Executive Summary / Key Takeaways

• Accelerated Global Expansion and IP-Centric Growth: MINISO Group is rapidly transforming into a world-leading IP design retail group, leveraging a dual-track strategy of international IP licensing and proprietary IP development. This approach, coupled with an aggressive global store expansion, particularly in high-potential markets like the U.S. and Europe, is driving significant revenue acceleration and market penetration.
• Robust Financial Performance and Margin Expansion: The company has demonstrated strong financial momentum, with Q2 2025 revenue growing 23.1% year-over-year and adjusted operating profit up 8.5%. Gross margins have consistently improved, reaching 44.3% in Q2 2025, primarily due to increased overseas revenue contribution and TOP TOY's margin optimization, with a mid-to-long-term operating margin target of 20%.
• Strategic Channel Upgrades and Operational Efficiency: MINISO is prioritizing quality over quantity in store expansion, focusing on larger formats like MINISO LAND and flagship stores that exhibit significantly higher efficiency and sales per square meter. This channel upgrade, alongside refined operational management and a "Chief Growth Officer" initiative, has successfully turned around mainland China's same-store sales to positive growth in Q2 2025.
• Proactive Risk Mitigation and Shareholder Returns: Management is actively addressing potential headwinds such as U.S. tariffs through supply chain diversification, increased local sourcing, and tax planning. Concurrently, MINISO maintains a strong commitment to shareholder returns, targeting 50% of annual adjusted net profit for dividends and engaging in dynamic share buybacks, reflecting confidence in its intrinsic value.
• Emerging Proprietary IP and Multi-Brand Ecosystem: The successful launch of proprietary IPs like "Yu Yu Chan" and the strategic investment in Yonghui Supermarket are expanding MINISO's brand matrix and IP ecosystem. These initiatives are poised to unlock new growth drivers, enhance product differentiation, and solidify MINISO's leadership in interest-driven consumption and quality retail.

The Global Retail Tapestry: MINISO's IP-Powered Evolution

MINISO Group Holding Limited, founded in 2013 in Guangzhou, China, has rapidly carved out a distinctive niche in the global retail landscape. The company's core business revolves around the retail and wholesale of design-led lifestyle and pop toy products, distinguished by a strong emphasis on intellectual property (IP) design. Operating under its flagship MINISO brand and the specialized TOP TOY brand, MINISO has strategically positioned itself as a purveyor of affordable, trendy consumer goods that tap into the burgeoning "interest-driven consumption" trend. This strategic focus, articulated as early as 2020, views IP as the most important vehicle for engaging consumers and driving sales.

The company's overarching strategy is to become the world-leading IP design retail group, a vision underpinned by a commitment to quality retail and relentless global expansion. MINISO's journey began with a global expansion strategy in 2015, which has since seen its footprint extend across Asia, the Americas, and Europe. This foundational expansion, coupled with a deep understanding of evolving consumer preferences, has shaped MINISO's current strategic responses to market dynamics, including channel upgrades, supply chain diversification, and a robust IP development roadmap.

Technological Edge: Fueling Product Innovation and Operational Agility

MINISO's competitive differentiation is deeply rooted in its product development and supply chain capabilities, which can be seen as its core technological advantage in the retail space. The company boasts a product development and design team of over 1,000 people, with 90% of its revenue derived from proprietary products. This extensive in-house design capacity allows for rapid product refreshing and high turnover, crucial for a multi-category, trendy department store model. The company has also cultivated a network of 1,500 high-quality global suppliers, enabling a flexible and scalable product offering.

The tangible benefits of this integrated product and supply chain "technology" are evident in MINISO's ability to quickly launch new products and limited editions, creating a "flywheel" effect where large stores generate heat and traffic, which then scales up to regular stores, delivering traffic and sales across all locations. For instance, the company's ability to quickly ship popular products to stores is a direct outcome of its well-connected mechanism for product and operation. This agility is a significant competitive moat, allowing MINISO to respond swiftly to market trends and consumer demands.

In terms of R&D and new technological developments, MINISO is actively investing in its proprietary IP capacity. This includes contracting pop toy artists and developing in-house IPs like "Yu Yu Chan," which quickly sold out upon its June launch. The stated goal of this proprietary IP investment is not short-term commercial deployment but long-term strategic development, aiming to unleash greater value and achieve global influence. The company is also enhancing its IT technology to improve its membership system, enabling more precise identification of high-demand and repeatedly purchased products. This data-driven approach allows for targeted product development and supply chain optimization for best-selling items, further solidifying its competitive edge.

For investors, this technological differentiation translates into several critical advantages. The rapid product development and efficient supply chain contribute to higher gross margins by enabling quick monetization of trends and reducing inventory risk. The focus on proprietary IP creates unique, differentiated products that command stronger pricing power and foster deeper consumer engagement, moving beyond mere transactional sales to interest-driven consumption. This technological backbone is foundational to MINISO's strategy, competitive positioning, and long-term growth trajectory.

Competitive Landscape and Strategic Positioning

MINISO operates in a highly competitive global retail market, facing both direct and indirect rivals. Directly, it competes with value-oriented retailers such as Five Below (FIVE), Dollar Tree (DLTR), and Fast Retailing (FRCOY) (Uniqlo). MINISO's extensive global store network and diversified product offerings, often featuring IP collaborations, provide a distinct advantage in emerging markets and in capturing a broader demographic seeking affordable, trendy lifestyle products.

Compared to Five Below, which primarily focuses on the U.S. market with a niche for extreme value, MINISO's broader global footprint and diverse product lines, including its specialized TOP TOY brand, offer a more aspirational appeal and greater adaptability in international markets. While Five Below excels in creating a high-energy shopping environment, MINISO's emphasis on cultural trends and IP collaborations provides a unique value proposition. Against Dollar Tree, MINISO differentiates itself by blending affordability with aspirational branding and stylish designs, moving beyond basic essentials to curated, trend-driven selections. This allows MINISO to capture market share in growth-oriented regions where consumers seek both value and aesthetic appeal.

When contrasted with Fast Retailing's Uniqlo, which focuses on high-quality, functional apparel, MINISO's strength lies in its wider array of non-apparel categories, offering greater product diversity. While Fast Retailing boasts advanced supply chain management and technological integration in apparel, MINISO's agility in product development across multiple categories and its extensive global store density give it an edge in variety and market penetration for lifestyle goods.

Indirectly, MINISO faces competition from online platforms like Amazon (AMZN) and Alibaba (BABA), which offer convenience and broad product access. To counter this, MINISO is strengthening its omnichannel presence, particularly its O2O business, which grew by nearly 80% year-over-year in the first nine months of 2024. The company's strategy of leveraging its physical stores for immersive experiences and exclusive IP launches helps to differentiate it from purely online retailers.

MINISO's competitive advantages, or "moats," include its strong global brand recognition, extensive store network, and diversified product offerings. These factors foster customer loyalty and recurring revenue. Its ability to rapidly develop and launch IP-driven products, supported by a robust global supply chain, provides a significant edge in product innovation and market responsiveness. However, vulnerabilities exist, particularly in supply chain dependencies and potential overreliance on physical stores, which could be impacted by global disruptions or shifts to digital channels. To mitigate these, MINISO is diversifying its supply chain, increasing local sourcing in key markets like the U.S., and actively exploring new business models like its 24/7 Meituan warehouse stores.

Financial Performance: A Trajectory of Growth and Margin Expansion

MINISO has demonstrated a compelling financial trajectory, marked by consistent revenue growth and improving profitability. For the full year 2024, total revenue reached RMB 17 billion, a 23% increase year-over-year, driven by an 80% growth in average store count. This momentum accelerated into 2025, with Q1 revenue growing 90% year-over-year to RMB 4.43 billion, and Q2 revenue further accelerating to RMB 4.97 billion, up 23.1% year-over-year, exceeding the upper end of guidance.

Gross Margin Expansion: A notable highlight is the consistent improvement in gross margin, which reached 44.9% for the full year 2024, climbing for eight consecutive quarters. In Q2 2025, gross margin stood at 44.3%, primarily driven by the increasing contribution from overseas revenue and the optimization of TOP TOY's gross profit margin. This trend underscores the effectiveness of MINISO's IP strategy, as IP co-branded products often exhibit lower price sensitivity, contributing to healthier margins.

Profitability and Efficiency: Adjusted operating profit increased by 70% in 2024, with an adjusted operating profit margin stabilizing around 20%. In Q2 2025, adjusted operating profit was RMB 850 million, up 8.5%, with an adjusted operating margin of 17.2%, an improvement from Q1. While the rapid expansion of directly operated stores, particularly overseas, has led to increased selling and administrative expenses (up 52% in 2024 and 45% in Q1 2025), management views these as upfront investments to capture sales opportunities and expects profitability to improve in H2 2025 as operational efficiencies are realized. The company targets a mid-to-long-term operating margin of 20%. Adjusted net profit for Q2 2025 was RMB 690 million, with a net margin of 13.9%.

Cash Flow and Liquidity: MINISO maintains a robust financial position. For the full year 2024, net operating cash flow was RMB 2.17 billion, with free cash flow of RMB 1.41 billion. As of June 30, 2025, cash reserves stood at RMB 7.47 billion. The company's inventory turnover days improved to 93 days in Q2 2025 from 102 days in the previous quarter, indicating efficient working capital management.

Segmental Performance Highlights

MINISO Mainland China: This segment demonstrated high-quality growth, with Q2 2025 revenue increasing 13.6% year-over-year, outpacing China's overall retail sales growth. Crucially, domestic comparable same-store sales turned positive in Q2 2025, the first time in four consecutive quarters, and further accelerated into Q3. This turnaround is attributed to channel upgrades, product mix optimization, and a focus on larger, higher-efficiency stores like MINISO LANDs and flagship stores. MINISO LAND stores have shown exceptional performance, with the Shanghai Nanjing East Road store achieving RMB 100 million in sales within nine months of opening.

MINISO Overseas: The international markets continue to be a significant growth engine. Q2 2025 overseas revenue grew 28.6% year-over-year to RMB 1.9 billion, with the U.S. market alone seeing revenue growth exceeding 80%. Overseas same-store sales improved to a low-single-digit decline in Q2 2025, with Europe and North America achieving mid-single-digit positive growth. The company added 94 new overseas stores in Q2 2025, contributing to 189 additions in H1 2025. The U.S. market, a strategic stronghold, saw 37 net new stores in Q2 2025, with new stores exhibiting 1.5 times higher efficiency and 30% higher sales per square meter than existing stores.

TOP TOY: This specialized brand continues its rapid growth trajectory, with Q2 2025 revenue surging 87% year-over-year to RMB 400 million, exceeding guidance. TOP TOY achieved low-single-digit same-store sales growth and significantly improved gross margins in Q2 2025. The brand reached full-year profitability for the first time in 2024 and has maintained positive profit for four consecutive quarters. TOP TOY added 30 stores in Q2 2025, bringing its total to 293, with plans for 50-60 net new stores in 2025, targeting 70%-80% performance growth.

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Outlook, Guidance, and Strategic Initiatives

MINISO's management is highly optimistic about accelerated growth in 2025, projecting full-year revenue growth of no less than 25% and adjusted operating net profit between RMB 3.65 billion and RMB 3.85 billion, an increase from RMB 3.4 billion in the previous year. The company expects revenue growth to accelerate in H2 2025, with Q3 revenue growth guided at 25% to 28%. Same-store sales are expected to maintain low-single-digit growth in Q3, with adjusted operating profit showing double-digit growth.

Strategic Pillars for Future Growth:

• IP Strategy Deepening: MINISO is committed to its "dual drive strategy" of leveraging international IP licensing and aggressively developing proprietary IPs. The success of "Yu Yu Chan" is a testament to this, with expectations for RMB 100 million in sales next year. The company aims for IP products to contribute over 50% of sales by 2028.
• Large Store Strategy: The focus on MINISO LAND and flagship stores will continue, with 100 to 150 net new MINISO stores in mainland China for 2025, primarily comprising these larger formats. Overseas, over 500 new stores are planned for 2025, with 80 net new stores specifically targeted for the U.S., emphasizing quality and efficiency.
• Yonghui Integration: The acquisition of a 29.4% stake in Yonghui Supermarket is a strategic move to capitalize on quality retail opportunities. MINISO aims to optimize Yonghui's procurement costs, develop self-owned brands, and improve store operational efficiency, with a goal to retrofit all Yonghui stores by the end of 2026 and ensure positive profitability.
• Supply Chain Globalization: To mitigate tariff risks and enhance competitiveness, MINISO is diversifying its supply chain. In Q1 2025, U.S. direct sourcing accounted for 40% of local product, with plans to further increase procurement from Southeast Asia, Japan, and South Korea.

Risks and Challenges

Despite a strong outlook, MINISO faces several risks. The "micro consumption in China has not yet been fully restored," posing a challenge to sustained domestic growth. Global economic uncertainties, particularly U.S. tariff policies, could impact costs and margins, though MINISO has proactively diversified its supply chain and implemented tax planning to mitigate these effects. The rapid expansion of directly operated stores, especially overseas, entails significant upfront investments in labor, rent, and depreciation, which could temporarily pressure operating margins. The integration of Yonghui Supermarket also presents operational complexities and financial impact, with a projected RMB 119 million impact on net profit in Q2 2025. Furthermore, the highly competitive nature of the retail and pop toy markets necessitates continuous innovation and efficient execution to maintain market share and profitability.

Conclusion

MINISO Group is executing a compelling growth narrative, transitioning from a rapid expansion phase to a more refined, IP-driven retail model. The company's strategic focus on interest-based consumption, powered by a robust proprietary product development and supply chain "technology," is yielding tangible financial benefits, including accelerating revenue growth and expanding gross margins. The successful turnaround of mainland China's same-store sales, coupled with aggressive and targeted overseas expansion, underscores the resilience and adaptability of its business model.

The strategic investment in proprietary IP and the integration of Yonghui Supermarket are pivotal steps in building a diversified, multi-brand ecosystem that is poised to capture significant opportunities in the evolving retail landscape. While challenges such as macroeconomic uncertainties and competitive pressures persist, MINISO's proactive risk mitigation strategies, strong liquidity, and unwavering commitment to shareholder returns position it favorably. The company's vision to become a world-leading IP design retail group, supported by its technological leadership in product innovation and a clear roadmap for profitable growth, presents a compelling investment thesis for discerning investors.