When a leading trend toy giant starts selling desserts, the capital market is expressing its anxiety with real money. On May 12, 2026, Pop Mart disclosed its first-quarter performance. Overall revenue grew by 75% to 80% year-over-year, while revenue in China surged by 100% to 105%. The company simultaneously announced the opening of the first directly-operated store of its independent dessert brand, POP BAKERY, in Aranya, Qinhuangdao. This marks the first introduction of tea beverages, with plans to further expand into self-operated tea and coffee products. On the day of the earnings release, Pop Mart's stock price fell by 2.69%. The following day, after the earnings conference call concluded, the stock closed at HK$154.30, erasing over HK$100 billion in market value over two days. This represents another test for Pop Mart's "high-growth narrative." In 2025, the company's revenue reached 37.12 billion yuan, a staggering increase of 184.7% year-over-year. Adjusted net profit was 13.08 billion yuan, up 284.5%. Gross margin jumped from 66.8% to 72.1%. The LABUBU family contributed 14.16 billion yuan from a single IP, accounting for 38.1% of total revenue. However, behind the impressive financials, signals of slowing growth momentum are emerging. Revenue declined by nearly 10% sequentially from Q3 to Q4 2025, and fell another 16% to 18% sequentially in Q1 2026. Overseas growth rates plummeted from 475%-480% in Q1 2025 to a range of 25%-30% (Asia-Pacific). In this tug-of-war between high performance and valuation reassessment, can the dessert venture become Pop Mart's second growth curve beyond trend toys? Intertwined High Growth and Underlying Concerns: Why is Capital No Longer "Buying In"? On March 25, 2026, the day Pop Mart released its 2025 annual report, the company's stock price dropped by over 15% at one point. This was not a market rejection of the performance—revenue up 184.7% and net profit up 293% are impeccable figures. The real trigger for the valuation correction was a statement from founder Wang Ning during the earnings presentation: in 2026, the company would "strive to achieve a growth rate of no less than 20%." The dramatic gap from 184.7% to 20% directly shattered market expectations for sustained high growth at Pop Mart, prompting an orderly retreat led by foreign institutions. On the day of the report release, short-selling turnover reached HK$4.63 billion, a record high since its IPO. Institutional investors were forced to recalibrate their valuation models, making a valuation cut inevitable. Deutsche Bank interpreted the 2026 earnings call as "management needing to hint at downside risks," which was subsequently confirmed. Following this, several brokerages lowered their target prices. CICC reduced its adjusted net profit forecasts for 2026 and 2027 by 14% and 13%, respectively, to 13.3 billion yuan and 15.5 billion yuan, and cut its target price by 12% to HK$218. By mid-May 2026, Pop Mart's stock price had fallen approximately 55% from its historical high in August of the previous year. This reflects a reassessment by the capital market of the company's lifecycle stage. The transition from a high-speed expansion phase to a stable growth phase is an unavoidable reality for any company. However, for a trend toy leader that once wrote a business story with "mythical growth rates," the sudden shift in speed and the resulting valuation restructuring are far more impactful than actual performance fluctuations. Over the past year, LABUBU sparked a global cultural phenomenon through design mutations in vinyl and plush toys and social media virality. In 2025, overseas revenue reached 16.27 billion yuan, accounting for 43.8% of total revenue. North American growth once soared to 1265%-1270%, making overseas markets the core engine driving Pop Mart's success. However, the speed of the traffic decline has been equally startling. In Q1 2026, growth rates across all overseas regions decelerated significantly: Asia-Pacific (excluding China) grew only 25%-30%, the Americas grew 55%-60%, and Europe and other regions grew 60%-65%. In contrast, overseas growth in the same period of 2025 was as high as 475%-480%. This stark contrast reveals the deeper challenges facing Pop Mart's overseas strategy. Chief Operating Officer Si De admitted in the Q1 2026 conference call that this was the result of a decline in "traffic-driven users"—"Last year, a large number of new users came because of LABUBU, but they did not understand trend toy culture or were unfamiliar with other IPs." More critically, many overseas employees who joined in 2025 "may only understand the company through LABUBU 3.0, even less than ordinary users." When the traffic subsided, business performance followed suit. From the overall revenue trend, structural characteristics of slowing growth are becoming increasingly evident. Revenue declined nearly 10% sequentially from Q3 to Q4 2025 and fell another 16%-18% sequentially in Q1 2026, marking two consecutive quarters of sequential negative growth and a quarterly revenue drop of about 1 billion yuan. Multiple overlapping factors—the fading benefits of overseas store expansion, LABUBU's popularity transitioning from explosive to steady growth, and proactive domestic inventory adjustments—paint a complex picture of the growth slowdown. Si De's response highlighted the core dilemma of overseas expansion: "The high growth in 2025 largely relied on hit product dividends and market opportunities. In 2026, it depends more on the team's refined operations." As traffic normalized, issues like low brand awareness among overseas users and insufficient accumulation within overseas teams became glaringly apparent. Wang Ning himself acknowledged, "Investors always focus on P/E ratios and chase market cap gains, but rarely delve into the core issue—whether organizational capacity can match high-speed business scale, and whether overseas operational standards can keep pace with expansion." In his view, the current Pop Mart requires a systematic restructuring of organizational capabilities, a process that precisely demands time. The risk of over-reliance on a single core IP remains a Sword of Damocles hanging over Pop Mart in the capital markets. In 2025, the THE MONSTERS family generated 14.16 billion yuan in revenue, with its share of total revenue skyrocketing from 23% in 2024 to 38.1%. With LABUBU contributing nearly 40% of revenue, any fluctuation in its popularity will have a systemic impact on company performance. LABUBU's sales contribution has already declined in Q1, a trend the market has noted, though management has not disclosed specific figures. However, a deeper analysis of the IP portfolio structure suggests that LABUBU's dominance is not an unsolvable problem. The 2025 annual report shows that six other IPs—SKULLPANDA (3.54 billion yuan), CRYBABY (2.93 billion yuan), MOLLY (2.9 billion yuan), DIMOO (2.78 billion yuan), and Star Man (2.06 billion yuan)—each generated over 1 billion yuan in revenue, with a total of 17 artist IPs exceeding 100 million yuan. The new IP Star Man achieved 2 billion yuan in revenue in its first full fiscal year, demonstrating considerable growth potential. In absolute terms, the combined revenue of the top five IPs (excluding LABUBU) is approximately 14.1 billion yuan, nearly equivalent to LABUBU's single-IP contribution of 14.16 billion yuan. High IP concentration is an inevitable stage for all content companies. Disney built its animation empire with Mickey Mouse, Marvel established its cinematic universe with the Avengers, and Sanrio defined global "cute economics" with Hello Kitty—no IP company started with an "evenly distributed" portfolio. Pop Mart's COO Si De once noted that the most crucial lesson learned from Disney is "continuous investment and continuous operation"—to make LABUBU a "world-class IP with a long lifecycle." From a product category perspective, the company's product matrix is also undergoing positive changes. In 2025, plush product revenue reached 18.7 billion yuan, a 560.6% increase year-over-year, surpassing figurines for the first time to become the most profitable category. This breakthrough signifies that Pop Mart is moving beyond the limitations of a single category and evolving into a comprehensive IP consumer goods platform. 2026 marks the 20th anniversary of MOLLY's creation, with the company launching global theme tours, further validating the long-term operational capabilities of its legacy IPs. However, the capital market in the short term does not focus on "long-term logic" but only on "immediate delivery." As LABUBU's buzz recedes from its peak and overseas growth plummets from triple to double digits, the market's verdict is clear. Since the beginning of the year, Pop Mart has faced multiple downgrades and target price cuts from foreign institutions. Morgan Stanley expects overseas sales to decline this year, with mainland sales maintaining 23% growth, and has lowered its overseas sales forecasts for 2026-2028 by 18% to 19%. The significant compression of high-growth valuation premiums is the capital market's most direct response to the company's transition in lifecycle stage. Dessert Venture: From IP Ecosystem Expansion to Strategic Testing Amid this struggle between high performance and valuation pressure, the launch of POP BAKERY's first directly-operated store has become a new strategic focal point for Pop Mart. POP BAKERY is not a sudden cross-border experiment. As early as August 2024, Pop Mart opened "MOLLY's Dessert House" within its Beijing Chaoyang Park City Playground, combining IP imagery with dessert experiences as an exclusive amenity, serving as a testing ground for the dessert business. In December 2025, POP BAKERY's first offline pop-up store debuted at Beijing Capital International Airport, testing the IP-derived dessert market in a mobile cart format. Subsequently, the pop-up model rapidly expanded to cities including Qingdao, Chengdu, Nanjing, Xi'an, Shenzhen, and Wuhan. As of May 11, 2026, there were 21 themed dessert pop-up locations nationwide, covering over ten cities. The opening of the Aranya directly-operated store marks the transition of the dessert business from a testing phase to a new stage of scaled operations. Unlike the single-category pop-up carts of the past, the first directly-operated store introduces tea beverages for the first time. Informed sources suggest future expansion into self-operated coffee products, creating a composite consumption scene of "desserts + tea + coffee." From a product matrix perspective, POP BAKERY is closely aligned with Pop Mart's core artist IPs. Dessert products correspond to IPs including THE MONSTERS (LABUBU family), SKULLPANDA, CRYBABY, MOLLY, DIMOO, and Star Man, covering categories such as ice cream, cakes, butter cookies, chocolate, and lollipops. In terms of staffing, store managers earn a monthly salary of 10,000 to 15,000 yuan, with senior consultant positions explicitly requiring "proficiency in coffee preparation." It is worth noting that the Aranya location is not random. As a well-known cultural landmark in the Beijing-Tianjin-Hebei region, Pop Mart has previously held LABUBU pop-up events at Aranya in 2022, hosted an art exhibition for Xiao Ye in 2024, and featured Star Man prominently on a large wall during the 2025 Aranya Theater Festival. Years of marketing efforts have built local awareness for the new dessert store and provided fertile ground for multi-layered development of IP consumption scenarios. Regarding the strategic positioning of Pop Mart's entry into the dessert business, the market offers two interpretative frameworks. The first view posits that desserts, as a high-frequency consumer category, can extend IP engagement from "occasional purchases" to "daily companionship." Trend toy consumption is inherently low-frequency—consumer interaction with the brand often ends after purchasing a figurine or blind box, with the next purchase potentially months away during a new product release. In contrast, dessert and tea beverages offer high repurchase rates and frequency, bringing consumers into the IP consumption scene with a lower single-purchase threshold. Starting with blind boxes, Pop Mart has amassed a vast membership system. The POP BAKERY initiative aims to leverage this system to further extract user value. Furthermore, Pop Mart's dessert strategy exhibits a distinct "cost-reduction and efficiency-improvement" mindset. Using a lightweight pop-up model to test market reactions across multiple cities and scenarios before committing to directly-operated stores effectively lowers the trial-and-error costs of cross-border food and beverage ventures. The company demonstrates a prudent and pragmatic approach to expansion rather than an aggressive scale sprint. Guolian Minsheng Securities' research report shares a similar view, stating that "the dessert business is essentially not traditional F&B expansion but an extension of IP consumption scenarios." Its core value lies in increasing IP exposure scenarios and companionship time to enhance purchase frequency and user stickiness. However, the second interpretation offers a more cautious perspective. Currently, Pop Mart's dessert business is minuscule, starting with only 21 pop-up stores and one yet-to-open directly-operated store. Even if hundreds of stores open rapidly within the next three years, its contribution to the company's 37.12 billion yuan revenue base would be extremely limited. Achieving substantial financial contribution in the short term is highly challenging. The barriers to cross-border food and beverage operations are also significant. From product development and supply chain management to staff training and quality control, desserts are a typical service-intensive industry, markedly different from Pop Mart's core competencies in product design and manufacturing-based retail. Synthesizing these views, the most likely strategic positioning lies somewhere in between. In the short term, the dessert business's strategic significance is closer to an "IP experience enhancer" and "traffic entry point" rather than a genuine second growth pillar. Its core value lies in expanding the scenarios and frequency of consumer IP contact, enhancing brand loyalty, consolidating the membership ecosystem, and simultaneously providing investors with a signal of "diversification narrative." However, whether it can evolve from 21 pop-up stores into a high-efficiency independent food and beverage brand depends on Pop Mart's ability to build a compatible food service operation system beyond its core IP management capabilities. Placing the dessert business within the strategic framework of "IP-centric groupization" reveals it as a structural strategic extension. Founder Wang Ning has explicitly stated that "IP-centric groupization" and "internationalization" are the company's two long-term strategic directions. The accelerated implementation of the dessert business is a concrete manifestation of this strategy. The essence of IP "groupization" is replicating the business model of expanding diversified consumption scenarios centered around IPs into more product categories. From plush toys (2025 revenue: 18.7 billion yuan, up 560.6% year-over-year) to the MEGA collectible series, to building blocks, and now POP BAKERY's desserts and tea, Pop Mart's strategic logic is consistent: leveraging IP assets to achieve horizontal expansion of consumption scenarios across different categories, extending IP reach into more dimensions of consumers' lives. This "IP + X" model has mature precedents in the consumer goods sector. Disney, centered around core IPs like Mickey Mouse and Marvel, extends IP licensing into theme parks, retail consumer goods, and licensed partnerships, generating tens of billions in annual IP licensing and retail revenue. However, unlike Disney, which possesses a century-old IP content library and the "heavy-asset moat" of immersive theme parks, Pop Mart's core assets are trend toy products based on original artist IPs, lacking the support of content (film, animation, books, etc.). This dictates that Pop Mart's IP "groupization" path is closer to product collaborations and vertical category extensions rather than content-driven, full-ecosystem penetration. From this perspective, the limitations of the dessert business are equally clear. Unlike IP-derived consumer goods, food and beverage is a service-intensive industry with high personnel management complexity and significant regional variations. Pop Mart's core competencies lie in product design, supply chain management, and retail experience, whereas food service requires building a new set of capabilities. Poor management or inappropriate category choices could lead to brand dilution and operational risks instead of IP ecosystem expansion. For instance, the LABUBU co-branded refrigerator incident sparked consumer controversy, highlighting the potential erosion of brand value from excessive IP commercialization. Therefore, the success of the dessert business depends, in the short term, on validating the per-store efficiency model and consumer feedback. In the medium to long term, it hinges on Pop Mart's ability to establish a systematic food and beverage operation capability—encompassing supply chain standardization, service experience consistency, and cross-regional store management, among other dimensions. The operational data accumulated from the 21 pop-up stores and the actual performance of the Aranya directly-operated store will be key indicators for judging whether the dessert business can proceed further. From a longer-term perspective, in the growth trajectories of international IP giants, no brand has reached its stature relying solely on a single product category. Pop Mart has passed the "0 to 1" stage of leveraging the blind box model to crack the market and is now in the "1 to N" transition phase of horizontally expanding categories centered around IPs. The dessert venture reflects the company's deeper consideration of long-lifecycle IP operation: as LABUBU's popularity transitions from explosive to steady, Pop Mart needs to find richer consumption scenarios and monetization paths for its various IPs, not just relying on the pulse-like growth from new product releases. In 2026, Pop Mart is simultaneously engaged in a "dual narrative"—on one side, a valuation reassessment as growth rates shift from triple to stable double digits; on the other, the continuous extension of IP consumption scenarios represented by the dessert business. These are not contradictory but form a complex emotional backdrop in the capital market. As high revenue growth no longer garners capital approval, as overseas hyper-growth leaves systemic challenges, and as LABUBU dependency becomes a valuation drag, Pop Mart stands at a strategic crossroads requiring rebalancing. The dessert business is a structural attempt within this framework—its scale remains small, but its direction is clear. As renowned investor Duan Yongping stated, he has sold his position in China Shenhua to invest in Pop Mart, remarking that he can "understand how impressive Wang Ning is; he can still work diligently for at least 25 more years, and the compound interest is staggering." Duan's shift from "not understanding" to "excitement" represents some long-term capital's recognition of Pop Mart's long-term value. But market patience is finite. Pop Mart faces three daunting tasks within a year: convincing the capital market that "20% growth" is healthy, not a signal of an approaching "ceiling"; building a sustainable localized operation system and brand recognition barrier overseas; and validating the monetization potential of the "IP ecosystem" with new categories like desserts and small appliances. None of these can be achieved overnight. The tug-of-war between short-term stock price fluctuations and long-term value will ultimately be decided by the actual results of performance delivery and ecosystem development. Whether Pop Mart can forge a sustainable commercial path between growth transition and ecosystem boundary-breaking will likely be revealed in the practice of the next two to three years.
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