By Sherry Qin

Pop Mart posted blockbuster earnings off the global Labubu craze, but that didn't stop investors from dumping its stock, with some booking profit as they wonder if the Chinese toy maker's success is just a fad.

The Beijing-based company captured the hearts--and wallets--of global consumers with its ugly-cute Labubu dolls, part of a range of collectibles sold in "blind boxes" that conceal the contents from buyers, making each purchase a surprise.

Many had doubts on the logic of Pop Mart's share price catapulting above that of heavyweights like Alibaba's on the back of a trend. But the company's profit quadrupled last year. Revenue nearly tripled.

In a year marked by weak consumption in Pop Mart's home market of China and tariff turmoil across the world, the toy company posted net profit of 12.78 billion yuan, equivalent to US$1.85 billion. It made 37.12 billion yuan in revenue.

The question now is if it can keep churning out hits.

Pop Mart relies heavily on the Monsters collection, which includes Labubus and contributed 38% of total revenue last year.

Fading Labubu mania underlines why the company is making efforts to branch out.

The once-impossible-to-get doll is now easily available, no longer selling for double the retail price on secondary markets.

As the initial hype wanes, the bar for customer repurchases is rising, Deutsche Bank analyst Sammi Xu said in a note.

So far, Pop Mart has managed to keep fans' attention with new rollouts like Mini Labubus and other characters, such as Skullpanda and Twinkle Twinkle.

But skeptical investors want evidence that Pop Mart is monetizing its intellectual property in a Disney-esque way, creating a reliable pipeline of profits from a diversified IP portfolio.

They were also disappointed by the dividend pullback, Morningstar analyst Jeff Zhang said.

The toy maker's shares ended 22.5% lower at HK$168.30 on Wednesday after the results, which showed that its dividend payout ratio dropped to 25% in 2025 from 35% in 2024.

The stock slump wiped out year-to-date gains, putting it at more palatable levels after it rallied 109% in 2025 and a staggering 343% in 2024.

Pop Mart has stressed that it is on the hunt for its next blockbuster product.

It has had some success with the "Crush on You" plush collection under the Twinkle Twinkle line and the Pucky "Tap Tap Babies" series in January.

It has also doubled down on its theme park, expanding the scope of proceeds originally planned for strategic investments to include the park and showcase events.

There are new plans for Labubu too: Pop Mart is teaming up with Sony Pictures to bring the doll to the big screen, and Chief Operating Officer Si De said during an earnings call that Labubu 4.0 will hit store shelves in the second half.

Management announced a foray into home appliances as well, with plans to launch its first products next month.

Analysts may also take some comfort from Pop Mart's capital-spending plans.

The company said it will redirect the remaining proceeds from its Hong Kong offering to expand overseas rather than acquire more intellectual property.

Morningstar's Zhang said the move makes sense as it will fund "more urgent needs," noting that the proceeds had been sitting unused since the offering a few years ago.

Pop Mart's performance overseas was a highlight of its 2025 earnings report. Revenue from abroad increased almost fourfold, accounting for 44% of total revenue.

This year, the company's CEO said it aims for overall revenue to rise 20% as its business growth normalizes.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

March 25, 2026 04:36 ET (08:36 GMT)

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