MINISO is expanding its stores and investing heavily in intellectual property, but these strategies are also increasing its operational costs. For the first quarter of 2026, the company's adjusted net profit margin fell to 9.7%, dropping below 10% for the first time in nearly two years. Excluding foreign exchange gains and losses, the adjusted net profit margin stood at 11.1%.
This scenario is not unfamiliar for MINISO. In the first quarter of 2025, the company also experienced a significant decline in its net profit margin. At that time, management attributed the drop to higher upfront costs associated with the ramp-up of directly operated stores in North America. This year, while pressure from overseas direct-operated stores persists, MINISO has begun substantial spending around its "IP" strategy, leading to higher licensing costs and increased expenditures on advertising, promotion, and content-driven marketing.
MINISO finds itself at a crossroads that many consumer companies aspire to reach: overseas markets, IP-driven consumption, trendy toys, and large-scale physical stores. However, these directions are not immediately translating into fatter profit margins; instead, they are bringing investment pressures to the forefront earlier.
In 2023, MINISO's adjusted net profit margin remained largely within the 16%-17% range. Although it declined somewhat in 2024, it mostly stayed above 15%. Entering 2025, this metric fell to around 13%. Even as same-store sales growth continued to improve, the adjusted net profit margin failed to break past 14% again. The step-down in profitability is evolving from a temporary fluctuation into a more sustained trend: the destinations MINISO aims for are indeed attractive, but the journey is proving costly.
**Multiple Pressures on Profitability**
In recent years, MINISO's profit margin improvements have primarily benefited from several factors: higher gross margins in overseas markets, the large-store model boosting sales per square foot and average transaction value, and IP products enhancing premium pricing power. Together, these supported the company's previous profit performance, pushing the gross margin above 45%. However, as this growth logic is pursued further, changes are emerging.
First, the growth rate of overseas business is slowing. In 2024, MINISO's overseas revenue grew by 41.9% year-over-year, remaining a key driver for the group's gross margin expansion. However, starting in 2025, the growth rate of overseas revenue began to decline quarter by quarter. In Q1 2026, MINISO's overseas revenue growth slowed to 21.9%, unusually lagging behind the domestic market. Affected by a decrease in the proportion of high-margin overseas revenue, MINISO's Q1 gross margin dropped to 43.3% from 44.2% a year earlier.
In recent years, MINISO's overseas store expansion has shifted from a predominantly franchised model towards more directly operated stores and larger formats. As of the end of Q1 2026, MINISO had 3,617 overseas stores, with 745 being directly operated, accounting for over one-fifth of its overseas store count. This quarter, global revenue from directly operated stores grew nearly 50% year-over-year, while related expenses increased by 35%, indicating that the earlier optimization of the direct-operated single-store model is yielding results.
The direct-operated model carries higher operational leverage; when revenue grows rapidly, it can dilute fixed costs like rent, labor, and depreciation. However, if overseas growth continues to slow or even declines, the pressure from these rigid expenses on profit margins will be amplified. To counter cost pressures, MINISO is also attempting to restore gross margins in overseas markets. Management stated the company will systematically increase the proportion of high-margin IP products, advance a "reduce breadth, increase depth" strategy focusing on bestsellers and phasing out underperforming IPs. On the supply chain side, it will extend the inventory preparation cycle for core supplier hit products from 2 months to 3-4 months to lock in costs earlier.
Ye Guofu also mentioned during the earnings call that MINISO's primary price range in the U.S. is $5-$25. Within this range, consumer purchasing decisions are driven more by emotional connection to IP—"I like it, so I buy it"—rather than simple price comparisons. Based on this assessment, MINISO has begun differentiated pricing tests in the U.S., reporting a month-over-month gross margin improvement in May with expectations for stable to slightly increasing margins thereafter. However, whether price adjustments can truly restore profit margins depends on external costs and the consumption environment. On one hand, elevated oil prices may continue to push logistics costs higher; on the other, weakening consumer sentiment in some markets could limit pricing power.
The domestic market presents a different constraint. The year-over-year decline in MINISO's Q1 gross margin is attributed not only to a lower proportion of high-margin overseas business but also to a "return to value-for-money product assortments" domestically. Management described this as trading "a little restraint in pricing" for "a significant increase in volume." In other words, within the domestic consumption environment, MINISO still needs to maintain customer traffic and conversion with mass-market price points. It must leverage IP for premium pricing while not losing the price appeal of mass retail.
This tension is further amplified by external competition. IP retailers like POP MART continue to strengthen licensed IP and celebrity collaborations. Co-branded products with Disney, Sanrio, and others are becoming increasingly diverse, and partnerships with celebrities are emerging as new traffic drivers. As user expectations are continuously raised, MINISO's task is not just to "sell at higher prices" but to prove that its IP products warrant those higher prices.
In Q1, MINISO's selling and distribution expenses, excluding share-based compensation, increased 37.7% year-over-year. The selling expense ratio rose 1.6 percentage points to 24.5%. The expense growth primarily came from investments in directly operated stores, promotion and advertising expenses, licensing fees, and logistics costs.
Beyond operational investments, items related to investment income, debt, and financial instruments also amplified volatility in MINISO's income statement. In Q1, the company's profit for the period surged 199.7% to 1.248 billion yuan, of which nearly 900 million yuan came from investment gains related to the AI company MiniMax. MINISO excluded interest related to equity-linked securities and the Yonghui loan from its adjusted net profit, emphasizing that of the 50.4 million yuan in interest on equity-linked securities, only 4.7 million yuan was a cash outflow. For Q1, MINISO's adjusted net profit, excluding foreign exchange gains and losses, was 633 million yuan, up 8.1% year-over-year. Without excluding these items, the adjusted net profit was 551 million yuan, down from 587 million yuan a year earlier.
**Proprietary IP Is Not a Shortcut**
According to Ye Guofu's vision, for MINISO to achieve long-term improvement in its profit structure, it must ultimately rely on proprietary IP. In his view, licensed IP primarily leverages established characters for short-term sales conversion, while proprietary IP offers "absolute exclusivity and differentiation," with higher gross margins and greater sustainability. The broader potential lies not just in product sales but in monetizing IP value across the industry chain: external licensing, multi-format operations, and continuous content generation.
MINISO's cultivation of proprietary IP is progressing at a notable pace. Its proprietary IP "YOYO" achieved cumulative global sales exceeding 100 million yuan within six months of launch and generated 165 million yuan in sales in Q1 2026. This success is supported by industry trends and channel changes. The popularity of vinyl and plush toys in 2025 increased category awareness for trendy toys, plush items, and emotional consumption. Meanwhile, the large-store model provides better offline display scenarios for IP.
This approach is already reflecting in domestic store operations. In Q1, MINISO's same-store sales in Mainland China achieved high single-digit growth, with domestic revenue up 29.6% year-over-year. Approximately 80 stores were renovated during the quarter, with post-renovation average daily sales increasing over 50%. Theme park stores and flagship large stores together accounted for about 12% of the total store count but contributed roughly 30% of sales. Moving forward, MINISO plans to renovate over 300 stores for the full year, guided by the principle of "opening large stores and closing small ones, opening good stores and closing poor ones."
Ye Guofu noted during the earnings call that the company has received applications for over a thousand new stores this year, with more than half explicitly seeking to open large or flagship stores. On average, large stores can achieve payback within one year, with some well-performing theme park stores even recouping investment within six months. TOP TOY, which has submitted its Hong Kong IPO application, is also accelerating expansion by leveraging trends. As of the end of Q1, TOP TOY had 355 stores total, an increase of 75 year-over-year, including 39 overseas stores, up 35 from a year earlier. During the same period, TOP TOY's revenue grew 51.4% year-over-year, faster than the group's overall growth.
In theory, MINISO has established an amplification path for its proprietary IP: proprietary IP gains exposure first through MINISO theme park stores and flagship large stores, then undergoes validation with trendy toy users at TOP TOY, and finally achieves broader sales through MINISO's larger store network and lifestyle scenarios. Demand for IP and trendy toys is not confined to first- and second-tier cities. MINISO reported positive same-store sales growth across all city tiers: provincial capitals and major cities rely on penetration and new customer acquisition, while county-level markets achieve double-digit growth through "trendy toys going rural." The reach of emotional consumption is broader than commonly perceived.
For IP, the greatest challenge is not the initial launch but building a stable fan community and driving repeat purchases. Starting this year, MINISO requires membership registration for trendy toy purchases, meaning data on trendy toy buying, IP preferences, and membership are more tightly integrated. The company mentioned during the earnings call that member repurchase contributed over 60% of performance in Q1, up from 54% for the full year 2025. Management also views member operations as a key driver for domestic same-store sales growth in the second half of the year, focusing on new member acquisition in the first half and repurchase conversion in the second.
To increase visibility for its proprietary IP, MINISO is increasingly willing to leverage celebrity partnerships. Ye Guofu previously cited the case of LABUBU and Lisa, emphasizing the amplifying effect of collaborations with top global artists on IP promotion. In March, MINISO partnered with BLACKPINK member Jennie; the "Jennie Ruby" co-branded pop-up store opened at Shanghai's Grand Gateway 66, achieving over 2.2 million yuan in sales on its first day. In April, TOP TOY enlisted Zhao Lusi for promotion, further strengthening its presence among young trendy toy users.
Celebrity partnerships are essentially a play for traffic. They can quickly generate exposure, queues, and social media buzz, but they also entail higher marketing costs. In Q1, MINISO's promotion and advertising expenses surged 73.7% year-over-year, while licensing fees increased 42%. This marks the first time in six quarters that growth in promotion expenses has again outpaced that of licensing fees. The last similar occurrence was in Q3 2024, which marked the high-profile beginning of MINISO's large-store narrative: the company announced its goal to become the "world's leading IP design retail group" and opened its MINISO LAND Global Flagship Store on Nanjing East Road in Shanghai.
Proprietary IP is not a low-asset shortcut but a longer-cycle investment. It requires support from store formats, membership systems, trendy toy channels, celebrity marketing, and content operations. For MINISO, if proprietary IP successfully takes off, it indeed holds the potential to improve the profit structure. However, before that happens, cost pressures often materialize ahead of profit realization.
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