Pop Mart’s third-quarter revenue plunges; Citi cuts earnings forecasts and target price

Why was third-quarter revenue below Citi’s expectations?

Pop Mart’s group revenue fell 45%–50% year over year in the third quarter of 2026, below Citi’s expectations, mainly because sales in China and Asia were weaker than expected; the Americas and Europe performed broadly in line with the bank’s expectations.
China revenue fell 25%–30% year over year, with offline revenue down 5%–10% and online revenue down 45%–50%, a marked gap between the channels. Revenue in Asia, the Americas and Europe fell 65%–70%, 70%–75% and 50%–55%, respectively.
The comparison base is also important context: group revenue grew 245%–250% year over year in the third quarter of 2025. Citi expects fourth-quarter revenue to improve quarter over quarter after the high-base effect passes, with the year-over-year decline narrowing due to seasonal factors.

Management expects the China business to stabilize in the fourth quarter and still achieve positive revenue growth for the full year; Citi’s base case forecasts China revenue growth of 9% year over year in 2026.
As overseas markets enter the peak holiday season, management expects fourth-quarter sales to improve quarter over quarter. Citi’s base case, however, still forecasts a 48% year-over-year decline in full-year overseas revenue, dragging group revenue down by approximately 16% for the year.
User data provides some support: the number of new users grew by double digits year over year in the third quarter and also increased quarter over quarter, while core-member retention and cross-category spending continued to improve.

Management expects the gross margin in the second half of 2026 to fall by less than 2 percentage points from the first half, mainly because overseas sales account for a smaller share and prices have been reduced in some overseas markets. Overseas store expansion will also push up the expense ratio and put pressure on the net margin.
Citi cut its 2026 revenue forecast by 9% to 31.238 billion yuan, and its net profit forecast by 17.5% to 8.361 billion yuan, down 34.6% from 2025. The larger cut to the earnings forecast than to the revenue forecast reflects the bank’s inclusion of margin pressure.
Citi cut its target price from HK$198 to HK$162 and maintained its buy rating.

The company is shifting its store focus toward quality and profitability. Newly opened flagship stores are performing well: monthly foot traffic at the China flagship store is more than twice that of the top 50 stores nationwide, new-user acquisition is several times as high, and its conversion rate is also above their average; the company is also upgrading older stores and negotiating rents.
By the end of September, group inventory had fallen significantly from its May peak. The company is reducing inventory mainly through stock transfers and new distribution channels while preparing inventory for the coming peak season; in logistics, it is controlling expenses through warehouse consolidation in Asia-Pacific, local fulfillment in the United States and multimodal transport in Europe.