Pop Mart’s third-quarter sales turn negative: fourth-quarter recovery expected, but margins remain under pressure
Pop Mart’s third-quarter revenue fell 45%–50% year on year, below Goldman Sachs’ and market expectations. Goldman expects sales to improve sequentially in the fourth quarter, but overseas price adjustments, changes in the revenue mix and new-store costs will weigh on profitability in the second half.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
The seasonal sales peak and improved product supply could drive a sequential recovery for Pop Mart in the fourth quarter, but declining overseas sales and store expansion costs are pressuring a recovery in profitability. Goldman Sachs has therefore lowered its earnings forecasts and target price.
Where did third-quarter sales fall short of expectations?
Pop Mart’s total revenue fell 45%–50% year on year in the third quarter of 2026, below Goldman Sachs’ previous forecast and market consensus; revenue had still grown 24% year on year in the first half.
Sales in China fell 25%–30% year on year, with offline sales down 5%–10% and online sales down 45%–50%. The online decline also exceeded the roughly 30% decline indicated by Goldman Sachs’ tracking of third-party platforms; weaker performance in other online channels may be one reason.
The overseas decline was steeper: sales in Asia-Pacific, the Americas, and Europe and other regions fell 65%–70%, 70%–75% and 50%–55% year on year, respectively. The Americas performed worse than the data tracked by Goldman Sachs indicated.
What will drive the fourth-quarter recovery, and how broad will the improvement be?
Management expects China sales to be flat to better sequentially in the fourth quarter and each overseas market to grow sequentially, citing the traditional peak sales season and improved product supply. Goldman Sachs also expects overall sales to improve sequentially.
Management still expects positive full-year revenue growth in mainland China. New customers on the mainland grew by double digits year on year in the third quarter, repeat-purchase metrics were broadly flat, and the retention rate improved year on year, supporting its assessment of subsequent demand.
Overseas sales have stabilized since the third quarter, improving gradually from July to October; however, after a strong start to October in Europe, recent trends have become volatile again.
Why might a sales recovery not bring an accompanying improvement in margins?
Management expects the group’s gross margin in the second half of 2026 to be lower than in the first half: higher-margin overseas operations account for a smaller share of revenue, while the company has adjusted prices for some overseas products to improve competitiveness.
The expense ratio is also expected to be higher in the second half than in the first. New stores in key overseas markets have increased fixed costs, while weaker sales make it harder for revenue to absorb those costs; the number of US stores exceeded 100 in the third quarter.
Inventory pressure has eased: group inventory peaked in May, began to decline in August, and fell more noticeably by the end of September. The company does not plan large-scale clearance promotions, opting instead for targeted promotions.
How has Goldman Sachs adjusted its earnings and valuation assessment?
Following weaker-than-expected third-quarter sales and margin pressure, Goldman Sachs cut its net profit forecasts for 2026–2028 by 18%–22%. Its forecast for 2026 was lowered from approximately RMB 10.46 billion to approximately RMB 8.5 billion.
Goldman Sachs maintained its neutral rating and lowered its 12-month target price from HK$139.5 to HK$119. With reduced visibility on a recovery in earnings growth, it lowered the forecast 2027 price-to-earnings multiple used for the target price from 15 times to 14 times.
The company has yet to use the six-month RMB 2 billion–5 billion share buyback program announced in late August. Goldman Sachs believes potential buybacks could provide some support to the share price.
