Summary of Key Issues
On the surface, MINISO continues to expand (opening overseas stores and seeing growth in its TOP TOY product line), but the capital market is not optimistic about its prospects because it has achieved increased revenue without a corresponding increase in profits. While its sales have risen, profits have been eroded by high costs associated with overseas direct operations, IP licensing fees, marketing expenditures, and misguided diversification investments. The management tried to counter the challenges of a sluggish consumer market by focusing on trendy trends (such as IP collaborations, opening large stores, acquiring Yonghui, and investing in AI), but these strategies have backfired, and the company is now reflecting on and making adjustments.
1. Two Key Drivers of Growth Have Slowed Down
MINISO's growth has primarily relied on "overseas expansion" and the popularity of its TOP TOY products, but both have slowed:
- Overseas Expansion: The proportion of overseas revenue has decreased from 42% last year to 36%, and its growth rate is lower than that of its domestic operations. More critically, the costs of renting and staffing overseas stores have risen faster than revenue. For example, although overseas sales account for 35%-45% of total revenue, they only generate 10%-15% of profits, meaning that opening ten overseas stores yields less profit than opening one domestic store.
- TOP TOY: This trendy product line, which competes with brands like PopMart, saw nearly doubling in growth last year but only achieved a 32% growth rate in the first half of this year, indicating a significant slowdown.
Domestic store expansion has also slowed, with only 97 new stores opened in the first half of the year, a significant decrease from the second half of last year, indicating diminishing efficiency in expansion.
2. IP Collaborations: A Booming Appearance, but a Loss-making Venture
MINISO uses IP collaborations to attract younger customers, but this strategy has both advantages and disadvantages:
- High Licensing Costs: 90% of the products in its stores feature external IPs such as Disney and Sanrio, and it must pay royalties for each sale. The more popular the IP, the higher the licensing fees, resulting in a larger share of profits going to the IP owners. In contrast, PopMart generates 72% of its gross profit from its own IPs, leaving MINISO with only a small portion of the profits.
- Impact on Profitability: The company's large-scale MINISO LAND stores (e.g., the one on Nanjing East Road in Shanghai, which generates 150 million in annual sales) require high rents and significant labor costs, which prolongs inventory turnover times. The original small, high-efficiency stores were more profitable, but the larger, more expensive stores have increased overall costs.
- Uncontrolled Expenses: Marketing expenses increased by 36% in the second quarter of 2026, with a large portion coming from IP licensing and advertising. In the first half of 2025, IP licensing fees alone amounted to 241 million yuan, a 31% increase year-over-year, significantly eroding profits.
3. The Success of Its Own IP, YOYO, Is Temporary and Dependent on the Parent Company
MINISO launched its own IP, YOYO, in an attempt to move away from being a mere IP distributor, but it has become a costly endeavor:
- Short-lived Popularity: YOYO gained instant fame by appearing at events like the Met Gala and the Spring Festival Gala, with monthly sales exceeding 100 million yuan in June 2026. However, this success was achieved through substantial marketing spending, which led to a sharp decline in profit margins from 13.9% to 9.1%.
- User Disinterest: Originally a small, affordable item for offices, YOYO has become more expensive and less appealing to consumers after being promoted as a luxury item. It is now available at discounted prices on online platforms like Xianyu, indicating a rapid decline in popularity.
- Weak IP Portfolio: MINISO has 16 IPs, but only two or three have been truly successful. Without new, popular IPs, any potential decline in YOYO's popularity could lead to a disruption in the company's growth.
4. Diversification Has Backfired, Damaging Profits and Increasing Debt
In the past two years, the management has made aggressive moves to diversify its business, but these efforts have been counterproductive:
- Acquisition of Yonghui: MINISO spent 6.2 billion yuan to acquire a 29% stake in Yonghui in 2024, but Yonghui suffered a loss of 2.5 billion yuan in 2025, resulting in MINISO incurring an 800 million yuan loss that cut its net profit in half. Yonghui and MINISO operate in completely different industries with different supply chains and customer bases, so there was no synergistic benefit.
- AI Investment: MINISO invested in the AI company MiniMax, incurring a nearly 600 million yuan loss.
- Rising Debt: The company's debt-to-asset ratio increased from 42.8% in 2024 to 65.6% in mid-2026, highlighting the financial strain caused by diversification.
MINISO once thrived on its efficient supply chain and affordable pricing strategy. However, its pursuit of new trends has weakened these strengths, leading to a loss of its competitive edge.
Conclusion
MINISO's main problem is that it has tried to mask the challenges of a sluggish consumer market through rapid expansion and a focus on trendy trends, while neglecting its core strengths. It needs to slow down, control costs, and return to its roots as a small, efficient retailer to achieve long-term success.