Summary of Key Points
Mixue Ice City has encountered its first growth bottleneck since going public: revenue only increased by 2.3% in the first half of 2026, while net profit decreased by 14.7%. Although the company continues to expand its store network (with 64,000 stores globally), revenue per store has declined by approximately 17%. The traditional formula of "opening stores → diluting costs → increasing profits" is no longer effective. Compared to GuMing, HuShang Auntie, and Luckin, Mixue is the only one experiencing a slowdown in revenue growth and a decline in profits. Additionally, Mixue has distributed its first dividend of RMB 1 billion, marking a shift from a "high-growth" strategy to one focused on "expansion and shareholder returns." As a result, its stock price has dropped by 14.88% in two days, and its market value of HK$80.3 billion falls short of market expectations.
I. The Failure of the Growth Formula: Opening More Stores, but Making Less Money
Mixue's past success strategy involved rapidly opening franchise stores, which increased the scale of its supply chain and reduced costs, thereby boosting profits. However, this approach is no longer effective:
- Store expansion has slowed down: The company added 4,166 new stores in the first half of the year (compared to 6,534 last year), maintaining its position as the industry leader with 64,000 stores globally. However, its growth rate is slower than that of GuMing (28.4%), HuShang Auntie (39.4%), and Luckin (38.6%).
- Decline in revenue per store: Analysts estimate that revenue per store has decreased by 17% year-over-year. For example, the annual sales of a franchise store have dropped from RMB 550,000 last year to RMB 460,000 this year. In other words, the revenue from opening 10 new stores may not even cover the loss from one declining store.
- Pressured profits: The gross margin has decreased by 1.2 percentage points, and the net profit margin has decreased by 3 percentage points. Despite a 2.3% increase in revenue, costs (for raw materials, sales, and administration) have risen more rapidly, leading to a 14% decline in operating profits.
II. Comparing with Competitors: Mixue is Falling Behind
When compared to GuMing, HuShang Auntie, and Luckin, Mixue's performance is clearly inferior:
- Revenue growth: Mixue's growth rate of 2.3% is significantly lower than GuMing's 31.9%, HuShang Auntie's 42.4%, and Luckin's 31.4%.
- Profit performance: Mixue's net profit decreased by 14.7%, while GuMing's adjusted profit increased by 53.3%, HuShang Auntie's by 58.3%, and Luckin's by 22.8%.
- Revenue per store: GuMing's revenue per store increased by 7-8%, and Luckin's user base grew by 22.9%. Only Mixue's revenue per store has declined by 17%.
The industry is beginning to show differentiation: other companies are either improving efficiency per store or focusing on user growth, while Mixue is stuck in a situation where opening more stores does not lead to increased profits.
III. Three Major Reasons for the Growth Slowdown: Subsidies, Store Density, and Rising Costs
There are three main reasons for Mixue's recent decline:
1. Decline in delivery subsidies: Last year, platform subsidies were substantial, and Mixue's low average transaction value (a few yuan per order) made customers highly sensitive to these subsidies. With the removal of subsidies this year, orders have naturally decreased, and management acknowledges this as the primary cause of the decline in revenue per store.
2. Excessive store density leading to competition: With nearly 60,000 stores in mainland China, 58% are located in third-tier and lower-tier cities, which has saturated the market. New stores are too close to existing ones, causing customer diversion and reduced revenue per store. Mixue has started to emphasize "high-quality store development" rather than blindly expanding the number of stores.
3. Product upgrades increasing costs: Mixue has attempted to upgrade its products to remove the "cheap" label by using fresh juice, fresh milk, and freshly ground coffee. However, short-term increases in raw material costs (by 4.1%) have outpaced revenue growth, significantly reducing the gross margin. Additionally, sales and administrative expenses have also risen, further compressing profits.
IV. The Role of Mixue's Coffee Business
Mixue has two coffee businesses: its main brand and the independent brand Lucky Cafe (with 7,774 stores, ranking fourth in China). Could these two businesses compete with each other?
- Theoretical synergy: The main brand can use its existing tea drink stores to sell morning coffee, improving space utilization, while Lucky Cafe can focus on providing professional coffee services throughout the day, sharing the supply chain (coffee beans and logistics) to reduce costs.
- Practical conflicts: The prices of the two brands are similar (the main brand's Americano costs RMB 6, Lucky Cafe's costs RMB 5-10), and their target customer groups (students and consumers in lower-tier cities) overlap. If the main brand expands its coffee offerings to all times of the day, it may compete with Lucky Cafe. Lucky Cafe is planning to upgrade its products (using shorter-shelf-life beans and fresh milk) and target higher-tier cities, but Mixue has not disclosed its financial data, making it difficult to assess the extent of the potential competition.
V. A Change in Corporate Narrative: From a "Store-Opening Machine" to a "Cash Cow"
Mixue used to focus on high growth, but now it is shifting its focus to shareholder returns:
- First dividend distribution: The company distributed RMB 1 billion (43.8% of its first-half profits) and still has RMB 21.6 billion in cash, with no loans, indicating healthy cash flow. Management plans to consider further dividend distributions and share repurchases in the future.
- Shift in valuation criteria: While the market used to focus on growth rates, it now also considers cash flow and dividend payments. Some investors believe that companies with strong cash flows can become stable "value stocks."
- Future challenges: Although Mixue remains the largest company in the industry, the market is now more concerned with whether each store can generate higher profits. If Mixue cannot improve revenue per store, it may transform from a "low-price growth giant" into a "mature company with high dividends," and its valuation will accordingly adjust.
In Conclusion
Mixue Ice City has moved from a strategy of rapidly opening stores to focus on improving revenue per store and distributing profits to shareholders. Whether it can reverse this trend will determine whether it continues to lead the industry or becomes a stable, dividend-paying company.