MINISO Group Holding Limited (MNSO.US) released its Q3 2025 financial results: 1. Revenue rose 28.2% year-over-year (YoY) to RMB 5.797 billion, setting a new quarterly record. Gross profit increased 28% YoY (excluding other expenses like marketing, administration, and finance), with gross margin improving to 44.7%. Net profit attributable to shareholders declined 31% YoY to RMB 441 million, while adjusted net profit (including one-time expenses like equity incentives for Top Toy’s IPO preparation) grew 12% YoY to RMB 767 million, yielding an adjusted net margin of 13.2%.
2. Business segments: - MINISO brand revenue: RMB 5.22 billion (+23% YoY). - TOP TOY brand revenue: RMB 570 million (+111.4% YoY). - Total stores: 8,138 globally (7,831 MINISO + 307 TOP TOY).
3. Same-store GMV performance: - Group-wide low-single-digit growth (mainland China + overseas, MINISO + TOP TOY). - MINISO brand in China: high-single-digit growth (highlighting stability in its core market).
Comparisons with Q1 and Q2 2025: - Q1: Revenue grew 18.9% YoY to RMB 4.427 billion, but operating profit fell 4.51% to RMB 710 million, with net profit down 28.92% to RMB 417 million. Adjusted net profit dropped 4.81% to RMB 587 million, and net margin plunged from 16.6% to 13.3%. - Q2: Revenue increased 23.1% YoY to RMB 4.97 billion, with gross margin up 40 bps to 44.3%. Operating profit rose 11.3% to RMB 836 million, while net profit was RMB 489.5 million (vs. RMB 591.4 million YoY). Adjusted net profit grew 10.6% to RMB 690 million, with a 13.9% adjusted net margin.
Key observations: 1. **Business Model Concerns**: Without a strong business model, long-term high ROE is unlikely. Companies lacking pricing power (due to competition eroding margins) struggle to sustain high net margins. Differentiation is key—e.g., Apple’s 40% gross margin and Tencent’s 60% have remained stable for years, unlike Xiaomi or Li Auto’s volatile 20% gross margins. Huawei’s recent MPV launch, for instance, will pressure Li Auto’s Mega and XPeng’s X9.
2. **Two Viable Models**: - Unique product power (e.g., Apple, Kweichow Moutai, Coca-Cola, Hermès, POP MART). - Extreme cost efficiency (e.g., Costco, Pinduoduo).
3. **Retail Fundamentals**: For offline retail, single-store metrics (GMV, efficiency, margins) are critical. If these stagnate or decline, expansion—especially overseas—often fails (e.g., Nayuki in the U.S., KKV in Southeast Asia). Domestic weaknesses typically follow brands abroad when local rivals enter their markets.
**MINISO’s Positioning**: - Historically pitched as “high-quality, low-cost,” MINISO’s current ~50% product gross margin (estimated from H1 GMV and加盟商分佣) contradicts this. For context: - POP MART (unique products): ~70% gross margin. - Costco (cost leader): ~12% gross margin. - MINISO’s加盟商 model (99% of stores) inherently limits cost control (e.g.,加盟商 take ~38% of sales, preventing true “discount” pricing).
**Strategic Shift**: MINISO is pivoting toward larger stores and IP-driven products to obscure price sensitivity (e.g., selling a RMB 39 IP-themed cup vs. RMB 19.9 on Pinduoduo). This aligns with its strengths—rapid store expansion, design flair, and marketing—but neglects back-end efficiency.
**Risks**: - Valuation: At 21.5x P/E (including loss-making Yonghui’s consolidation), MINISO isn’t cheap. - Competition: TOP TOY benefits from the booming潮玩 trend but lacks POP MART’s IP depth. - Alternatives: Investors seeking unique IP might prefer POP MART; cost-leadership advocates may choose Pinduoduo.
**Conclusion**: MINISO’s hybrid model—neither uniquely differentiated nor cost-efficient—faces structural risks. While Q3 showed same-store GMV growth, its premium pricing and加盟商 constraints leave it vulnerable to rivals. Short-term rebounds (like Vipshop’s) don’t justify long-term bets amid shifting retail trends (e.g., Douyin for apparel). The stock’s risk-reward appears unbalanced.
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