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POP MART (09992.HK) Expects Both GPM and Net Margin to Decline in 2H, Stresses No Large-scale Discounting to Reduce Inventory
2026-10-28 10:34:39 POP MART (09992.HK) management said during the third-quarter business update conference call that overall output in China is expected to rise steadily in 4Q, with the group facing "little pressure" in maintaining positive growth for the full year. Overseas markets are expected to achieve QoQ growth in 4Q on the basis of stabilization in 3Q across regions. Regarding overseas demand forecasts and earnings volatility, POP MART management explained that reference value of many data points has weakened due to significant fluctuations last year and in 1H this year. As of the end of September, the group's overall inventory level had started to decline from August and showed a relatively clear downtrend by the end of September. Management also stressed that the group will not reduce inventory through large-scale discounting for the time being in order to avoid damaging the brand. In terms of profitability, management expects the group's gross profit margin in 2H to decline from 1H due to a lower contribution from overseas revenue and proactive price adjustments in certain overseas markets, although the decline is expected to be no more than 2 ppts. With more new stores opened in core overseas markets in 2H, fixed costs including labor and rent increased, and management expects net margin to decline accordingly in 2H. Regarding pricing adjustments in the US market, management explained that this was a repricing exercise rather than broad-based price cuts, mainly aimed at balancing additional tariff costs incurred previously and the global pricing strategy. The impact on gross profit margin is only about 1 ppt. Management noted that POP MART's overseas strategy is shifting from pursuing absolute growth to a refined operational approach described as a "slow business". For expansion of offline stores, the company said approval standards for new stores will become more stringent, with greater emphasis placed on the quality of individual stores. Management disclosed that the LABUBU movie remains in the script stage and has a relatively long development cycle. The company is also exploring the possibility of animation projects with partners. As content projects are still at an early stage, investment will not increase substantially in the short term. However, management believes that content-generated music, scenes and story materials will support product development and licensing over the long term. Regarding theme parks, management said the second park is still in the site selection stage and the company is taking a cautious approach. In addition, exploration of new categories including standalone dessert shops, building blocks and accessories is not an accelerated development process and will require a longer cycle to test market response. (jl/u)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |