the same-store growth, what is the reason behind it, and what would be the trend? This is the first question.
The second question is about the rental income, which has a big impact on our profitability. We have closed down 20 stores. What is our prospect for the rental income? For the structural optimization work, is it done? You said you would like to increase the percentage of entertainment and education to tenants. Is that work finished? Some more have reduced their rental income. So what is our prospect and expectation for rental income, and what is our perspective for the rental contribution to our revenue?
There are lots of questions regarding the business performance in April and May. In fact, our confidence and morale is very important. It is not some empty talk. I can see some change on a day-to-day basis, which is very important. Just to give you an example, one weekend, I went to a store and visited that store as a customer.
Of course, I discover a lot of problems, and last week, one friend told me that, "Oh, you should come to this store again. There are many changes, good changes." This is just an example, as I have mentioned that we will have other actions, such as the returning of some merchandise. I always say that the customers are more professional than me. They are the wisest. They know what they want. There is another thing that is very crucial. RT-Mart has the best and fastest execution. When we have a policy, for example, we want to become the cheapest in the community, we need to compare with other peers. We need to have weekly report. I have seen such actions are being executed. Another example is also about a store. A competitor never came to our store, but now they were here to investigate our price.
We have seen such trend in Shanghai. Shanghai is a strategic market for all players in retail. If you want to see who is the best in retail, you must come to Shanghai. This is a saying in the industry. I can tell you that the traffic growth is the fastest in Shanghai. The business growth is also quite ideal for Shanghai. We are back on track. Of course, there will be some fluctuations and adjustments. In the overall trend, I would say that I am very confident. We are community stores. We provide services and products to the local residents. We believe that apart from rental, we need to see whether the tenants can bring along some traffic and services to the local residents. Such kind of adjustments takes time because we also need to consider the duration of the lease.
But these stores can bring us around 25% of the customer traffic. But of course, we will continue to enhance at that level. And there is one very positive point, but I am not a professional. But my colleagues told me that some restaurants' rentals are not the same as before. But back to my previous point, why do we think that same-store sales is very, very important? Because the same-store sales growth can also help drive the growth for our tenants. If their income increase, then the rental level might also go up. The tenants that brings along traffic can help other tenants with the additional traffic. And in return, the rental can also go up. We need to realize win-win together. We need to be empathetic. We are not just charging them rental. That is not our pure purpose. Our rental income would be quite stable this year.
But of course, we will continue to make adjustments. We hope that the tenants can become a part of our thriving and prosperous organic entity. I want the tenants to perform better as well. Of course, we are learning from the best in the industry and see if there are any best practices that we can refer to. There are many professional commercial property peers that we can learn from as well. Now, I would like to open the floor for the online investors and analysts. If you have any questions, please feel free to press star one. Our operator will help raise your questions. Thank you.
The first question is from Luo Chen, Bank of America. Please feel free to raise your question now.
Can you hear me well?
Yes. Loud and clear. Please start your question.
Thank you, Mr. Shen and Desory and Xiaobei.
I am from Bank of America. Sorry I cannot make myself available for the online results announcement, and sorry for missing your debut, Mr. Shen. I have several questions. The first question is that I have been researching retail for 20 years, and I have witnessed the changes for the retail industry in the past 20 years. Digitalization, near field, adjustment, et cetera. I feel that for more than a decade, we have seen adjustment mentioned by the management. But ultimately, planning can never catch up with the changes. Mr. Shen mentioned about positive same-store growth target. Is there any assumptions? For example, assumptions for the macro environment, industrial competition, and also the format of retail. Is there any uncertainties in the future? And I have also noticed that there are a lot of discounted snack store.
For us, one of our major merchandise category is food, and we focus on the eastern part of China, such as Shanghai and Jiangsu. And we do not see a lot of discounted snack stores, but it is quite popular in other provinces. If this kind of format of retail starts to enter the East China market, how do we cope with that? And last question, and I know Mr. Shen, you have worked in France and then came to Sun Art. And what do you think of the relationship with Alibaba, and is there any changes in terms of resources allocation when it comes to the cooperation relationship with Alibaba? Can you hear me well, right?
Thank you for your question. I hoped to have an opportunity to talk with you. I started my career in 1999, so I have around 20 years of experience as well.
In the future, I believe there will continuously be emerging retail ideas, but the essence of retail will remain the same, which is to sell the products that the customer desire at a price that they think reasonable. The founder of Auchan is [Shaun Mediac]. I had the honor to work with him, and he said that for retail and e-commerce, whatever the form is, we are just a seller of merchandise. We need to focus on selling the goods. He also said, "If we can sell more products with cheaper price, that is what the consumer wants." For Sam's Club, the efficiency is quite high. We are learning from them for our membership store. As a brick-and-mortar store, but now, of course, they are involved in the online business. It's all about price and customer experience.
To my understanding, it is very necessary for us to utilize new technologies, but the essence of the retail will remain unchanged. It would be the same tomorrow, it was the same yesterday. Of course, we need to catch up with the latest technology, how we can deliver our goods and services to the home of our customers. For RT-Mart, we have our channel and siting advantage. We are always located in the center of a community. For iterations of technologies, there will be new technologies in the future, but the essence will remain unchanged. For discounted snack stores, we have noticed such trends. We have been noticing their business model. For some snacks stores, there are different types. For example, discounted stores for the near expiration products. Yes, we need to pay attention to this format of retail.
As I have mentioned that we keep reviewing our price structure. For example, snack department will mention about discounted snack franchise stores. They will tell me whether we should learn from them. Review of different product categories is not only about one competitor. Different categories will see different format of business and different competitors. We will learn from the best, and we will review our own stores. For example, for the textile products, we learn from Uniqlo, not just from other hypermarkets or supermarkets. The next question is about the relationship with Alibaba. First, we have a smooth communication with Alibaba. Alibaba is quite open. Other resources of Alibaba, if we need them, they give us full support. Sun Art is market-driven. Sun Art is independent.
If there are other partners, we are very willing to partner with them, and we can partner with others, and we will get the full support from Alibaba. There are no more questions from online investors and analysts. Maybe we will allow some more time for the after communication. This would mark the end of the briefing. If you have any questions, please feel free to contact the investor relations department, and hope to see you again very soon. Thank you.