Hello everyone, and thank you for joining 111's conference call today. On the call today from the company are Dr. Gang Yu, Co-founder and Executive Chairman; Mr. Junling Liu, Co-founder, Chairman, and CEO; Mr. Luke Chen, CFO of 111's major subsidiary; and Mr. Harvey Wang, COO. As a reminder, today's conference call is being broadcast live via webcast. The company's earnings press release was distributed earlier today, and along with the earnings presentation, are available on the company's IR website. Before the conference call gets started, let me remind you that this call may contain forward-looking statements made under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known and unknown risks, uncertainties, and other factors, all of which would cause actual results to differ materially.
For more information about these risks, please refer to the company's filings with the SEC. 111 does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under applicable law. Please note that all numbers are in RMB, and all comparisons refer to year-over-year comparisons unless otherwise stated. Please also refer to the earnings press release for detailed information of the comparative financial performance on a year-over-year basis. With that, I will turn the call over to 111's CEO, Mr. Junling Liu.
Good morning and good evening, everyone. Thank you for joining the fourth quarter and the full year 2024 earnings call. The information we'll be discussing here is also available in the slides posted earlier today on the company's website. I encourage everyone to download the presentation as well as the earnings report from our investor relations website at ir.111.com.cn. 2024 was a year of significant challenges stemming from the macroeconomic pressures and ongoing healthcare reforms. These headwinds have impacted the broader healthcare industry. Yet, we delivered our first-ever operational profitability and positive operating cash flow, an important milestone in our company's history. This solid performance is a direct result of our diligent execution of strategic initiatives to boost operational efficiency and cement us as one of the most efficient healthcare platform operators in the sector. It also underscores our agility and resilience in navigating unfavorable and complex market conditions.
Beyond financial performance, we also advanced our technologies and strengthened our supply chain infrastructure, laying the foundation for long-term growth. These improvements position us to better meet future demand with greater speed and lower costs, ultimately driving value across the industry. Next, I will provide a deeper look into the current industry landscape, outline our outlook and opportunities, and highlight key financial achievements. I will also share updates on our advancements in technology and supply chain infrastructure, as well as the recent industry recognition. Finally, I will discuss our growth strategies for navigating this challenging environment before handing over to our CFO, Mr. Luke Chen, for a detailed analysis of our financial performance. Turning to the macroeconomic landscape, economic uncertainties in China have led to increasingly cautious consumer behavior, slowing discretionary spending, and significantly dampening retail sales growth. The healthcare sector is no exception.
According to the National Bureau of Statistics, China just saw a 3.6% year-over-year growth in 2024 per capita healthcare expenditure. This represents a sharp decline of 12.4 percentage points from the 16% growth in the prior year and a lag behind the 5% GDP growth during the same period. At the same time, downstream pharmacies continue to face pressure from ongoing healthcare reforms, including adjustments to individual medical accounts, phased rollout of coordinated outpatient benefits, and heightened regulatory oversight. These reforms aim to build a more sustainable and efficient healthcare system, ultimately benefiting well-managed pharmacy chains with strong product offerings and service capabilities. However, the transition period presents short-term operational challenges. Market growth has not kept pace. As a result, China's total retail pharmacy sales dropped by 2.2% in 2024, according to Zhongkang data .
With more stores competing in a stagnant market, per-store revenues have fallen, intensifying industry competition. Newer stores, still in their growth phase, face additional pressure weighing on short-term profitability. Large pharmacy chains are already feeling the impact. For instance, Jianzhijia or JZJ Chain Drug Store expect its net profit attributable to shareholders, excluding non-recurring gains, analysis to decline by up to 69% in 2024, followed by 66% and a 45% decline for Yixint ang or YXT Health and Shanghai DEYAOYE or Shanghai No. one Pharmacy Co., respectively. Independent pharmacies with limited resources face even greater financial strain. Given this challenging backdrop, digital transformation is no longer optional. It is essential. Pharmacies must cope with weaker consumer sentiment, slower healthcare spending, and shifting patient behaviors while managing cost pressure and operational inefficiencies.
The key to survival and growth lies in innovation, rethinking service delivery, optimizing product categories, enhancing client management, and improving operational coordination across stores. This is where digitization and AI-driven solutions come in. As a pioneer in the digital revolution, we have integrated leading technologies across our operations, from sales and procurement to customer demand identification, inventory optimization, and warehouse allocation. Our fully digitized operating system also empowers our upstream and downstream partners to reduce costs, improve efficiency, and enhance service quality. Beyond the necessity of digital transformation, we remain highly confident in China's long-term healthcare market, supported by two key structural trends. First, the ongoing anti-corruption campaign in the healthcare sector is driving greater transparency in hospital procurement, which is anticipated to expedite the shift of drug sales and prescriptions to retail pharmacies.
This transition represents a RMB 1,000,000,000,000 out of the hospital pharmaceutical distribution market that could eventually account for nearly half of the entire pharmaceutical distribution sector. In the short term, however, policy execution remains uneven across provinces and cities, with uncertainties and delays in medical reform refinement and implementation. In the 2025 Government Work Report, China called for promoting the coordinated development and governance of healthcare, medical insurance, and the pharmaceutical sector. It aims to steadily advance provincial-level coordination of basic medical insurance while improving its financing and benefit adjustment mechanisms. Once these adjustments are fully in place, particularly with on-time payments from government's national medical insurance, pharmacy chains will be among the primary beneficiaries. As a trusted partner to chain pharmacies, we're well-positioned to capitalize on this growth.