Summary of Key Points
Mixue Ice City has presented an unexpected financial report for the first half of the year, showing an increase in revenue but not in profit: sales grew by just 2.3% (to 15.22 billion yuan), while net profit plummeted by 14.7% (to 2.32 billion yuan), marking the first half-year decline in profit since the company went public. The total number of stores has reached 64,000 (an annual increase of over 10,000), but the revenue contributed by each store to the headquarters has decreased by 15%, indicating that the company is making less money despite higher sales. Rising costs and expenses (due to quality improvements and expanded management) have further dragged down profits. The stock price has fallen by more than 8% in half a year and has been halved in the past year, resulting in a loss of hundreds of millions in market value. The company is attempting to stabilize investor confidence with a special dividend of 1 billion yuan, but its long-term growth depends on three new strategies: developing multiple brands, improving the supply chain, and expanding overseas. However, these strategies have not yet been successfully implemented. The new brands (Lucky Cafe and Fresh Beer Fulu Jia) are still losing money or have not reached a significant scale, the investment in the supply chain is a short-term cost, and the number of overseas stores has been decreasing for two consecutive years.
Detailed Analysis
1. More stores, but less profit per store?
97% of Mixue's revenue comes from supplying ingredients and equipment to franchisees. Theoretically, more stores should mean more sales, but this time the opposite is true:
- Decline in revenue per store: Last year, each store generated an average of 273,000 yuan for the headquarters; this year, it has dropped to 231,000 yuan, a decrease of 15%.
- There are three reasons for this:
- Last year, intense competition in delivery subsidies pushed up revenue levels, and this year those subsidies have been reduced, leaving the industry trying to adjust to the higher baseline.
- The lower-tier markets are becoming saturated: With 59,600 stores covering all cities, 58% of them are in third-tier and below areas, and new stores are competing with existing ones for business.
- Costs have risen faster than revenue: Improvements in quality (such as switching from “freshly brewed” coffee to “instantly brewed”) have increased material costs, and the management of 64,000 stores (including supervision and image upgrades) as well as the operation of the Snow King IP (animation, merchandise) have increased sales and administrative expenses by 20%-40%. The additional 380 million yuan in expenses almost offset the 400 million yuan in reduced profit.
The company has started to slow down its expansion: This year, it opened 30% fewer new stores than last year and closed more than 100. In the future, the focus will shift from opening new stores to increasing the profitability of existing ones.
2. Why is it difficult for new brands to replicate the Snow King's success?
Mixue hopes to create another hit with Lucky Cafe (coffee) and Fresh Beer Fulu Jia (beer), but so far, the progress is slow:
- Lucky Cafe: With over 10,000 stores, the low price strategy (with an investment of only 127,000 yuan per store, much lower than Luckin Coffee) results in thin profits. Starting 2026, the brand will focus on per-store revenue rather than expanding rapidly. The losses mentioned in the group's annual report are likely related to this.
- Fresh Beer Fulu Jia: The number of stores has increased from 270 to 3,000 in one and a half years, but the financial performance is not disclosed, so it's unclear whether they are profitable.
- Problems: The coffee market is highly competitive with companies like Luckin and Kudie, and being “affordable” is just a basic requirement, not a competitive advantage. The beer market is also competitive, and it will take time for the new brands to stand out, with almost no immediate impact on overall revenue.
3. The supply chain is a strong advantage, but it requires significant investment
The supply chain is Mixue's core strength (for example, producing its own ingredients and building a cold chain system), but it is still in the investment phase:
- This year’s efforts: The company has launched a passion fruit production base in Yunnan to reduce costs by processing ingredients locally, built 31 warehouses across the country, and set up cold chain systems in some overseas stores.
- The cost: This will result in annual capital expenditures of 1.8-2 billion yuan, which are currently considered costs and will not generate profits immediately. The market will need to see these investments turn into profits, such as by reducing material costs or selling products at a higher price to franchisees.
4. Can overseas expansion maintain growth?
Overseas expansion was once Mixue's growth strategy, but it has faced challenges:
- Poor performance: The number of overseas stores has decreased by 355 (to 4,378) compared to last year, mainly due to closures and reorganizations in Indonesia and Vietnam.
- Reasons for the changes: Many unprofitable stores were opened initially to expand quickly, and now the focus is on optimizing operations, with new markets like Mexico and Brazil being explored.
- Future prospects: Management believes overseas is a stable source of growth, but whether this will become a significant driver of growth depends on whether new markets can be successful and whether existing markets can turn losses into profits.
5. Can a dividend stabilize investor confidence after a 50% drop in the stock price?
Mixue has 21.6 billion yuan in cash (with no debt) and is distributing a special dividend of 1 billion yuan to show the market that its fundamentals are strong. However, this only helps stabilize short-term sentiment:
- Short term: The dividend gives shareholders some cash and alleviates concerns about the stock price.
- Long term: The stock price ultimately depends on growth. Mixue needs to prove that it can generate profits without relying on new store openings, such as increasing revenue from existing stores, making new brands profitable, and improving the efficiency of the supply chain. Otherwise, even large dividends will not prevent the stock value from declining.
Conclusion
Mixue Ice City once became the “king of affordable drinks” by opening many stores. Whether it can maintain this success depends on its ability to make the business more profitable. It needs to either increase sales per store, increase the profit per cup, or make the new businesses successful. Otherwise, the myth of a 100-billion yuan market value may be difficult to sustain.