MINISO: Large Stores to the Rescue, IP Retail 'Revives' Again?

$Miniso(MNSO.US) $MNSO(09896.HK) On the afternoon of August 21st, Beijing time, MINISO (9896.HK) (MNSO.N) released its Q2 2025 results. By closing inefficient small stores and converting small stores into larger ones, MINISO Group's same-store revenue finally turned positive in the second quarter. Additionally, compared to the soaring selling expenses in the previous quarter, the selling expenses this quarter have been somewhat restrained, and the overall performance exceeded market expectations.

Key points are as follows:

1. Revenue exceeded guidance upper limit: In Q2 2025, MINISO Group achieved total revenue of 4.97 billion yuan, a year-on-year increase of 23%, surpassing the company's previous guidance upper limit of 18%-21%. Breaking it down, benefiting from the improvement in same-store sales brought by "small store to large store" conversion, domestic MINISO achieved revenue of 2.84 billion yuan, a year-on-year increase of 13.6%, with a slight acceleration quarter-on-quarter. Particularly noteworthy is Top Toy, which achieved explosive growth through rapid store openings on a low base, achieving revenue of 400 million yuan, a year-on-year increase of 87%.

Meanwhile, overseas business, still undergoing transformation, achieved revenue of 1.94 billion yuan, a year-on-year increase of 28.6%, with growth rate slowing quarter-on-quarter.

2. Store openings returned to positive growth. In terms of store numbers, after closing a large number of low-efficiency stores in low-tier cities in the first quarter, the number of stores resumed growth in the second quarter, with 30 new stores added by the end of the second quarter, mostly concentrated in third-tier and below markets. In first-tier cities, the focus was mainly on optimizing store locations, converting small stores to large ones to help franchisees improve single-store efficiency.

In overseas regions, there was a net addition of 94 stores in Q2 2025, with the overall pace slowing down, the proportion of directly operated stores further increased to 17.5%. In terms of store layout, MINISO in the US began shifting from past scattered layouts to focusing on densely populated areas (California, Florida, New York, etc.) for cluster-style store openings, optimizing logistics routes to enhance scale effects and improve logistics efficiency.

3. Domestic same-store revenue turned positive. In terms of the core indicator measuring single-store efficiency—same-store revenue growth, domestic same-store revenue turned positive. Based on the conference call content, Dolphin Research speculates that under the implementation of "large store + IP product upgrade (exclusive launch of Disney Stitch)", the average transaction value has significantly increased.

In overseas regions, despite a high base in the same period last year, although same-store revenue still declined by low single digits, since April, MINISO's key focus areas—markets like the US and Mexico—saw same-store revenue turn positive quarter-on-quarter and accelerate during May Day. Key attention is on whether overseas same-store revenue can turn positive as the overseas market enters the consumption peak season in the second half of the year.

4. Gross margin slightly increased. With 1) an increase in the proportion of self-developed products by TOP TOY 2) an increase in the proportion of localized procurement overseas 3) an increase in the proportion of IP products, MINISO's gross margin slightly increased by 0.4 percentage points to 44.3% in Q2 2025.

5. Selling expenses restrained, profit exceeded market expectations. In terms of selling expense ratio, due to MINISO's optimization of site selection and decoration for directly operated stores in the US, overall increased by 2.6 percentage points year-on-year to 23.1%, with the increase restrained quarter-on-quarter, management expense ratio remained relatively stable, and ultimately, MINISO's adjusted net profit in Q2 (adding back the loss borne by Yonghui under the equity method) reached 690 million yuan, exceeding market expectations.

6. Detailed financial data overview:

Dolphin Research's overall view:

MINISO's overall performance in the second quarter was quite good, with the market focusing on three aspects: 1) the improvement in same-store efficiency after "small store to large store" conversion 2) whether the selling expense ratio can improve 3) the adjustment situation of Yonghui. Let's discuss them one by one:

Firstly, regarding the conversion from small stores to large stores, based on the conference call communication, MINISO's same-store revenue turned positive in the second quarter, with large stores contributing the main driving force, which can be clearly said to be a correct move. The core lies in large stores over 300㎡, where the proportion of IP products is higher, leading to an increase in average transaction value, driving store efficiency to be more than 30% higher than regular stores. On the other hand, from the consumer's perspective, large stores can better provide consumers with an immersive experience, thus enhancing user repurchase rate and stickiness.

Additionally, regarding selling expenses, although the related expenses for opening directly operated stores in the US in Q2 were reduced by optimizing site selection and decoration (reduced by about 15%), but according to research information, the major part of selling expenses—IP licensing fees—actually did not decrease, which reflects the difference in business models: compared to Pop Mart's full industry chain of IP, MINISO's IP design capability is relatively weak, with more of a retail gene, so Dolphin Research believes that it is difficult for MINISO's selling expenses to significantly decrease in the short term.

Finally, regarding Yonghui's operations, due to 1) expenses brought by store closures (staff compensation, lease compensation, asset write-offs) and 2) increased capital expenditures brought by store adjustments, Yonghui remained in a loss state in the second quarter, but currently, after store closures, Yonghui has only 548 stores left, which is quite close to the final target of 450 stores, so the significant reduction in store closures in the second half of the year is expected to further reduce losses for the company.

On the other hand, according to research information, Yonghui is still in the process of rebuilding the supply chain and fully switching suppliers, with the proportion of private label products less than 10%, compared to leading retail supermarkets like Fat Donglai, Sam's Club, and Hema (with proportions over 30%), there is still a considerable gap, Dolphin Research believes that the possibility of releasing profits in the short term is not high, and the focus at this stage is still on observing the actual effects of adjustments.

In terms of valuation, based on Dolphin Research's previous profit forecast, MINISO's overall revenue growth CAGR from 2025 to 2027 is expected to remain above 20%, and the current market value implies a PE of about 17x for MINISO in 2025, which is actually not high compared to the 20% revenue growth rate, but since MINISO is still in the pre-opening investment period in the US, profit release still requires time, which will have some suppression on valuation. Therefore, whether to intervene depends on whether MINISO can gradually improve its profitability through sustained high growth overseas and the release of operating leverage while maintaining stable growth domestically.

The following is a detailed interpretation of the financial report:

I. Revenue exceeded guidance upper limit

In Q2 2025, MINISO Group achieved total revenue of 4.97 billion yuan, a year-on-year increase of 23%, surpassing the company's previous guidance upper limit of 18%-21%. Breaking it down, benefiting from the improvement in same-store sales brought by "small store to large store" conversion, domestic MINISO achieved revenue of 2.84 billion yuan, a year-on-year increase of 13.6%, with a slight acceleration quarter-on-quarter. Particularly noteworthy is Top Toy, which achieved explosive growth through rapid store openings on a low base, achieving revenue of 400 million yuan, a year-on-year increase of 87%.

As a trendy toy brand under MINISO, TOP TOY achieved revenue of 400 million yuan in the second quarter, a year-on-year increase of 87%, with a further acceleration quarter-on-quarter, showing a relatively bright performance, but currently, due to the overall low base of Top Toy, its contribution to overall performance is limited.

Based on research information, currently, blind boxes account for about 50% of TOP TOY, figures about 15%, and building blocks about 20%, forming the core categories of TOP TOY, and in the future, SKU will be streamlined to focus more on promising categories.

Additionally, currently, TOP TOY's own products account for about 40% in stores, and about 50% across all channels (including online), and as the proportion of own products increases in the future, profitability will also improve.

In the context of slowing domestic growth, MINISO is betting on overseas as the "second growth curve", so the growth of overseas business has always been a point of concern for investors. Overall, overseas achieved revenue of 1.94 billion yuan in the second quarter, a year-on-year increase of 28.6%, with growth rate slowing quarter-on-quarter.

The best-performing overseas region was the US market, where MINISO, drawing on the domestic large store strategy, also opened directly operated stores in landmark commercial areas in the US. Currently, the new store efficiency in the US has increased by more than 30%, driving a year-on-year increase of 80% in revenue in the US region in the second quarter. However, the Latin American market was dragged down by high inventory, affecting the overall growth of overseas regions.

II. Store openings returned to positive growth

In terms of store numbers, after closing a large number of low-efficiency stores in low-tier cities in the first quarter, the number of stores resumed growth in the second quarter, with 30 new stores added by the end of the second quarter, mostly concentrated in third-tier and below markets. In first-tier cities, the focus was mainly on optimizing store locations, converting small stores to large ones to help franchisees improve single-store efficiency.

III. Domestic same-store revenue turned positive

In terms of the core indicator measuring single-store efficiency—same-store revenue growth, domestic same-store revenue turned positive. Based on the conference call content, Dolphin Research speculates that under the implementation of "large store + IP product upgrade (exclusive launch of Disney Stitch)", the average transaction value has significantly increased.

Overseas, due to last year's rapid expansion of directly operated stores, personnel reserves, etc., were somewhat lacking, and in the same period last year, although same-store revenue still declined by low single digits, since April, MINISO's key focus areas—markets like the US and Mexico—saw same-store revenue turn positive quarter-on-quarter and accelerate during May Day. Key attention is on whether overseas same-store revenue can turn positive as the overseas market enters the consumption peak season in the second half of the year.

III. Gross margin remained stable, selling expenses surged

With 1) an increase in the proportion of self-developed products by TOP TOY 2) an increase in the proportion of localized procurement overseas 3) an increase in the proportion of IP products, MINISO's gross margin slightly increased by 0.4 percentage points to 44.3% in Q2 2025.

In terms of selling expense ratio, due to MINISO's optimization of site selection and decoration for directly operated stores in the US, overall increased by 2.6 percentage points year-on-year to 23.1%, with the increase restrained quarter-on-quarter, management expense ratio remained relatively stable, and ultimately, MINISO's adjusted net profit in Q2 (adding back the loss borne by Yonghui under the equity method) reached 690 million yuan, exceeding market expectations.