Pop Mart is entering a critical adjustment period following the Labubu frenzy. As growth momentum from its core IP weakens, the company needs to prove it can continuously incubate best-selling IPs and convert short-term traffic into stable consumer demand. At the same time, its expansion strategy of shifting from lightweight stores to large flagship locations places higher demands on operational efficiency and profitability.

According to a research report released by JPMorgan on October 21, Pop Mart International Group Limited is expected to see revenue decline by approximately 37% year-on-year in the third quarter of 2026. The bank estimates the company's full-year adjusted net profit at approximately RMB 9.341 billion, down 27% year-on-year.

This means the challenges facing POP MART are no longer just a short-term sales slowdown, but also whether its growth model can be sustained. The rapid growth previously driven by hit IPs and overseas expansion is now being tested by shifting demand and rising operating costs.

As the third-quarter earnings report approaches, market attention will also extend to 2027: whether new IPs can succeed Labubu, whether large-store expansion can generate returns commensurate with the investment, and how the company's profit margins will change — all of which will influence its future growth expectations and valuation.

Q3 Revenue Expected to Fall 37%, Overseas Markets Sharply Cooling

Pop Mart's growth slowdown is accelerating. JPMorgan expects third-quarter 2026 revenue to decline by approximately 37% year-on-year, with the fourth-quarter decline narrowing to about 23%. The bank also forecasts full-year adjusted net profit to fall 27% year-on-year to approximately RMB 9.341 billion.

Regional performance has diverged noticeably. In the first half of 2026, mainland China market revenue still grew 47% year-on-year, while overseas market revenue declined 11% year-on-year; JPMorgan estimates that overseas second-quarter revenue fell as much as 44% year-on-year. After the Labubu frenzy faded, the overseas business faces both high base comparison pressure and the need to prove that consumers still have sustained demand for other IPs and regular products.

Therefore, the key to the third-quarter report is not only whether the revenue decline meets expectations, but also whether overseas sales can stabilize and whether products beyond Labubu can absorb demand. If overseas markets remain weak, growth in the mainland business may not be enough to fully offset overall performance pressure.

Revenue Growth Has Not Yet Recovered, Costs Are Rising First

Facing fluctuating overseas demand, POP MART is shifting from a relatively lightweight store layout to large flagship stores in core commercial districts, hoping to capture foot traffic through larger operating spaces, strengthen brand experience, and enhance member loyalty.

In the United States, the company has established locations at New York's Times Square, Fifth Avenue, and a two-story flagship store in SoHo; in Paris, it also plans to open a large flagship store adjacent to Galeries Lafayette. The flagship concept store at Nanjing Xinjiekou in China reflects the company's approach of expanding from merchandise retail toward immersive experiences.

However, the flagship store strategy also means higher fixed costs: larger operating space, longer lease terms, and upfront investment may all increase expense pressure. If foot traffic and sales do not continue to grow, new stores could instead drag down profit margins. JPMorgan noted that Pop Mart International Group Limited's overseas operating margin has already fallen 14 percentage points year-on-year to 30%. In addition, its U.S. Instagram follower count only stopped declining and rebounded in September 2026, after falling continuously since March, indicating that brand momentum had come under pressure.

Whether flagship stores can generate sustained foot traffic, member conversion, and multi-IP sales will determine whether expansion investment can translate into long-term channel advantages. If consumer enthusiasm recovers more slowly than expected, scale expansion could further amplify downward pressure on profits.

After Labubu, Who Will Support 2027 Growth?

Whether the product side can form new growth drivers will directly affect POP MART's medium-term performance. Labubu 4.0, combined with interactive features, a third-quarter launch, and World Cup collaboration and other catalysts, fell short of expectations in actual performance. JPMorgan believes that limited content resources related to the World Cup, combined with consumer aesthetic fatigue, constrained further momentum for the product.

New IPs such as Supertutu, Merodi, and KeyA delivered mediocre first-round sales, with relatively limited premiums in the secondary market. By contrast, established products such as the Twinkle Twinkle series "Crush on You" and the Labubu and Sanrio collaboration continue to contribute sales, while Zsiga recently sold out in mainland China and Hong Kong channels — one of the few standout new IP cases. However, strong sales of individual products are not yet sufficient to prove that the company has established a stable new IP incubation mechanism.

At the same time, large-scale restocking may weaken product scarcity, while expanding into the mass market also places higher demands on IP design's adaptability to broader audiences. JPMorgan expects Pop Mart International Group Limited's net profit margin may decline from approximately 35% to 26%, reflecting the dual pressure of weakening IP momentum and rising store expansion costs.

The core question for 2027 is whether POP MART can cultivate new growth pillars and stabilize profit margins while expanding channels. This will determine whether the company can shift from being driven by a single hit product to a more sustainable multi-IP growth model.