Performance doubles then suddenly brakes, Pop Mart bids farewell to the "hit product leverage" era

Can AI successfully hedge against the risks of the IP cycle in new business models?

Pop Mart is still that entity with doubled performance, but the market is no longer buying it.

On March 25, Pop Mart disclosed its latest financial report: revenue of 37.12 billion yuan, a year-on-year increase of 184.7%; adjusted net profit of 13.08 billion yuan, a year-on-year increase of 284.5%; a gross margin of 72.1% and an adjusted net profit margin of 35.2%, both at historical highs.

Objectively speaking, this is a financial report that is hard to call “dull,” but the market’s expectations for Pop Mart were evidently higher.

Over the past year, multiple investment banks have intensively raised their target prices, with the core logic being: the popularity of IP, the potential for overseas expansion, and the potential for category expansion. When the financial report failed to further strengthen the long-term narrative of a “global IP platform,” a stock price correction almost became inevitable.

At the earnings conference, Pop Mart’s CEO Wang Ning provided a growth guidance of 20% for 2026 and clearly stated that the company would not sacrifice profit for scale expansion.

This “steady” posture appears to be an emergency brake in the eyes of a capital market accustomed to 100% or even 200% growth over the past two years.

However, prior to the financial report’s disclosure, market sentiment had already shown subtle cracks.

From the public disputes sparked by new IPs to the sustained decline in secondary market premiums, to the plush toys and figurines no longer being out of stock on store shelves, every detail is eroding investor confidence.

Pessimism and panic spiraled out of control after the financial report was released, ultimately triggering a severe sell-off—Pop Mart recorded its largest single-day decline and turnover rate in nearly three years on that day.

For Pop Mart, what is more unsettling to the market than “LABUBU is not selling well” is the series of chain reactions brought about by the continuous withdrawal of traffic and attention.

The pain following this retreat of dividends has become an unavoidable hard battle for Pop Mart.

Where the expectations differ

Pop Mart’s “underperformance” is essentially not a collapse of overall scale, but rather a failure of some optimistic expectations.

After the release of the third-quarter report, Morgan Stanley forecasted a growth of 26% in 2026 and 20% in 2027, which is almost consistent with the guidance disclosed by the company this time.

Some investors analyzed that, after a significant rise over the past year, the market’s holding structure has severely tilted towards “high expectation funds.”

In this context, once the target company’s fundamentals are acceptable but its performance does not exceed expectations, combined with a more conservative management guidance, it is natural for funds to choose to cash out, making exit almost inevitable.

Breaking down the data, the domestic fourth quarter is the core bleeding point. The previous third-quarter earnings announcement stated that domestic growth was 185%-190%, but ultimately the entire second half saw domestic growth of only 135%, confirming a significant quarter-on-quarter decline in the fourth quarter.

The performance of the overseas market has become one of the most contentious focal points after this financial report disclosure.

Pop Mart’s Chief Operating Officer, Si De, stated that sales in the North American market are expected to be around 800 million yuan in 2024, and will ultimately reach 6.8 billion yuan in 2025, which is lower than the company’s internal expectation of 7 billion yuan mentioned in the mid-year report.

The uniqueness of the North American market lies in its significantly high online proportion, reaching 64%. The management explained that this is mainly due to the insufficient capacity of offline stores, leading to a concentration of products towards online channels.

In the context of overall growth rate slowdown, the market has once again amplified the “old topic” of IP dependence.

From the structural perspective of IP, the THE MONSTERS series, which includes LABUBU, has seen a concentrated restocking period in the second half of the year, with annual revenue reaching 14.1 billion yuan, accounting for over 38%, an increase from 34.7% in the first half of the year.

Although other IPs have their highlights—SKULLPANDA, CRYBABY, MOLLY, and DIMMO, which are in the second tier, all generated revenue above 2.7 billion yuan, and “Star People” saw its revenue explode 16 times year-on-year to 2 billion yuan in just one year,

The hundred-billion-level contribution of LABUBU has become a benchmark, making it exponentially difficult for backup IPs to match its contribution.

Another noteworthy data signal: against the backdrop of a significant 57.5% increase in the total number of Pop Mart members, the core IP from earlier years, MOLLY, only achieved an annual revenue growth rate of 38%.

This indirectly confirms that the monetization efficiency of a single trendy toy IP is facing diminishing returns as it enters the maturity phase.

The greatest concern brought about by the LABUBU effect lies not in dependence on a single high base, but in its unreplicability as a “super leverage.”

IP is the origin of everything. LABUBU not only contributed to performance but was also the core chip for Pop Mart to leverage top global resources over the past year.

From appearing in Macy’s Thanksgiving Day Parade to a deep collaboration with the Tourism Authority of Thailand that carries diplomatic significance, to the cross-border collaboration with MOYNAT, a century-old leather brand under LVMH, and even the content adventure in collaboration with Sony Pictures, LABUBU has almost carried all of Pop Mart’s narrative ambitions regarding “globalization” and “brand elevation.”

The extreme brilliance has brought about extreme panic: the peak of LABUBU is so high that the market is uncertain about the extent of the pullback risk: "Where is the bottom of the ‘cycle’, and what will break it, remains a blank.

Pessimistic sentiment is thus deduced and continues to spread, leading to concerns and uncertainties about the longer term—not just the performance in 2026.

Who will hedge against LABUBU?

Expectations from the outside world are constantly jumping between optimism and panic, but Pop Mart itself continues to move forward according to its established strategic center.

At the earnings conference, Wang Ning once again emphasized that Pop Mart’s strategic direction has remained consistent since its IPO in Hong Kong: globalization and group development centered around IP.

To support this grand narrative, in 2025, Pop Mart completed the largest organizational restructuring in five years: setting up regional headquarters in Greater China, the Americas, the Asia-Pacific, and Europe, with Senior Vice President Wen Deyi also concurrently serving as Co-COO of the group.

In that structural system, Si De managed Greater China and the Americas, while Wen Deyi was responsible for the Asia-Pacific and Europe.

Just two days before the financial report was disclosed, Pop Mart completed another critical personnel shift: Wen Deyi was appointed Chief Growth Officer (CGO), focusing on mid-to-long-term strategies, particularly advancing innovations in group development centered around IP; Si De will oversee the group’s platform department and fully take charge of the operational management of the four major regions, driving international business.

The deeper meaning behind this division of labor is that Pop Mart is attempting to address the growing contradiction between performance scale and relatively lagging organizational structure.

Currently, the performance proportion of Pop Mart’s markets outside mainland China has approached 45%, with the scale of plush toys and figurines becoming nearly equivalent.

As the foundation for globalization and group development begins to take shape, the company urgently needs a more efficient “central nervous system” to command this large multinational machine.

However, compared to the long-term goals set by Pop Mart itself, this stage is still just the starting point.

According to content leaked from an all-employee letter, Pop Mart hopes to push the non-consumer goods business to nearly 50%.

To achieve this, Pop Mart is simultaneously advancing multiple new business models, including theme parks, accessories, desserts, and film and entertainment, and will launch small household appliances in collaboration with JD.com in April 2026.

The logic behind this is to hedge against the unsustainable nature of single IP popularity through multi-dimensional consumer scenarios, channel systems, and content ecosystems, thereby extending the IP lifecycle and enhancing monetization depth.

Compared to the randomness of IP explosions themselves, channel expansion, experience optimization, operational efficiency, and the exploration of new artists are the certain variables that the company can truly control.

In the domestic market, Pop Mart’s strategic focus has shifted from “scale racing” to “quality of existing stock.”

In 2025, the net increase in stores is only 14, with resources primarily allocated to upgrading existing stores and building flagship stores.

Management has revealed that the number of openings and renovations this year will increase, with the core logic being to enhance user stay time and experience through the “store as a theme park” model. Last year’s practical data confirmed the feasibility of this path: after some stores increased their area by 30%-40%, store efficiency achieved double growth.

Compared to steady adjustments in the domestic market, the overseas market remains the company’s most important growth engine, while also being the source of the greatest uncertainty.

Management stated at the earnings conference that overseas expansion has shifted from a past approach centered on the Chinese headquarters to radiating outwards from the four major regions, gradually penetrating second and third-tier cities, tourist destinations, and airport scenarios.

The supply chain and logistics system are also being reconstructed in parallel, with regional warehousing and transportation resources being integrated to negotiate collectively for cost reductions and improve the matching of shipping times and demand.

Recently, Pop Mart has established its U.S. headquarters in Culver City, Los Angeles, an area that gathers a large number of creative companies in the film and entertainment industry, hoping to attract more artists and content creators to participate in IP development.

Localization operations are expected to be a major focus for Pop Mart this year.

Whether promoting collaborations between local IPs and core proprietary IPs, or developing and commercializing IPs around local artists, all are seen as key paths to open regional markets and enhance user recognition.

Although the overseas market currently represents a high-margin segment, the increasing uncertainty directly impacts profits. Data disclosed at the earnings conference shows that the company’s gross margin has already fallen by 1 percentage point in January and February this year.

To reduce market uncertainty, management stated that they will increase the frequency of information disclosure in the future, and in addition to the semi-annual and annual reports, will add business status update announcements in May and November, and will provide guidance related to profit margins in May this year.

For Pop Mart in 2026, the company is continuously ramping up efforts in almost all “areas of potential”—heavier asset investments, more complex organizational structures, and more diverse business forms, attempting to build a long-term growth path that can traverse the IP cycle.

However, the natural withdrawal of traffic, marginal fluctuations in profit margins, and costs and geopolitical friction during the globalization process remain variables that any consumer IP company finds difficult to fully control.

In the face of business cycles, these factors often determine the short-term upper and lower limits of enterprises, forming the most sensitive part during market repricing.