What insights can be drawn from Pop Mart's quarterly results?
Trendy toy brand $POP MART(09992.HK) has released its latest business update for Q1 2024, primarily focusing on revenue growth data. What does this imply for its performance? Caihua News breaks it down for you.
Overall, POP MART's Q1 2024 revenue increased by 40%-45% year-over-year (YoY), with domestic revenue growing by 20%-25% YoY, while revenue from Hong Kong, Macau, Taiwan, and overseas markets surged by 245%-250% YoY. Clearly, the high overall revenue growth was primarily driven by the expansion in these regions.
POP MART began disclosing operational data for Hong Kong, Macau, Taiwan, and overseas markets in its 2022 annual report. Judging by the growth in store numbers and revenue scale, this market is expanding far faster than its domestic business.
As shown in the chart below, domestic operations remain POP MART's primary revenue source, but the share from Hong Kong, Macau, Taiwan, and overseas markets is rising—from 4.09% of total revenue in 2021 to 16.92% in 2023.
In 2023, revenue from Hong Kong, Macau, Taiwan, and overseas markets grew by 134.86%. According to POP MART's Q1 2024 operational guidance, revenue from these regions soared by 245%-250%, far exceeding the full-year growth in 2023. This indicates POP MART's aggressive push into overseas markets, and it’s foreseeable that the revenue share from these regions will climb further.
Breaking down the Hong Kong, Macau, Taiwan, and overseas business by channel, offline channels saw the most significant growth, as shown below.
Caihua News notes that the gross margins for both offline and online channels in the Hong Kong, Macau, Taiwan, and overseas segments are higher than those in domestic markets, likely due to premium pricing. For example, in 2023, the gross margins for offline and online channels in these regions were 74.4% and 73.5%, respectively, significantly higher than the 63.0% and 60.5% for domestic offline and online channels. Consequently, as offline and online channels in overseas markets grow robustly (with higher growth rates than lower-margin wholesale and other channels), the overall gross margin for this market improved notably, rising by 10.4 percentage points YoY to 64.9% in 2023.
It’s foreseeable that the sustained strong growth in Hong Kong, Macau, Taiwan, and overseas markets will further enhance POP MART's overall profitability.
POP MART did not provide segmented channel data for its Hong Kong, Macau, Taiwan, and overseas business in Q1 2024 but did share growth figures for domestic channels.
Compared with Q1 2023, POP MART's domestic channel growth improved across the board in Q1 2024. Retail store revenue grew by 20%-25%, up from 5%-10% in Q1 2023, while robot store revenue maintained a 15%-20% YoY increase.
However, online platforms showed mixed trends: POP MART's blind box vending machine revenue grew by 0%-5% YoY, compared to a 40%-45% decline in the same period last year, likely due to a low base effect. E-commerce and other online platforms grew by 20%-25% YoY in Q1 2024, rebounding from a 5%-10% decline in the prior-year period. Notably, Douyin (TikTok) emerged as a major growth driver for POP MART.
Caihua News observed that before the 2023 annual report, POP MART's key domestic online channels included Tmall and JD flagship stores. However, starting in 2023, JD was grouped under "other online channels," while Douyin was listed separately. Douyin's sales surged by 431.24% YoY to RMB 283 million in 2023, increasing its share of domestic online revenue from 2.91% in 2022 to 16.56%—nearly matching Tmall's contribution of RMB 322 million.
In Q1 2024, POP MART's Douyin flagship store grew by 95%-100% YoY, far outpacing Tmall's 0%-5% growth. It’s likely that Douyin will soon surpass Tmall to become the second-largest online platform after POP MART's blind box vending machine.
Summary
No matter how much criticism the "blind box" economy faces, it hasn’t hindered POP MART's robust growth.
In 2023, POP MART shifted its domestic retail store expansion from tier-1 cities to tier-2 and other cities while optimizing single-store operations in tier-1 cities. This strategy boosted domestic offline revenue by increasing per-store sales in tier-1 cities and tapping into lower-tier markets. Online, POP MART adeptly leveraged new marketing trends, with Douyin rapidly rising to replace JD and Tmall as its primary growth driver.
Looking ahead, POP MART may focus more on Hong Kong, Macau, Taiwan, and overseas markets. Since 2022, these regions have seen explosive growth, led by offline expansion, while online channels—primarily via platforms like Shopee, Shopify, and its official website—remain less significant. Given the higher gross margins in overseas online channels, POP MART's overall profitability is expected to improve further as these markets contribute more to revenue.
Author: Mao Ting
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