MINISO Group Holding Limited is set to complete the most crucial piece of its trendy toy narrative puzzle.

During the earnings call, Chairman Ye Guofu announced the signing of 9 artist IPs, with plans to transition toward a dual-driven model combining international IPs with self-owned IPs in the future.

Ye Guofu stated that self-owned IP represents a major strategic initiative for the group this year and beyond.

"In the past, MINISO Group has demonstrated advantages in product development, marketing, and channels through collaborations with international IPs. The only missing element was self-owned IP. As long as we align our understanding of self-owned IP and take action, I believe we have a bright future ahead," Ye Guofu said.

Just one day prior, Pop Mart surged past a market cap of 420 billion under CEO Wang Ning's optimistic expectation of "easily reaching 30 billion."

Pop Mart's rapid growth in North America and other global markets has validated the potential and scope of the trendy toy market for subsequent entrants.

This presents a significant opportunity for MINISO Group, which has established over 3,000 overseas stores.

In the first half of the year, MINISO Group achieved revenue of 9.393 billion yuan, up 21.1% year-over-year, with adjusted net profit of 1.278 billion yuan, representing a 3% increase.

The TOPTOY brand experienced rapid growth, with second-quarter revenue surging 80% year-over-year to 400 million yuan. During the reporting period, it secured a strategic funding round led by Temasek, resulting in a post-transaction valuation of approximately 10 billion Hong Kong dollars.

Self-owned IP will undoubtedly create valuation opportunities, but first, MINISO Group must prove its capabilities.

Flagship Store Strategy

MINISO Group has substantial experience in the IP trendy toy sector, primarily recognized as a "channel brand" in the market.

In recent years, through collaborations with high-profile IPs such as Chiikawa and Harry Potter, MINISO Group has achieved rapid product launches and traffic conversion.

IP-driven product premiums have increased gross margins by 13 percentage points over three years.

However, non-exclusive collaboration models are easily replicated, leading to severe product homogenization in the market. Continuous marketing investments primarily accumulate intangible assets for IP rights holders rather than effectively building internal barriers.

High licensing fees continue to squeeze profits. Compared to Pop Mart's 70% gross margin achieved through self-owned IPs, MINISO Group's licensing expenses have consistently grown faster than revenue in recent years.

In the first half alone, MINISO Group's licensing expenses increased 31.5% year-over-year to 240 million yuan.

Compared to licensing fees for internationally renowned IPs, signing early-stage artists is indeed "a small expense."

More importantly, the success of MINISO LAND may have demonstrated MINISO Group's potential as a channel for promoting IPs.

MINISO LAND represents the company's highest-tier store format, designed as an "IP theme park" concept to create new retail experiences.

The existing 11 MINISO LAND stores average monthly sales efficiency of 4 million yuan, with inventory turnover and cash recovery efficiency far exceeding regular stores, while demonstrating exceptional customer attraction capabilities.

The MINISO LAND Global Flagship Store on Shanghai's Nanjing East Road achieved single-store sales of over 100 million yuan in just 9 months after opening. In June, the world's first MINISO SPACE entered Nanjing's Deji Plaza, successfully penetrating the luxury shopping district.

"Most IPs cannot enter Deji on their own, but they can through us," Ye Guofu said.

In May, "Letsvan's" WAKUKU second-generation vinyl plush products launched exclusively at MINISO LAND Shanghai and Nanjing stores, setting a single-day sales record of 1 million yuan.

A month later, limited-edition vinyl keychains at the Nanjing Deji Plaza MINISO SPACE opening day again triggered fan queues starting at dawn.

The strategy of launching at flagship stores to generate market buzz, then leveraging regular stores for volume sales, is being replicated for the company's self-owned IPs.

Ye Guofu introduced that the IP "Youyou-chan," launched by signed trendy toy artists, sold out quickly upon release and frequently experiences stock shortages.

He expects this IP to achieve sales exceeding 100 million yuan, "with projected sales of 40 million yuan this year and breaking the 100 million threshold next year."

However, there's a fundamental difference between simply serving as a channel to expand market coverage for IPs versus deeply participating in IP incubation, operation, and building long-term vitality.

Even leading brands like Pop Mart continuously strengthen IP content development, constantly enriching LABUBU's backstory and detailed settings to extend the IP's lifecycle.

Some voices question whether MINISO Group's accelerated "trendy toy transformation" might create overseas competition with its subsidiary trendy toy brand TOPTOY.

Earlier this year, TOPTOY, backed by MINISO Group's IP and supply chain capabilities, announced plans to open 1,000 stores within five years, achieving overseas sales accounting for over 50%.

Management responded during the earnings call that MINISO extends from lifestyle department stores into trendy toys, while TOPTOY focuses specifically on professional trendy toy tracks, with differences in positioning, product formats, and average transaction values.

However, observations suggest the two brands still lack clear separation regarding core IP resources such as Sanrio.

In the first half, TOPTOY acquired a 51% controlling stake in trendy toy company HiTOY Haichuang Culture with a 5.1 million yuan capital contribution, incorporating three major IPs: Nommi, Honey, and MayMei under its umbrella.

Managing marketing resource balance among multiple IPs may present new challenges.

Efficiency Improvements Underway

Behind the increased focus on self-owned IP, MINISO Group achieved its first positive same-store sales growth in four quarters this quarter, signaling positive momentum for turnaround.

The "close small stores, open large stores" strategy implemented in the domestic market is proving effective.

As of the first half, the company operated over 200 large stores exceeding 400 square meters, with half opened in 2024.

These stores significantly outperform average levels in terms of sales per square meter, single-store sales, and profitability. Despite representing only 5% of stores, large stores contributed double-digit percentages to China market sales in the first half.

In the second quarter, despite high comparisons from last year's Chiikawa collaboration, same-store sales still achieved low single-digit growth, successfully turning from first-quarter decline to positive growth.

Ye Guofu stated that the company established a performance growth team led by the merchandise center domestically, streamlining cross-departmental connections between merchandise, operations, channels, and marketing, significantly improving the speed and operational efficiency of bringing bestselling products to stores.

Management confirmed that from the beginning of the year through August, domestic same-store growth has turned positive, expressing full confidence in achieving positive same-store growth for the full year.

Overseas markets are actively adopting proven domestic operational methodologies.

Management indicated that MINISO Group will implement a quality-first strategy in North American markets, focusing on developing trendy toy categories and achieving refined operations through localized teams.

In the second quarter, U.S. market revenue grew over 80% year-over-year, with same-store sales achieving mid-single-digit positive growth.

Additionally, new North American stores opened this year have achieved store efficiency 1.5 times that of existing stores, with sales per square meter nearly 30% higher and better rent-to-sales ratios than older stores.

Market concerns triggered by aggressive store expansion strategies are gradually easing as operational conditions improve.

However, from a profit perspective, gross margin improvements are being partially offset by store structure adjustments: numerous new stores in North America remain in the profit improvement phase, creating short-term pressure on overall profit margins.

In the first half of this year, MINISO Group's operating profit margin was 16.5%, down 2.8 percentage points from the same period last year.

Upfront investment costs related to directly-operated stores, including rent and labor, increased substantially, causing first-half selling expenses to grow over 40% year-over-year.

MINISO Group's medium-to-long-term target operating profit margin is 20%.

Given stable domestic franchise business profits, achieving this target depends on the subsequent operational efficiency performance of overseas directly-operated stores.

The pace of direct store openings has clearly slowed. While maintaining a net addition of over 500 overseas stores annually, MINISO Group has reduced the proportion of overseas directly-operated stores from around 40% to 35%.

The U.S. annual store opening target is 80 locations, nearly half of last year's pace, shifting from scattered deployment to focused cluster openings in densely populated areas like California to improve logistics and marketing efficiency.

"Since we've slowed the store opening pace, we must polish the single-store model better," Ye Guofu stated, planning to allocate 100 square meters within 600-800 square meter large stores as dedicated trendy toy sections to attract more young customers.

The previous leveraged investment in Yonghui may somewhat limit MINISO Group's larger-scale capital investments.

Starting this quarter, MINISO Group accounts for its Yonghui investment using the equity method, resulting in a 119 million yuan book loss.

In the first half, Yonghui Superstores closed 227 stores with a net loss of 241 million yuan.

According to plan, 300 store renovations will be completed before the 2026 Lunar New Year. Until then, continued losses are expected to pressure MINISO Group's financial statement performance.