Following the release of its latest financial results, Mixue Group's stock price experienced a dramatic decline. On August 27, during the midday break, MIXUE GROUP (02097.HK) submitted its second interim report since listing. In the first half of this year, the company's revenue reached 15.216 billion yuan, a year-on-year increase of 2.3%, while net profit was 2.319 billion yuan, down 14.7% compared to the same period last year. This marks the first time the company has seen such a stagnant revenue figure coupled with a significant profit pullback, a performance that also fell short of market expectations.
When trading resumed that afternoon, MIXUE GROUP's share price plummeted, at one point dropping more than 12% during the session to a low of HK$217.6. This represents a decline of over 60% from its listing high of HK$618.5. Similar to Luckin Coffee, Mixue Ice City appears to have reached a stage where expansion-driven growth is no longer translating into improved per-store profitability.
By the end of June, MIXUE GROUP's total number of stores had expanded from 53,000 to nearly 64,000, a net increase of 11,000. Despite this expansion, the company's profit fell by nearly 400 million yuan, indicating a clear decline in operational efficiency.
The company's global footprint now encompasses nearly 64,000 stores, spanning brands such as Mixue Ice City, Lucky Cup, and Fresh Beer Fulu Coffee, and covering 17 countries. Among these, domestic stores in China total 59,600, a net increase of 11,300 year-on-year, with the proportion of stores in third-tier and lower-tier cities further rising to 58%. The overseas expansion for Mixue Ice City has not been as smooth as anticipated. Last year, its overseas store count experienced a net decrease of over 400, marking the first negative growth since its large-scale international push in 2018. This contraction continued in the first half of this year, with overseas stores falling to 4,378, a reduction of 355.
It's important to note that Mixue Ice City's business model treats its franchisees as major customers, selling them the raw materials and equipment used to make its beverages. Previously, an increasing number of stores helped dilute supply chain costs and boost profits. However, this dynamic has now been disrupted, meaning the incremental contribution from over 10,000 new stores in the first half was nearly offset by the operational decline at existing locations.
The company is actively seeking new growth avenues. This year, a significant number of stores have begun selling higher-margin cultural and creative products, such as snacks, plush keychains, figurines, and building blocks. Additionally, over 3,000 stores have introduced coffee machines in the first half, potentially setting up direct competition with its other sub-brand, Lucky Cup.
Operating expenses are also on the rise. In the first half, MIXUE GROUP's sales and distribution expenses reached 1.123 billion yuan, a 22.9% year-on-year increase, primarily allocated to brand IP development and store operations support. Administrative expenses also surged by 39.4% to 610 million yuan, driven by higher labor costs.
Investment banks are also reassessing the company's prospects. In March of this year, JPMorgan downgraded its rating on MIXUE GROUP from "Overweight" to "Underweight," slashing the price target from HK$521 to HK$270, nearly halving it. The bank also lowered its profit forecasts for the 2026-2027 period by 9% to 14%. JPMorgan believes the phase of rapid store expansion driving growth may be nearing its end, and the company will face headwinds from reduced delivery subsidies, slowing store expansion, and persistent pressure on gross margins. It also suggested that internal competition between Mixue Ice City and Lucky Cup could intensify.
UBS holds a similar view, stating that the reduction in delivery subsidies and intensifying industry competition could pressure MIXUE GROUP's gross margin. The peak of the "delivery war" occurred in the second and third quarters of last year, creating a high comparison base that could impact performance figures. The key period to watch is the actual operating performance in the fourth quarter of this year.
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