Pop Mart: Large-store expansion is ahead of expectations. Can new IPs support profits in 2027?

When will revenue pressure be greatest, and how much will the fourth quarter improve?

J.P. Morgan expects Pop Mart’s third-quarter revenue in 2026 to fall approximately 37% year on year, with the decline narrowing to approximately 23% in the fourth quarter. The fourth-quarter improvement means a smaller year-on-year decline; the second half as a whole remains under pressure from the high base created by the previous year’s “Labubu craze.”
Domestic and overseas performance diverged markedly: in the first half of 2026, China revenue rose 47% year on year, while overseas revenue fell 11%; the bank estimates that overseas revenue fell 44% year on year in the second quarter. Domestic resilience is therefore not yet sufficient to offset the overseas slowdown, and the overseas business remains key to a near-term recovery.

Since the third quarter, store openings and upgrades have progressed slightly faster than J.P. Morgan expected. The overseas strategy is shifting from prioritizing small stores to large flagship stores in prime locations: demand fluctuations in 2025–2026 exposed stores’ limited capacity to handle peak customer traffic and retain members, and expansion is intended to address that shortcoming.
In New York, Pop Mart has established locations in Times Square and on Fifth Avenue, as well as a 430-square-meter duplex store in SoHo. In Paris, it plans to open a flagship store of 1,400–1,500 square meters. Larger spaces improve the experience but also bring higher rents, longer leases and greater upfront costs; if product popularity fails to keep pace, cost pressure will extend into 2027.

Labubu 4.0 had favorable conditions including interactive design, a third-quarter launch and a World Cup tie-in, but its performance still fell short of J.P. Morgan’s expectations, partly because of limited World Cup content and aesthetic fatigue. New IPs such as Supertutu, Merodi and KeyA had modest initial sales and limited premiums in the secondary market; third-quarter sales were still mainly supported by established IPs.
Restocking has weakened scarcity and the momentum for new IPs to ramp up sales on the strength of their popularity; KeyA’s mechanical style met resistance from some consumers, showing that design acceptance is harder to gauge when targeting a broader audience. As distribution capacity expands, consistently providing popular products has become a more pressing requirement.
Established IPs still have bright spots: Zsiga’s mini articulated figure, launched in September, sold out across channels in mainland China and Hong Kong. The bank therefore advocates concentrating resources on refreshing leading IPs and broadening the overseas audience through collaborations with local artists, cultural styles and the discovery of local IPs.

J.P. Morgan still expects revenue to rise 9.9% year on year to 36.686 billion yuan in 2027, but has lowered its revenue forecast by 2.1% and its adjusted net profit forecast by 11.9% to 10.413 billion yuan. The much larger cut to profit than to revenue reflects its concerns about costs and margins.
In its model, selling and administrative expenses rise from 31.7% of revenue in 2026 to 32.6% in 2027, while gross margin falls from 69.8% to 69.3%; operating margin edges up from 37.0% to 37.7%. This means the bank expects some recovery in profitability, but still sees a substantial gap from the 45.5% operating margin in 2025.
The bank maintains its “Underweight” rating and cuts its target price for June 2027 from HK$120 to HK$110, while retaining a 2027 forward price-to-earnings multiple of 12 times. The target-price cut corresponds to lower earnings expectations; a successful launch of a new blockbuster IP or a faster overseas recovery could improve its assessment.