Rate Of ReturnThe reason for the recent sharp drop in Pop Mart has been found - Pop Mart's latest roadshow actively slowed down US growth
Pop Mart released its Q3 performance report on October 21:
Total revenue for Q3 2025 increased by 245%-250% year-on-year compared to Q3 2024, with domestic revenue up 185%-190% and overseas revenue up 365%-370%.
Before the report, institutions generally predicted a year-on-year growth rate of around 150%. Undoubtedly, this Q3 report far exceeded market expectations, even surpassing Q2's 200% year-on-year growth, making it a near-perfect performance.
However, after the report was released, the stock price opened high but closed low, dropping from HKD 270 to a low of HKD 222, a 35% decline from its peak two months ago. Faced with stellar earnings and a plummeting stock price, many shareholders were left baffled.
Market rumors suggest that North American sales peaked in July but have been declining since, with no signs of recovery in October, leading investors to sell or short the stock.
The two charts above show third-party credit card data indicating Pop Mart's North American sales for July-September were approximately RMB 787 million, 722 million, and 532 million, respectively, with no improvement in early October.
As a region with high credit card usage, third-party data may not be entirely accurate but offers valuable insights. The stock's decline since late August aligns with investors tracking this sales downturn.
In short, while Q3 results were stellar, exceeding expectations, investors worry about Q4 growth slowing—potentially flat compared to Q3 (which would still be strong, but market expectations are higher).
Likely sensing investor concerns, Pop Mart recently held discussions with Morgan Stanley, addressing key questions.
Due to confidentiality, we won't share the full PDF but highlight key points:
1. Normally, Q4 sales should significantly exceed Q3 due to seasonality. However, this quarter has a nuance: pre-orders for certain Labubu plush products contributed heavily to Q3 sales, but the company has limited pre-orders in Q4. This may constrain supply for some Labubu items, offsetting stronger seasonal demand.
2. Driven by Labubu pre-orders, online sales in Q3 exceeded ~60% of H1 levels. Management views this as suboptimal, believing in-store shoppers are more likely to become loyal customers, especially first-time buyers. Thus, in Q4, its U.S. site only sells Labubu in-stock items, with the "Why So Series" seemingly the only pre-order option. This supply shift may temporarily impact U.S. online sales.
3. Pop Mart emphasized that with its 2025 financial targets already exceeded, it will focus on business quality and sustainability rather than 强行追求 Q4 sequential growth.
Plain English:
Normally, Q4 sales should dwarf Q3 due to holidays. But Q3's U.S. online pre-sales frenzy led to unhealthy online dominance, so Q4 restrictions are being imposed (though reversible) to prioritize quality and sustainability. This will temporarily dent Q4 performance.
Thus, market speculation about North American sales slipping was correct.
But why limit U.S. sales when factories are at full capacity, struggling to meet demand? My guess: Global plush shortages exist, but production was skewed toward the U.S. due to higher demand and prices (often double domestic). This left other markets undersupplied.
This short-term profit focus was myopic. Over-prioritizing the U.S.—where offline stores are sparse and underdeveloped—risks brand 透支 long-term. Clearly, management recognizes this, hence Q4's shift toward global balance and sustainability.
As a long-term investor, I support this adjustment. Restraint amid unpreparedness is wise. Rarely do leaders resist short-term performance pressures.
Pop Mart could chase higher 2025 profits (jokes about "300 亿" abound), but its market position allows patience. Overseas expansion requires solid foundations—supply chains and service—for lasting success.
Investors should focus on buying great companies at fair prices, ignoring short-term noise.$POP MART(09992.HK) $MNSO(09896.HK) $Miniso(MNSO.US)
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