Pop Mart Shares Slide Despite up to 80% Q1 Revenue Growth as Labubu Craze Cools

(Yicai) May 13 -- Shares of Pop Mart International Group fell after the Chinese toy maker reported first-quarter revenue growth of 75 percent to 80 percent from a year earlier, as investors grew concerned that the popularity of its flagship Labubu intellectual property is fading.The stock price of Pop Mart International Group [HKG: 9992] closed 1.2 percent lower at HKD160.90 (USD21). The company said first-quarter revenue growth exceeded market expectations, with the Chinese market leading performance as revenue there surged 100 percent to 105 percent. Online sales in China jumped 150 percent to 155 percent.Overseas revenue also maintained strong momentum, with sales in Europe rising 60 percent to 65 percent, the Americas climbing 55 percent to 60 percent, and the Asia-Pacific region increasing 25 percent to 30 percent, according to the Beijing-based company’s first-ever conference call held today.Management also responded to a May 11 report by Morgan Stanley, which lowered forecasts for Pop Mart’s overseas sales growth over the next three years due to declining social media interest in Labubu.Overseas Expansion Faces Post-Labubu ChallengesChief Operating Officer Si De said the company’s rapid overseas expansion last year was largely driven by the viral popularity of Labubu, while many new overseas consumers remained unfamiliar with Pop Mart’s other IPs. Combined with the overseas team’s relatively limited operating experience, business performance declined noticeably after the traffic generated by Labubu weakened, he added.Si said Pop Mart has already established a mature multi-IP operating system in China and built a membership base of more than 70 million registered users, which will serve as an important reference for overseas expansion.The company said it plans to extend the lifecycle of the Labubu IP through initiatives including a film project, collaborations tied to the FIFA World Cup, and the launch of two new products later this year. The film is currently in the scriptwriting stage and will be directed by Paul King, who is best known for the Paddington films and Wonka.Margin Pressure and Retail Strategy ShiftOn costs, Chief Financial Officer Yang Jingbing said rising prices for raw materials such as polyvinyl chloride (PVC) and fabrics, as well as higher fuel surcharges linked to international oil prices, are expected to increase production costs for new products by 3 percent to 5 percent and reduce the company’s overall gross margin by about 0.5 percentage points.For the full year, the company expects gross margin to decline by 1 to 2 percentage points due to a lower contribution from higher-margin overseas regions and rising import tariffs.Regarding retail strategy, Pop Mart said it will prioritize stores of around 200 square meters and shift its focus away from store count expansion toward improving store quality and operating efficiency. The company also plans to open large flagship stores in cities including Milan, London, Paris, and New York City.Last year, Pop Mart’s revenue totaled CNY37.1 billion (USD5.5 billion), up 185 percent from the previous year, with overseas markets contributing 43.8 percent of total revenue.Editor: Emmi Laine