The market landscape is undergoing a dramatic shift. Deutsche Bank argues that the disappearance of POP MART's "scarcity factor" is eroding the brand's pricing power.
In its latest research report dated December 16, 2025, Deutsche Bank downgraded POP MART to a "Hold" rating. The bank noted that since mid-October 2025, the company's aggressive production expansion has eliminated product shortages. While this move addressed supply issues in the short term, it has also triggered a dangerous "fashion fatigue."
For investors, the most alarming signal has emerged: outside of newly opened stores or a handful of cities like Tokyo, queues have vanished at most overseas locations, with foot traffic declining significantly. This slowdown will directly impact the company's high operating margins. If POP MART can only expand production at the expense of IP popularity, its valuation logic faces severe challenges. The so-called "super IP" cycle may be peaking—will Labubu follow Hello Kitty into a prolonged downturn?
**The Cost of a Volume-Driven Model: The Collapse of Scarcity Premium** POP MART's business model is now a high-stakes gamble. According to Deutsche Bank, the company increased its monthly production capacity from 10 million to 50 million units starting mid-October 2025. While this resolved stockouts, it drastically diminished product exclusivity, dampening collector enthusiasm.
The negative effects are already visible in retail channels. For the once-coveted Labubu series (approximately 145 million units sold globally), market excitement is fading. Inventory data shows that in the U.S. and other major overseas markets, Labubu products—previously hard to find—are now widely available. This accessibility has cooled Google search trends and social media buzz.
**A Business Model Overly Reliant on "Queues"** Wall Street is raising serious concerns about the sustainability of POP MART's model. The report highlights that the company operates on a "low average ticket size, high transaction volume" basis. To match the per-store output of top global fashion or even luxury brands, it relies on extremely high transaction frequency.
**Key Data:** - Deutsche Bank estimates that to maintain current per-store sales, POP MART must process **63 transactions per hour globally** and **34 per hour in China**.
**Reality Check:** Such transaction density is only possible with long customer queues. Yet, early observations show queues have disappeared in Bangkok, Singapore, Seoul, and many U.S. cities. If foot traffic declines further, the company's operating leverage will backfire. Deutsche Bank forecasts an adjusted net profit margin (NPM) of **34.4% in 2025** (vs. 26.1% in 2024), but this hinges on sustained high traffic. Without queues, maintaining such margins will be difficult.
**A Cautionary Tale: Hello Kitty’s Cyclicality** History offers a stark warning. The report revisits Sanrio’s Hello Kitty, which experienced two "super IP cycles" in the 2000s and 2010s, demonstrating that IP popularity is never linear.
**Boom and Bust:** - Hello Kitty’s peaks—driven by emotional value in the late 1990s and Western market expansion in the early 2010s—were followed by multi-year downturns.
**Downfall Triggers:** - Overreliance on a single IP, - Shift from "limited" to "mass" distribution (diluting brand appeal), - Competition (e.g., Disney’s *Frozen*).
Currently, POP MART’s new releases (e.g., "mini Labubu" and "The Monsters 1 a.m." series) have met lukewarm reception, and repurchase barriers are rising. Without sustaining Labubu’s hype or launching another blockbuster IP, POP MART may be teetering at the edge of a Hello Kitty-like decline.
**Valuation and Future Catalysts** POP MART’s forward P/E of **15x** appears modest but reflects market fears of a "fashion cycle" peak. Future stock performance hinges on short-term catalysts:
1. **New Product Performance:** Can Labubu’s 2026 series replicate past success? 2. **Q4 Sales:** The company must achieve sequential acceleration to meet its ~RMB 8 billion U.S. sales target.
If recent revenue growth stems from volume expansion at the expense of IP heat—with secondary market prices for Labubu generations and hidden editions already declining—the long-term valuation narrative will need rewriting.
**Investor Warning:** In a "post-hype era," volume-driven growth may prove illusory.
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