Pop Mart (Minutes): Sales growth in 2025 will not be more than 50%

Pop Mart (Minutes): Sales growth in 2025 will not be less than 50%

The following are the FY24 H2 earnings call minutes for Pop Mart. For the earnings interpretation, please refer to Pop Mart: Going Global and Achieving Greatness! Pop Mart is "Racing" Forward.

I. Core Information Review of the Earnings Report

1. Overall Performance

(1) Total Revenue: The total revenue for 2024 is RMB 13.04 billion, a year-on-year increase of 101.1%.

(2) Revenue from Hong Kong, Macau, Taiwan, and Overseas: The total revenue for 2024 reached RMB 5.07 billion, achieving a growth of 373.8% compared to 2023.

2. Performance by Channel

(1) Offline Business: Store revenue increased by 43.9% in 2024, with same-store sales growth reaching 28%, thanks to continuous improvements in display, enhanced store execution, and the introduction of a refined operational reward mechanism.

(2) Online Business:

Douyin Platform: The growth of the content e-commerce platform exceeded 100%, driven by hiring young talents, fine-tuning live streaming duration and average efficiency, and enhancing the visual content of live streams.

Tmall Platform: As a solid foundation for all-platform e-commerce, it continued its growth trend in 2024, increasing by nearly 100%, with significant growth in attracting new users from cross-industry segments compared to last year.

Box Machines: In the first half of the year, it promoted traffic, while in the second half, it increased traffic and new customer transaction rates. By streamlining internal operational details and improving entry barriers for new brands and users, it achieved a growth of 52%, with UV growing simultaneously by 64%.

(3) Membership Data: The number of members has exceeded 50 million, with over 46 million registered members accumulated in mainland China in 2024, compared to 34 million in 2023. The number of new registered members exceeded 10 million for the first time, and the contribution ratio and repurchase rate of members remained stable.

II. Detailed Content of the Earnings Call

2.1 Key Information from Executives

1. IP and Products

(1) SKULL PANDA Performance: With its unique visual concept and innovative style, it continues to lead trends in the collectible toy industry. Its classic series "Temperature Series" has sold over 790,000 sets, making it one of the best-selling collectible toy products in history, and it continues to sell well. The plush products launched in 2024 have received great acclaim, and it is expected to achieve faster growth this year with a richer product line, becoming one of the fastest-growing emerging IPs and one of the IPs to break RMB 1 billion in sales the fastest 2. Product Line Expansion and Innovation:

(1) Plush Product Line: In 2024, the growth rate is expected to exceed 1200% year-on-year, with overall sales accounting for more than 21%. Labubu's syrup plush products have become a trendy topic among young people. The company plans to establish a more stable plush supply chain system this year and continue to invest in design, craftsmanship, and materials.

(2) Building Block Product Line: In 2024, building block products will be launched for the first time, showcasing Labubu's story world through building block assembly, achieving good sales performance. This year, the focus will be on this category, with continuous investment from product innovation to supply chain.

(3) High-end Brand Mega: The operation is becoming increasingly mature, with a 146% growth expected in 2024. The company plans to launch long-term stores primarily focused on high-end product lines this year, advancing the brand's upward development strategy.

A new jewelry brand, Bubble: During the Spring Festival, three pop-up stores will be opened in Shanghai, Chengdu, and Shenzhen, achieving good sales performance. Plans to increase investment in the new brand in the second quarter and establish long-term stores.

Market and Channel Expansion

(4) International Market Development: With the acceleration of globalization and the increasing recognition of IP in different countries, the company will continue to strengthen its efforts in international market development, deeply promote localized operation strategies, and continuously provide consumers with high-quality product services. In 2025, iconic landmark stores will be established in countries such as France, the United States, Malaysia, Thailand, Vietnam, Indonesia, Japan, and Australia, while deepening the global e-commerce strategy, entering more localized e-commerce platforms in various countries, adding live streaming rooms, promoting the development of new business lines and limited products in overseas markets, and planning localized marketing projects to deeply embed brand culture in the hearts of consumers in different countries and regions.

(5) Copyright IP Cooperation: Continuously expanding the cooperation and licensing regions of copyright IP, having obtained global authorization for the vast majority of copyright IP. At the beginning of 2025, the figurine category in collaboration with the Nezha movie became one of the best-selling products in the first quarter.

3. Amusement Park Business

(1) 2024 Operational Results: The Beijing amusement park has far exceeded expectations in terms of revenue and profit, with visitors from outside Beijing accounting for over 50% and non-family users nearing 50%. The radiation range and influence have exceeded expectations. The visitor operation service experience has significantly improved, enhancing the park's attractiveness and product performance through rich activity content, such as the integration of the PTS model, summer water pageant activities, autumn Halloween, and winter Christmas events.

(2) Future Plans: Initiating a comprehensive enhancement plan for Phase 1, which will involve upgrading 2/3 of the area. Phase 2 design has already begun, and construction is expected to start next year if all goes well. Additionally, the dessert business incubated by the amusement park also has plans for launch this year.

2.2 Q&A

Q: In 2024, both domestic and overseas performances are impressive. In the current environment of high uncertainty, Bubble Mart has formed a flywheel effect through IP and products. Standing at the new height of 2024, what are the expected growth rates and driving factors for 2025 domestically and overseas, especially from online and offline perspectives? **

A: Regarding growth expectations, although targets are set every year, the growth for 2024 indeed exceeds expectations. Let's first review the growth factors and future growth outlook. The two core strategies proposed for 2024—internationalization and IP-centric group development—are driving rapid growth in 2024. The internationalization strategy has achieved explosive sales growth in Southeast Asia, Thailand, and other markets, becoming the second growth curve; the IP-centric group strategy, through category innovations such as building blocks, derivatives, videos, and theme parks, will become a new growth driver. Looking ahead to 2025, we remain confident in sales growth, expecting the entire group to achieve over 50% growth year-on-year compared to 2024, with overseas business expected to grow by 100%, driving group development. Meanwhile, North America and Southeast Asia markets are important growth points, with significant growth in 2024, increasing over 5 times and 6 times respectively, and are expected to continue to enhance their sales share in 2025.

Q: Please introduce the overall overseas expansion plan for the next few years, including new markets and cultural integration. Last year, there were over 400 stores domestically. Looking ahead to the 2025 domestic store opening plan and medium to long-term goals, I would like to understand the management's thoughts on store openings, including the number of pop-up stores, store efficiency improvement, and the balance of new product launches online and offline.

A: In terms of overseas expansion, we are confident in achieving over 50% market share by 2025. In the first quarter, domestic growth exceeded expectations, but overseas remains an important growth driver. In the future, we will enhance store opening quality, sign contracts for core landmark city stores, and strengthen brand perception. We will focus on North America and Europe, paying attention to landmark and tourism channels, such as airports. At the same time, we will push new businesses incubated domestically to overseas markets, such as the new store plan in Thailand. Regarding domestic store planning, the average retail store efficiency is expected to increase significantly in 2024, and the integration of online and offline has enhanced consumer loyalty. In 2025, we will control the number of new store openings, focusing on customer experience and upgrading existing store locations and sizes. The number of pop-up stores will be appropriately increased, introducing differentiated product structures to strengthen marketing roles.

Q: With a gross margin reaching a historical high of 66.8% in 2024, based on in-depth guidance, what are the expectations for operating leverage, gross margin, and net margin in 2025? The Southeast Asian market has shown significant growth, and the North American market has strong growth. What are the related teams' considerations for the high revenue targets in North America for 2025, and what strategies are in place for operations and team collaboration? How was the performance in the first quarter?

A: Regarding profit margins, the gross margin is expected to see a certain increase in 2025, mainly due to the rising proportion of overseas revenue and supply chain cost control; the net margin will remain stable or slightly increase, benefiting from revenue scale effects and strict expense management. In terms of North American market operations, we are confident in achieving high revenue targets in 2025, with first-quarter performance exceeding expectations, already nearing last year's total revenue. The team has been well-structured, with offline operations, store expansion, and online business collaboration progressing. We plan to open two flagship stores to enhance brand influence while also expanding into new markets such as Mexico and Canada, with online and offline integration improving user operation efficiency.

Q: The growth rate of overseas online channels is rapid, especially the official website. What are the e-commerce strategies for various overseas channels, and what are the future growth and operational strategies for live streaming channels? Will the proportion of overseas online e-commerce continue to increase? After a year and a half of park operations, is the management satisfied, and what are the plans and considerations for opening parks in other cities? **

A: The proportion of overseas e-commerce businesses is on the rise, increasing from 14% in January 2024 to 34% in December. Strategically, we are launching online and offline combinations in key markets such as Thailand and Singapore; we are focusing on live streaming platforms, with English-language live streams coordinated domestically and other language live streams operated locally. In terms of park operations, despite space limitations, we achieved profitability in the first year, which is a good result. In the future, we will renovate existing parks and explore new directions for urban parks, such as transforming them into night parks. We are satisfied with the existing parks and have plans to open new ones in the future, but the current focus is on optimizing existing projects.

Q: Membership numbers reached a new high in 2024. Please share the sources of membership, including new user profiles and consumption behavior. LABUBU restocks frequently; what experiences do you have for subsequent operations and maintenance?

A: Membership growth in 2024 is significant, with new user growth accelerating and contributing double-digit growth. Retail stores are the main source of new customers, and online channels, especially platform e-commerce and content e-commerce, are accelerating customer acquisition. New customers often come through blind boxes and trendy peripheral products. In the future, we will continue to focus on user operations that integrate online and offline.

Q: The company's SKU expansion is rapid, and the number of IPs is increasing. What is the SKU expansion level expected in 2025, and will it accelerate? The Nezha products are selling well; will you continue to cooperate in the future, and will you strengthen alliance IP efforts?

A: The SKU expansion adheres to the principle of "less is more." The absolute value in 2025 will not exceed that of 2024, focusing on streamlining and concentration. We will collaborate with more excellent IPs and maintain an open attitude, but we must ensure quality with each collaboration. For example, if there is a second-generation collaboration with Nezha, the Disney collaboration products are also popular.

Q: The management team has demonstrated commercial insight into new categories, such as jewelry, building blocks, and the progress and plans for content production. What are the plans for warehousing and logistics, especially overseas, in the context of expansion?

A: In terms of new categories, jewelry pop-ups are popular and will be gradually promoted this year; the building block category will see more innovations, introducing more artist IPs and external copyrights to develop larger products. In content production, we will launch short films during the summer, focusing on telling good stories to attract new users. Regarding warehousing and logistics, as overseas business scales grow, we will optimize the warehousing and logistics system, such as establishing warehouses in Southeast Asia to improve restocking efficiency.

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