MINISO reported a sharp decline in net profit for the third quarter of 2025 despite beating revenue guidance, as aggressive global expansion and direct store investments weighed on margins.

The Chinese lifestyle retailer's net profit attributable to shareholders dropped 31% year-on-year to RMB 441 million ($61 million), even as quarterly revenue climbed 28.2% to RMB 5.8 billion, exceeding the upper end of management's guidance range.

The profit squeeze came as selling and distribution expenses surged 43.5% to RMB 1.43 billion, driven primarily by investments in directly operated stores, particularly in strategic overseas markets including the United States. General and administrative expenses rose 45.6% to RMB 344 million due to headcount expansion supporting business growth.

The results underscore the near-term profitability trade-offs inherent in MINISO's international expansion strategy, which has seen the company open 75.7% of its new stores overseas over the past 12 months. Meanwhile, the company's toy brand TOP TOY delivered standout performance with revenue more than doubling, reinforcing its position ahead of a planned Hong Kong initial public offering.

TOP TOY, which filed for a Hong Kong listing targeting approximately $300 million in proceeds, recorded revenue growth of 111.4% to RMB 575 million in the third quarter. The subsidiary will remain under MINISO's control following the spinoff.

Store Network Surpasses 8,000 Milestone

MINISO reached a total of 8,138 stores across all brands as of September 30, 2025, representing a net addition of 718 locations year-on-year. The MINISO-branded store count stood at 7,831, with 4,407 stores in mainland China and 3,424 overseas locations. The company added 645 net new MINISO stores during the period, with international markets accounting for 488 of those openings.

The company now operates 700 directly managed stores at the group level, a significant increase as it shifts from a franchise-heavy model in select markets. The expansion of direct operations has driven stronger revenue growth but also elevated the cost base. Direct store revenue surged 69.9% in the third quarter, while related expenses including rent, depreciation and wages rose 40.7%.

Overseas Markets Drive Revenue Growth

International markets continued to gain importance in MINISO's business mix, with overseas revenue accounting for 44.3% of MINISO-brand sales in the third quarter. Overseas MINISO-brand revenue grew 27.7% year-on-year, outpacing the 19.3% growth rate in mainland China.

The company has prioritized strategic markets such as the United States for direct store investments, contributing to the surge in selling and distribution costs. Promotion and advertising expenses increased 43.3%, licensing fees rose 20.8%, and logistics costs climbed 23.3% during the quarter.

TOP TOY Emerges as Growth Driver

TOP TOY, established in 2020 in Guangzhou, has rapidly expanded to 307 stores as of September 30, adding 73 net new locations year-on-year. For the first nine months of 2025, TOP TOY revenue increased 87.9% to RMB 1.32 billion.

The brand offers figurines, 3D assembly models, and vinyl plush products across two categories: self-developed items featuring proprietary and licensed intellectual property, and externally sourced products from other brands. TOP TOY has achieved foot traffic levels approaching those of Pop Mart in certain commercial districts, according to the company.

Founder, Chairman and Chief Executive Officer Ye Guofu said TOP TOY's third-quarter performance "far exceeded our previous expectations, highlighting its strong market leadership and growth potential in the toy collectibles sector."

The subsidiary's planned Hong Kong listing will allow it to raise capital independently while remaining part of the MINISO group structure, providing resources to compete in China's competitive collectible toy market.