The company released the 1H2018 performance report. On the evening of July 23, the company released the 1H2018 performance report: 1H2018 achieved operating income of 2,077 billion yuan, a year-on-year increase of 7.91%; realized net profit of 56.94 million yuan, equivalent to EPS of 0.14 yuan, a year-on-year decrease of 13.81%; realized net profit of 44.46 million yuan, a year-on-year decrease of 22.25%, and performance below expectations. Innovation stores contributed to revenue side growth, and innovation store expenses dragged down the company's revenue side growth trend during the performance reporting period, mainly due to the acceleration in showroom speed and the increase in sales of innovative stores. However, due to the company's initial investment in business development in innovation stores and the increase in talent reserve costs, the company spent a lot of expenses during the reporting period, causing the year-on-year decline in net profit of the company to exceed our previous expectations. Furthermore, the company's share purchase expenses granted to the second phase of the employee stock ownership plan in the first half of the year also dragged down the company's performance to a certain extent. The expansion of new stores continues to advance, and 1Q2018 companies have opened 6 new stores in response to high cost pressure, bringing the total number of stores to 174. The company plans to open no less than 40 new stores in 2018. In order to achieve the above goals, the company's new store expansion rate may accelerate. As the degree of integration between the company and Ali in technology, inventory management, logistics, etc. gradually deepens, and Taoxian Da empowers the company's main supermarket business, the company's operating efficiency is expected to gradually improve. We maintain our previous judgment that the company's main theme throughout the year is the construction of new stores and the adjustment of old stores, and the corresponding cost pressure is expected to be high. Lowering the profit forecast, maintaining a “neutral” rating, the cost pressure brought about by the company's innovative store expansion is higher than our previous expectations. Considering that the company's innovative store promotion process will continue to advance, we lowered the company's fully diluted EPS in 2018-2020 to 0.24/ 0.24/ 0.27 yuan (previously 0.28/ 0.31/ 0.35 yuan), respectively, to maintain the “neutral” rating. Risk warning: The results of the new business format of cooperation with Ali did not meet expectations, and the CPI growth rate fell short of expectations.