Pop Mart Posts Sharp Revenue Decline as Global Demand Normalizes
TREE NEWS reports: Pop Mart International Group Ltd. (9992.HK) reported a 45-50% year-over-year decline in overall revenue for the third quarter of 2025. The drop was driven by a steep falloff in overseas demand following last year’s explosive global popularity of its LABUBU character.
By region, revenue fell 25-30% in China, 65-70% in Asia-Pacific, 70-75% in the Americas, and 50-55% in Europe and other regions. Domestic channels diverged sharply: offline revenue declined 5-10%, while online revenue plunged 45-50%. Although the market had widely anticipated a decline given the exceptionally high base from the prior year, the actual performance was weaker than some institutions’ already-lowered forecasts.
Management Highlights Stabilization, But Recovery Remains Uncertain
During the earnings call, Chief Operating Officer Si De emphasized signs of stabilization. He noted that overseas business, after continuous declines since the start of the year, has largely stabilized in most countries and regions in Q3, with sequential growth expected in Q4 due to the traditional peak season. Management also expects China revenue to achieve full-year positive growth.
However, the gap between stabilization and a return to growth remains wide. Last year, LABUBU’s global virality drove rapid overseas customer acquisition, with much of the demand concentrated online. Now, management is focusing on improving store efficiency, driving member repeat purchases, and enhancing global inventory management.
In China, the consumer base shows some resilience: offline foot traffic grew in Q3, new brand customers increased by double digits year-over-year, and member repurchase levels were roughly flat compared to last year, with improved next-year retention. Cross-IP purchases by existing customers also maintained high double-digit growth. These metrics contrast with the near-halving of online revenue, which had been inflated by concentrated purchases of hot IPs.
Overseas, the situation is more complex. Q3 2025 was the highest sales quarter in Pop Mart’s history, particularly in the Americas and Asia-Pacific, where LABUBU-driven purchases fueled rapid growth. This year, the company faces an extremely high comparison base and continued online traffic declines. Si De noted that online recovery may take longer as the company shifts to acquiring new customers through offline stores and gradually guiding them online.
Market Implications: A Test of Sustainable Growth
The revenue decline underscores the challenge of transitioning from a viral, one-off demand surge to a sustainable, repeat-purchase-driven model. Investors will scrutinize whether Q4 sequential improvement materializes and whether overseas markets can build lasting customer relationships.
For equity markets, Pop Mart’s results could weigh on sentiment toward Chinese consumer discretionary stocks, particularly those with significant overseas exposure. The company’s Hong Kong-listed shares may face pressure as investors reassess growth prospects. The broader toy and collectibles sector could also see spillover effects, especially among peers that benefited from the LABUBU craze.
On the operational side, management is taking steps to improve efficiency. The company has established a centralized global procurement team to better coordinate inventory across regions, reducing duplicate stockpiling and improving cross-regional allocation. Inventory levels, which peaked in May, have been declining since August and are expected to show a clear downward trend by the end of September. However, the company will avoid large-scale promotions to protect brand pricing and profitability.
Gross margin is expected to decline by no more than 2 percentage points in the second half compared to the first half, due to a lower share of high-margin overseas revenue and repricing of some US products. Additionally, continued store openings in Europe and the US will raise personnel, rent, and amortization expenses, further pressuring profit margins.
Key Takeaways for Investors
- High base effect: The revenue decline is largely a function of last year’s exceptional performance. Investors should focus on sequential trends and Q4 guidance rather than year-over-year comparisons alone.
- Repeat customer metrics: Management’s emphasis on member retention and cross-IP purchases suggests a shift toward sustainable growth. Watch for improvements in these indicators as a sign of long-term health.
- Margin pressure: Lower overseas revenue mix and rising costs will likely compress margins in the near term. Profitability recovery may lag revenue stabilization.
- Inventory management: The new centralized procurement model could reduce future inventory risk, but execution and demand forecasting remain critical.
- Valuation reset: The stock may continue to face pressure as the market digests slower growth. However, if Q4 shows sequential improvement and overseas stabilization, a re-rating could occur.
Overall, Pop Mart’s Q3 results highlight the challenges of sustaining growth after a viral product cycle. The company’s ability to convert one-time buyers into loyal, repeat customers will determine whether it can return to growth or settle at a lower plateau.
