Miniso, which is heavily engaged in IP collaborations, is rapidly expanding overseas.
In the first half of 2024, Miniso achieved a revenue of RMB 7.759 billion, a year-on-year increase of 25%; achieved an adjusted net profit of RMB 1.242 billion, a year-on-year increase of 17.8%. Excluding the impact of exchange gains and losses, the adjusted net profit increased by 25.5% year-on-year.
Looking at the second quarter alone, Miniso recorded a revenue of RMB 4.04 billion, a year-on-year increase of 24.1%, slightly exceeding Bloomberg's consensus expectation of RMB 3.96 billion; the adjusted net profit increased by 9.4% year-on-year to RMB 630 million.
Faced with a stock price still at a low point for the year, Miniso announced its first interim dividend plan. It plans to distribute an interim dividend of RMB 621 million, with a dividend payout ratio of 50%.
At the same time, Miniso put forward a repurchase plan: it believes that &#34;the current market environment has significantly undervalued its intrinsic value&#34; and plans to repurchase no more than HKD 2 billion of Hong Kong-listed ordinary shares or American depositary shares within 12 months.
Last year, Miniso announced its transformation from a retailer to a brand operator, with a new brand positioning as a &#34;global IP collaboration store&#34;. With this, it started a large-scale brand collaboration initiative, significantly improving profitability while expanding overseas markets through IP collaborations.
However, there are still concerns about this model.
First and foremost is the licensing fees brought by high-frequency IP collaborations. In the first half of the year, Miniso's authorization fees increased by 24.2% year-on-year, far exceeding net profit growth. The heavy asset expansion actions of opening self-operated stores in North America, Europe, and other places will also erode Miniso's profit performance.
In the first half of this year, Miniso's sales and distribution expenses, including IP licensing fees, overseas store rents, logistics, and advertising expenses, increased by 65.8% year-on-year to RMB 1.522 billion, with the expense ratio increasing by 4.8 percentage points to 19.6% year-on-year.
This led to a first-half adjusted net profit margin of 16.01%, a year-on-year decrease of 1 percentage point.
In this situation, Miniso's response is to develop self-developed products through the toy business brand TOPTOY, hoping to increase the proportion of high-margin products.
The strategy of aggressively expanding self-operated stores overseas may also be adjusted.
According to information obtained from relevant sources by TradeWind01, Miniso is considering opening up franchise business in the US next year to achieve the goal of opening 500 stores in the US.
However, it is emphasized that in prime business districts and shopping malls, Miniso still prioritizes opening self-operated stores.
But undoubtedly, Miniso's overseas business is trying to expand with a lighter asset model, which is the proven strategy in the domestic market.
Of course, how much return the single-store model will bring to franchisees and how long the return period will be are another story.
<h2>Accelerating the Pace of Internationalization</h2>
In the first half of the year, Miniso faced different challenges in the mainland China and overseas markets.
As the basic domestic market, in the first half of the year, Miniso added a net of 189 stores to reach 4,115 stores, contributing revenue of RMB 5.03 billion, a year-on-year increase of 17.2%.
However, the growth rate has significantly slowed down, with a net addition of 279 stores in the same period last year
As over 90% of domestic stores are operated by franchisees, and franchisees often operate multiple stores, the pace of expansion directly reflects the sales vitality.
In a weak consumption environment, Miniso's mainland China same-store sales were only 98.3% of the same period last year.
In response, Miniso's main adjustment in the domestic market is to enter instant retail. By opening &#34;24-hour super stores&#34; similar to front warehouses, it serves the immediate needs of consumers within 3-10 kilometers around the stores.
According to information obtained from sources close to Miniso by TradeWind01, the rental cost of this store type is one-tenth or even one-twentieth of a regular franchise store, with very low labor costs.
However, this store type has fewer SKUs, and monthly sales are only 30%-50% of regular franchise stores.
Insiders at Miniso believe that this store type has great profit potential.
CEO Ye Guofu stated at a briefing that since last year, Miniso has been optimizing store layouts and operational methods to improve the performance of domestic stores.
Ye Guofu expects that the same-store sales in the domestic market will recover to 100% or higher for the whole year, and offline business will maintain a year-on-year growth of 10% to 15%.
In overseas markets, Miniso is still accelerating its expansion.
In the first half of the year, it opened a net of 266 stores to reach 2,753 stores, with revenue of 2.73 billion yuan, a year-on-year increase of 42.6%. Revenue share reached 35.2%, an increase of 4.3 percentage points year-on-year.
The growth rate in the North American market is now second only to Asia (excluding China), becoming the focus area for Miniso's direct-operated store expansion in the past year.
In May last year, Miniso opened a global flagship store in Times Square, New York, becoming the first Chinese brand to enter.
Ye Guofu stated that Miniso has opened around 200 stores in about 40 states in the United States. Same-store sales in the U.S. increased by 14% in the first half of this year. By the end of July, Miniso had added 69 stores in the U.S. and is expected to reach around 100 stores this year.
&#34;We are optimistic about the long-term development of the U.S. market and will continue to explore new store formats to meet market demand,&#34; added Ye Guofu.
Although the expansion strategy of opening large stores directly operated by the company brings higher gross profit margins, heavy asset investment will erode net profit performance.
In the first half of the year, Miniso's gross profit margin increased by 4.1 percentage points year-on-year to 43.7%, but the adjusted net profit margin decreased by one percentage point year-on-year.
This may be due to the significant year-on-year increase of 72.5% in sales and distribution expenses to 826 million yuan in the first half of the year.
This is attributed to investments in direct-operated stores in mainland China and overseas markets, especially in strategic overseas markets such as the U.S., according to information obtained by TradeWind from relevant sources at Miniso.
TradeWind (ID: TradeWind) learned from sources at Miniso that Miniso is considering opening up its franchise business in the U.S. next year to achieve the goal of opening 500 stores in the U.S.
However, it is emphasized that Miniso will still prioritize opening directly operated stores in high-quality business districts and shopping malls in the U.S.
<h2>Empowering Self-developed IP</h2>
It is no exaggeration to say that co-branded IP products have become the most important driving force for Miniso's overseas expansion, accounting for 40% of its overseas business
However, Miniso did not initially use this strategy to open up the market. When it went public in the United States in 2020, it only collaborated with 17 IPs. By the end of the second quarter of last year, it had already reached agreements with over 80 IPs, with the number of IPs collaborated with each year exceeding 30.
The direct result of IP collaboration is to increase the average customer spending and thereby boost Miniso's profit performance.
According to Guotai Junan Securities analyst Ji Wenxin's offline research data, the premium rate of Miniso's IP products compared to white-label products ranges from 25% to 200%.
For example, a regular Miniso eye mask is priced at 15 yuan, but a product co-branded with &#34;Barbie&#34; is priced at 49.9 yuan, an increase of over 30%.
Having tasted success, Miniso is operating both directly operated stores and producing co-branded products. The gross profit margin has increased from less than 30% in 2021 to over 40% now.
However, the cost of frequent collaborations comes from the increased investment in IP licensing fees. In the first half of the year, Miniso's licensing fees increased by 24.2% year-on-year, almost in line with the revenue growth.
In the cooperation model of signing IPs, successful IPs that Miniso collaborates with have restrictions such as contract duration.
For example, the IP &#34;Chiikawa,&#34; which currently accounts for the highest revenue share, mostly completes its sales domestically, making it difficult to replicate in overseas markets.
In contrast, the neighboring Pop Mart (9992.HK), with its own IP &#34;LABUBU,&#34; is not only popular in China but also revered as a god of wealth in Southeast Asia.
In fact, as early as 2020, Miniso established the trendy toy brand TOPTOY, with expectations to create self-developed IP products.
TradeWind01 once learned from sources close to Miniso that TOPTOY's own brand accounts for nearly 20%, with a mid-term goal of reaching 50%.
The self-owned IP products mainly focus on building blocks, while others are reflected in co-branded products with Disney, Sanrio, and other IPs.
In the first half of this year, TOPTOY contributed to a year-on-year revenue growth of 37.9% to 215 million yuan, opening 47 new stores to reach 195 in total. This segment of the business also drove an increase in Miniso's gross profit margin in the first half of the year.
Miniso personnel informed TradeWind01 that TOPTOY will further optimize the gross profit margin by increasing the development and sales share of self-developed products.
Having already proven its eye for &#34;signing IPs&#34; to the market, Miniso's ability to &#34;create IPs&#34; under cost pressure remains to be tested over time

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Cost Reduction and Profit Increase

From "signing IP" to "creating IP", Miniso's overseas strategy