Pop Mart Q1 management discussion: growth remains strong, but overseas foundation and margin pressure are entering a validation phase

Overview

Based on Pop Mart's Q1 2026 management discussion, the core view is that the company can still deliver strong revenue growth, but it is at an inflection point as it shifts from the rapid expansion of 2025 to operational consolidation in 2026. Management emphasized a 'pit stop year' and 'quality over quantity', reflecting the need to catch up on overseas markets, the store network, the membership system, the supply chain, and organizational capabilities. Bernstein believes that revenue outperformance has not solved the issue of earnings quality, and the absence of Q1 margin disclosure leaves the market unable to confirm whether growth is supported by sustainable profitability.

Core views

The core view is cautious: first, the growth base in overseas markets is less mature than in China, and teams, membership, fan culture, logistics, and retail infrastructure still need to be built out; second, the direction of global organizational restructuring is correct but will bring short-term execution risk; third, both gross margin and net margin are under pressure, and the management's guidance of a 1-2 percentage point gross margin decline may understate the real pressure; fourth, Labubu remains strong, but traffic normalization is an inevitable risk, and it remains to be seen whether Hirono, Skullpanda, Dimoo, and Molly can make sufficient revenue contributions.

Analysis framework

The report combines management discussion interpretation, regional growth breakdowns, channel growth breakdowns, IP portfolio analysis, overseas retail infrastructure assessment, margin pressure decomposition, and valuation snapshots. The focus is not on the strength of a single quarter's revenue, but on judging growth quality, the replicability of overseas expansion, margin resilience, and the execution difficulty of organizational transformation.

Methodology notes

• Fundamental company analysisGrowth quality and margin decomposition

  Assess revenue growth together with gross margin, net margin, channel structure, fixed costs, and raw material costs.

  The report argues that strong revenue growth needs to be validated by margins, especially against a backdrop of higher overseas mix, online promotions, logistics costs, rents, and labor costs, where high revenue growth does not necessarily mean high-quality earnings.

• Strategic analysisFrom quantity expansion to quality improvement

  Shift store expansion from quantity to store quality, efficiency, and brand expression.

  Management's willingness to relocate, upgrade, or close underperforming stores suggests that the 2023-2025 overseas expansion had quality and consistency issues, and that the emphasis in 2026 is on operational standardization and efficiency improvement.

• IP portfolio analysisFlagship IP dependence and portfolio diversification

  Evaluate the contribution of Labubu, Hirono, Skullpanda, Dimoo, Molly, and other IPs to growth and regional fit.

  Labubu remains a global super IP, but traffic volatility is normal; Hirono and Skullpanda provide diversification signals, but it remains to be seen whether new and older IP refreshes can translate into meaningful revenue.

• International operations assessmentCompressing the overseas learning curve

  Compare the mature retail system in China with the infrastructure gap in overseas new markets.

  The report questions whether China's ten-year retail learning curve can be quickly replicated overseas, because overseas markets differ structurally in geographic density, consumer behavior, logistics, membership systems, and cultural identity.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 9992.HK

  core coverage name

  Strengths

  Q1 revenue growth was strong, and the China market significantly beat expectations; Labubu remains globally popular, Hirono is breaking through in China and Asia, and Skullpanda is performing strongly in Europe and the U.S.; organizational upgrades, the membership system, and supply chain standardization support long-term operating capability building.

  Weaknesses

  The overseas market team, fan base, store quality, and logistics system are not yet mature; Q1 margin was not disclosed; gross margin is under pressure from raw materials, tariffs, overseas mix, and logistics costs; rising fixed costs may weaken operating leverage.

  Comparison

  Over the past year, 9992.HK has materially underperformed ASIAX, with roughly -60.4% relative performance over 12 months; ASIAX has moved higher overall, while 9992.HK has fallen sharply since early 2026.

  Risks

  If Labubu popularity normalizes faster than expected, overseas restructuring disrupts sales, flagship store returns on investment are insufficient, or gross margin falls more than guided, both earnings and valuation could come under pressure.

Key data

• 1Q26 total revenue growth75%-80% YoYThe table shows the company's overall Q1 YoY growth range.
• 1Q26 China revenue growth100%-105% YoYChina was the strongest growth region and significantly exceeded expectations.
• 1Q26 Asia-Pacific revenue growth25%-30% YoYRegional growth was slower than in China, the U.S., and Europe and other regions.
• 1Q26 U.S. revenue growth55%-60% YoYOverseas growth remained fast, but infrastructure maturity and sustainability still need validation.
• 1Q26 Europe and other revenue growth60%-65% YoYEurope and other regions maintained high growth, but the report stresses that overseas brand and retail foundations remain unstable.
• 1Q26 China offline channel growth75%-80% YoYOffline channel growth was strong.
• 1Q26 China online channel growth150%-155% YoYOnline growth was about twice offline growth, but may be accompanied by promotional and channel-structure pressure.
• Full-year gross margin impactdown 1-2 percentage pointsManagement expects pressure from raw materials, overseas mix, import tariffs, and other factors.
• New product cost pressureabout +3%-5%PVC, fabric, and packaging inflation push up new product costs, with an estimated gross margin impact of about -0.5 percentage points.
• Target priceHKD 181.0Bernstein target price.
• Closing priceHKD 160.9Closing price on 2026-05-13.
• RatingUnderperformShown as U in Bernstein's rating table, meaning Underperform.
• 2026E EPSRMB 11.68The report table shows the forecast EPS for 2026.
• 2026E P/E13.8xThe valuation table shows the forecast P/E for 2026.

Impact & implications

The implication for investment judgment is that Pop Mart still has IP-driven revenue elasticity in the near term, but valuation and share performance are more likely to be driven by earnings quality, the sustainability of overseas expansion, and organizational execution. If the full-year results disclosure in August shows that strong Q1 growth came with a clear margin compression, the market may reassess growth quality; if overseas store optimization, the membership system, and IP diversification progress smoothly, concerns about reliance on Labubu as a single IP and weak overseas foundations may ease.

Risks

• Strong Q1 revenue growth was not accompanied by disclosed margin figures, so growth quality still needs to be validated.
• Full-year gross margin is expected to decline by 1-2 percentage points, and the actual pressure could be greater due to channel mix, overseas mix, tariffs, and rising fixed costs.
• Overseas markets do not have the same mature membership, logistics, retail, and fan culture base as China, so the learning curve may not compress quickly.
• Global organizational restructuring involves artist discovery, IP operations, procurement, store operations, visual merchandising, and supply chain, which may affect execution and sales in the short term.
• Shifting from store-count expansion to quality improvement requires relocating, upgrading, or closing some stores, which may create short-term revenue disruption and capital expenditure pressure.
• Labubu remains the flagship IP, but if traffic normalization accelerates, the ability of other IPs to fill the gap has not yet been fully proven.
• Flagship stores in Europe and the U.S. require significant investment, but the economic returns of brand-experience stores are difficult to measure.
• New businesses such as movies, theme parks, dessert shops, and appliances are more about extending IP depth and are likely to contribute only limited scale to the group in the short term.

What to watch

• The actual Q1 margin disclosure in the August full-year results, especially whether gross margin and net margin are significantly below revenue growth.
• Whether Q2-Q4 revenue growth normalizes or slows as management suggested.
• Whether overseas market membership systems, repeat purchase rates, local consumer contributions, and store efficiency metrics are disclosed quantitatively.
• Labubu traffic trends, and whether Hirono, Skullpanda, Dimoo, Molly, and other IPs achieve meaningful revenue diversification.
• Whether global organizational restructuring improves store operations, supply chain, and product allocation efficiency, or instead creates short-term disruption.
• The traffic, sales efficiency, and brand pull effect after the opening of flagship stores in Milan, London, Paris, and New York.
• The actual impact of raw materials, fuel surcharges, import tariffs, rents, and labor costs on gross margin and operating margin.
• Whether new theme park areas, dessert shops, appliances, and movie projects can strengthen IP stickiness rather than disperse management attention.