9896.HK MNSO.US
Miniso opens on Champs-Elysees

The seller of cheap lifestyle goods opened a massive store in Paris last month, the latest step in its ambition to win over bargain hunters worldwide

Key Takeaways:

  • Miniso accelerated its new store openings abroad in the first quarter to offset sluggish sales in its home China market
  • About a third of the retailer’s revenue comes from stores outside China, as it moves to lower its reliance on shaky domestic demand

  

By Xia Fei

As the listing fate of Chinese fast fashion sensation Shein meets resistance on stock markets in New York and London, another Chinese retail brand is finding the going far smoother in those and other global destinations with its blistering worldwide expansion and record profits.

Already occupying iconic locations such as Times Square in New York and on Oxford Street in London, Miniso Group Holding Ltd. (MNSO.US; 9896.HK), a lifestyle-goods retailer that sells budget products from cosmetics to kitchenware, is showing no sign of curbing its ambition to reach more corners of the world.

The retailer opened a mega-store on Paris’s tourist-crammed Champs-Elysees late last month, in one of its showiest displays so far on its journey abroad. Spanning two floors and colored bright pink, the shop – its largest in Europe – reported 580,000 yuan ($79,764) in sales on the first day, marking a new record for single-day performance among its overseas outlets, according to the company.

The Paris opening is just the latest step in Miniso’s ambition to add 900 to 1,100 new stores this year, half of those outside China. The retailer, founded by Chinese billionaire Ye Guofu in 2013, had over 6,600 stores as of March, including nearly 2,600 outside China.

It’s not just its store count that’s soaring. The company’s revenue rose 26% in the first quarter from a year earlier to a new high of 3.72 billion yuan, while its net profit climbed 24% to 586 million yuan. Miniso’s gross profit margin also hit a fresh high of 43.4% for the quarter, up 4.1 percentage points from a year earlier. The strong growth contrasts with Miniso’s domestic peers, many reporting weakening consumer sentiment as China’s economy slows after years of rapid growth.

Miniso’s overseas success is a relative rarity among globally minded Chinese retailers in today’s stormy geopolitical environment. High-profile Chinese firms such as Shein, Temu and BYD are all facing escalating scrutiny in the U.S. and Europe over allegations of everything from using illegal labor to selling their products at subsidized prices.

Miniso’s strategy stands out among a pack of low-budget Chinese retailers. While Shein and Temu are locked in a battle for top dog at the ultra-low end of the U.S. e-commerce market, Miniso is focusing on the traditional retailing and the shopping experience. With its brightly lit brick-and-mortar stores with many Japanese elements, the company is aiming to build itself into a multinational brand in some of the world’s largest consumer markets.

To some extent, Miniso’s speedy growth shows its attempt to transform from a mere “penny store” into a more worldly retailer is paying dividends. It has partnered with nearly 100 major intellectual property (IP) owners worldwide, including Disney, Snoopy, Barbie and Pokemon to make more upscale-branded goods from water bottles to plush animals. The transition is helping the company lure in a younger generation who aren’t afraid to pay big premiums for collectibles they find more emotionally satisfying than ordinary daily-use goods.

Leveraging branded IP

As of March, more than a quarter of Miniso’s total sales came from products using branded IP, with the proportion even higher overseas at 40%. Estimates by Frost & Sullivan project China’s branded variety retail market will grow 14.2% annually from 2022 to 2026, providing a boon for Miniso, which was already the largest player with a market share of 11%. 

Selling more foreign IP-branded products may also make consumers less likely to think of Miniso as a typical Chinese brand, which are less known for their quality and innovation. In fact, Miniso has been criticized in the past for its logo and store design that resemble a mix of Japanese brands Muji and Uniqlo. That imitation also got the company in trouble two years ago when Chinese nationalists accused it of trying to hide its Chinese roots by looking Japanese.

Miniso unveiled a new logo last October in response to some of the criticism, though it was mocked for making largely indistinguishable changes.

Consumer perceptions about its identity aside, the company’s strong global push seizes on another advantage common among Chinese retailers: efficient supply chains. The company announced in 2022 that it had built “preliminary capabilities” that would allow it to carry out its own version of fast-moving retailing in major overseas markets by churning out about 100 new products every seven days from its catalog of 10,000 product ideas.

Miniso’s focus on cheaper goods may also help it endure in the West if consumers, like their Chinese peers, experience a consumption downgrade due to recessionary pressures as central banks maintain high interest rates to battle inflation.

Overseas markets are increasingly pivotal for Miniso’s financial performance. North America and Europe were its fastest-growing markets in the first quarter measured by gross merchandise value, expanding 110% and 80% year-on-year, respectively. Some 36% of revenue came from outside of China at the end of last year, compared to just 20% in 2021.

Nearly a third of the company’s first-quarter revenue this year came from overseas markets, up 53% from a year earlier and far exceeding the 16% growth rate at home. In an interview with Bloomberg, Ye said Miniso wants 70% of its business to come from abroad by 2028.

The company’s profitability is higher abroad too. The average selling price (ASP) of Miniso’s products in China is 35 yuan per item, while selling prices in the U.S. are generally three times higher, according to a local media report.

However, the company isn’t immune from potential geopolitical headwinds, particularly with the proposition of further tariffs on Chinese imports if Donald Trump is re-elected as U.S. president this fall. North America is one of the company’s fastest-growing regions with 191 stores at the end of March, up 62% from the 118 a year earlier. 

Despite its overseas progress, Miniso’s shares have tumbled nearly 27% since mid-May, and are down 23% from their listing price of $24.40 in New York in late 2020. Investors may be disappointed in part after the company’s reported earnings of 27 cents per share for the March quarter trailed the 33 cents forecast by analysts polled by Yahoo Finance.

The company looks undervalued based on its price-to-earnings (P/E) ratio of 19. That’s below the 22 for both Ryohin Keikaku (7453.T), operator of the Muji brand, and BJ’s Wholesale Club (BJ.US). But it’s on par with the 18 for U.S. discount retailer Dollar General (DG.US), suggesting investors still see Miniso as a discount retailing play.

Analysts remain upbeat about the stock nonetheless. Among the 12 polled by Yahoo Finance, four had “strong buy” ratings on the company in June while the rest rate it a “buy.”

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