The fresh grocery retail sector is undergoing a profound transformation. With intensifying price wars, the closure of inefficient stores, and persistent profitability pressures, most brands are grappling with the challenge of growing revenue without boosting profits, and expanding store count without enhancing quality. Against this headwind, merely holding the line is difficult, let alone breaking through. Yet, fruit retail leader PAGODA GP (02411) has chosen this period of industry adjustment to deliver a robust set of results: for the first half of 2026, the company generated revenue of RMB 5.008 billion, a 14.5% year-on-year increase; net profit attributable to shareholders was RMB 34 million, a sharp turnaround from the RMB 342 million loss recorded in the same period last year; and net store additions reached 372, pushing the total count to 4,758. Revenue, profit, and store expansion—all three core metrics surged simultaneously, forming a rare trend of synchronized improvement. This is not a weak rebound but strong evidence of a comprehensive recovery in operational quality. Unlike many industry players who are passively defending their positions and following the crowd into cutthroat competition, PAGODA GP has taken the initiative to innovate once its core business stabilized: on one front, it is breaking through the ceiling of the single-fruit category through format innovation; on the other, it is extending its supply chain and AI digital capabilities outward, carving out a high-quality recovery path defined by "internal enhancement and external expansion." This comprehensive repair marks a new growth inflection point. With this interim scorecard, PAGODA GP is declaring that the deep adjustments of the past two years are over, and the true re-rating of its value has only just begun.

Diving deep internally: clearing out inefficient capacity and fortifying the core business with refined operations

It is clear that the underlying support for this comprehensive recovery is closely tied to PAGODA GP's proactive self-renovation over the past two years. During the earlier phase of industry-wide expansion, a large number of offline stores suffered from severe homogenization, low sales per square foot, and high spoilage rates. Compounded by industry price wars, companies were under constant pressure. In response, PAGODA GP chose not to blindly join the rat race but to focus on strengthening its internal capabilities and launching a full-scale operational optimization. On one hand, in terms of store footprint, the company continued to refine its national store network, completing the exit from inefficient capacity. Specifically, during the reporting period, the company systematically reviewed its stores nationwide, closing underperforming locations with poor site selection or thin margins while retaining quality core locations. After two years of clearing out inefficient stores and network iteration, the operational quality of its stores improved significantly. In the first half of 2026, retail stores saw net additions of 372, bringing the total to 4,758, officially returning to a sustainable expansion trajectory. At the same time, this purging of inefficient capacity has resolved the long-standing pain point of being "big but not strong, with many stores but thin profits," laying a solid profit foundation for the next round of growth. On the other hand, in refined operations, PAGODA GP implemented full-chain fine-tuned management, yielding notable cost reductions and efficiency gains. On the product front, the company continued to optimize its fresh produce SKU structure, eliminating low-turnover, high-spoilage categories to raise the share of high-value, high-repurchase core fruit items. On the supply side, it kept refining its centralized procurement, warehousing, and distribution systems to cut logistics costs and reduce spoilage across circulation links. On the management side, it strictly controlled various expenses to achieve precise cost savings. Additionally, the company fully deployed an AI ordering system, AI store operation diagnostics tools, and a dedicated fruit industry large model, leveraging intelligent algorithms to precisely forecast foot traffic, optimize order quantities, and reduce fresh produce loss. These multi-pronged efforts have significantly boosted profitability. During the period, gross profit surged 182.5% year-on-year to RMB 609 million, with the gross margin climbing to approximately 12.2%. When every link of operational optimization is effectively executed, a profit turnaround is no longer a surprise but a natural outcome. From refining store structures to full-chain cost reduction and efficiency gains, and from deep AI integration to improved per-store economics, PAGODA GP's profitability recovery is not the result of short-term policy dividends or one-off factors, but a necessary payoff from a systemic upgrade of its business model. This profit resilience, forged from within, is the most solid starting point for the company's next growth cycle.

Proactively seeking change: from "specialty fruit stores" to the new battlefield of "Fruit+"

It is worth noting that as the core business stabilized, PAGODA GP did not stop at repairing existing operations. Instead, it proactively stepped beyond the confines of single-fruit specialty retail, avoiding the industry's endless price wars, and launched format innovation and boundary expansion to build new growth curves—this is precisely the fundamental driver of the company's high-quality growth. Specifically, in response to the new landscape in retail, PAGODA GP established a new "Fruit+" development strategy, breaking through the ceiling of a single category. In the first half of 2026, the company joined forces with seven regional retail brands (collectively dubbed the "Seven Star Alliance") located in Inner Mongolia, Shaanxi, Henan, Jiangsu, Hunan, Jiangxi, and Guizhou, actively laying out innovative store formats such as fruit-plus-snacks, full-category discount supermarkets, and community fresh retail stores to meet residents' high-frequency, real-time demand for fresh food across "five meals a day." From a business logic perspective, fruit, as a high-frequency community necessity, has strong traffic-driving attributes that stably bring in daily foot traffic. Meanwhile, the snack category offers higher gross margins, lower spoilage, and stable consumption cycles. The two customer bases overlap significantly, and their consumption scenarios complement each other, perfectly addressing the weaknesses of pure fruit stores, which suffer from a single profit structure and greater performance volatility. As of the interim report date, the Seven Star Alliance model operated a total of 1,951 branded partner stores. On July 18, 2026, a landmark event took place: PAGODA GP's first innovative comprehensive store officially opened in Shenzhen. Named the "Moon Store," this new format spans roughly 150 square meters and breaks away from traditional fresh fruit retail limitations. The store integrates six business segments: curated fresh fruits, freshly made cut fruit and drinks, specialty fruit coffee, fruit bakery, premium fruit gifting, and leisure social space. To cater to different consumption scenarios, PAGODA GP has established a three-tier store matrix consisting of "Star Stores, Moon Stores, and Sun Stores." Star Stores are compact community-standard outlets of around 50 square meters, serving as the brand's baseline traffic foundation. Moon Stores range from 150 to 200 square meters, strategically placed in commercial streets, office districts, and mature communities, balancing consumer experience with store profitability. In the future, larger Sun flagship stores will be launched in prime urban business districts as brand showrooms. It is evident that with each expansion of its boundaries—from single-category fruit to a composite format including snacks, fruit drinks, and bakery, and from traditional fresh fruit retail to innovative comprehensive store types like Moon and Star Stores—PAGODA GP is upgrading its sales density and profitability. This also means that as the "Fruit+" new battlefield fully unfolds, PAGODA GP is opening up not just the imaginative potential of its store model, but also a clear growth channel for sustained expansion in both revenue and profit.

Spilling capabilities outward: fully opening the supply chain to build an industry-level service platform

With the core business fully stabilized, PAGODA GP's greater strategic depth has emerged: capability spillover. In 2026, the company formally set the direction to fully open its supply chain capabilities. Chairman Yu Huiyong has also charted the course for this strategic transformation: shifting from a "channel brand" serving its own stores to a "supply chain platform plus category brand incubator" that empowers the entire industry. This means that the procurement, quality control, cold chain, and operational capabilities accumulated by PAGODA GP over more than two decades will move from internal cost reduction and efficiency gains to broad external empowerment. This is not just a concept but a systematic project already being implemented. At the May 2026 supplier conference, PAGODA GP unveiled a systematic empowerment plan covering the entire chain, including cultivation, seed industry, agricultural inputs, post-harvest handling, and fulfillment. On the cultivation front, the company introduced services such as BLOF ecologically harmonious cultivation technology, variety licensing empowerment, and standardized agricultural input assurance. On the circulation front, it works to unlock key steps in fruit preservation and value addition through quality control, post-harvest R&D, and full-chain, cost-effective fulfillment services. On the support front, AI and digital tools are deeply embedded across all supply chain links. The relationship between PAGODA GP and its partner suppliers has also been fully upgraded from a traditional "buy-sell relationship" to a new partnership defined by "system integration, co-defined standards, data sharing, and co-creation of value." Data is the best touchstone. In the first half of 2026, PAGODA GP fully opened its supply chain externally. Its Banguo platform has established 9 central warehouses and 694 city warehouses nationwide, further improving supply chain efficiency and expanding its market share in the 2B segment. During the period, gross merchandise value from Banguo reached RMB 1.4 billion, up 21.9% year-on-year; direct sales revenue from fruit and other food products was RMB 701 million, up 0.1% year-on-year. Category brand incubation has also landed simultaneously, further amplifying the platform's industry value. In the first half, PAGODA GP continued to deepen the differentiation of its signature fruits, bringing a total of 56 proprietary signature fruit product brands to market, accounting for 11.2% of total store retail sales. Additionally, the company continued to execute a combined strategy of "high-traffic hero products" and "extreme value-for-money seasonal items," while sustaining marketing campaigns like "Good Fruit Returns." During the period, for high-traffic hero products like durian, the company staged the first Malaysia Durian Festival and the 10th Thailand Fruit Festival, driving durian sales up approximately 7.5% year-on-year. Beyond this, PAGODA GP's digital capabilities are also accelerating their outward spillover. Its AI ordering system, store smart diagnostic tools, and fruit industry large model are being exported externally, further helping partner merchants reduce fresh produce spoilage and improve operational efficiency. During the period, AI-assisted customer service work diversification reduced customer service team labor costs by 44%, while remote intelligent store patrol coverage per day improved efficiency fivefold compared to traditional patrol methods. From supply chain to category brands to digital tools, PAGODA GP's systematic capabilities are moving beyond the boundaries of its own stores.

Conclusion

In summary, from the composite business format exploration of the Moon Store, to the "Fruit+" category collaboration layout, to the industrial depth of supply chain opening and category brand incubation, PAGODA GP is using a combination of strategies to jump out of the price war in fruit retail and proactively define new battlefields. Today's PAGODA GP, armed with C-end brand momentum across the board, a mature B-end supply chain system, and platform-level category incubation capabilities, has long since transcended the single identity of a traditional fruit retailer, completing a deep leap from a terminal channel to an industry platform. At the fruit industry level, PAGODA GP's industry influence and market share will see substantial changes. In the future, as the company's operational inflection point becomes increasingly established and its growth boundaries continue to widen, its valuation logic will undergo a systemic reshaping, with a new round of value re-rating expected to accelerate.