Miniso (MNSO) Q1 2025: Overseas Revenue Jumps 30% as Direct Store Push Reshapes Margin Profile
Miniso’s overseas revenue surged 30% in Q1, fueled by aggressive direct-operated store expansion and supply chain localization, but margin headwinds emerged as business mix shifted and operating costs rose. Management doubled down on larger store formats, IP-driven merchandise, and U.S. market adaptation, with guidance reiterating a focus on long-term profitability and global brand scale.
Summary
- Store Model Transformation: Larger, direct-operated stores and targeted closures are reshaping Miniso’s revenue mix and cost base.
- IP and Product Innovation: Proprietary and licensed IP collections remain central to differentiated merchandise and consumer engagement.
- Global Supply Chain Shift: U.S. tariff risk and local sourcing drive a strategic pivot away from China-centric procurement.
Performance Analysis
Miniso delivered 16.5% revenue growth in its core brand, with overseas sales climbing 30% and now comprising 36% of total revenue, up from 33% a year ago. This expansion reflects the company’s deliberate push into international markets, especially the U.S., where direct-operated stores (DOS, stores run by the company rather than franchisees) are gaining share. However, this shift pressured margins: while gross margin rose to 44.2%, adjusted operating profit margin fell 4.2 percentage points as lower-margin DOS revenue diluted group profitability.
Domestically, same-store sales declines narrowed sharply, with Q1’s mid-single-digit drop a marked improvement over prior quarters. Management credited operational integration, cross-department collaboration, and a focus on larger, higher-efficiency stores. Notably, new large-format stores outperformed legacy locations, averaging 27% higher efficiency. TopToy, Miniso’s collectible toy segment, grew 59% and now derives over 40% of revenue from self-developed products, underlining the brand’s strategy of vertical integration and IP leverage.
- Direct Store Expansion: DOS revenue grew 86% and now represents 22% of group revenue, up from 14% last year, outpacing related expense growth but compressing margin.
- Expense Structure Shift: Selling and administrative expenses rose 45%, with labor, rent, and depreciation tied to DOS expansion as key drivers.
- Capital Allocation Discipline: Miniso paid out RMB 740M in dividends and repurchased RMB 260M in shares, balancing growth investment with shareholder returns.
Financial expenses increased due to convertible bond issuance, bank loans for YH investment, and lease obligations. This, combined with the changing revenue mix, explains the margin compression despite robust top-line growth.
Executive Commentary
"We have established the same-store enhancement as our core strategy. We will break down vertical management and continue to strengthen collaboration among operations, merchandise, channels, and marketing departments, building a flexible and very efficient integrated organizational framework with enhanced coordination, enabling faster and more agile decision-making and execution."
Ye Guofu, CEO
"The decline in the group's operating profit margin is primarily due to the changes in the revenue structure. The proportion of the high margin franchise and agents business has decreased, while the rapid growing direct operated business has increased, diluting the overall profit margin. Of course, we believe there is significant room to improve our profit margin of the directly operated business."
Zhang Jinting, CFO
Strategic Positioning
1. Direct-Operated Store (DOS) Focus
Miniso’s strategic pivot toward direct-operated stores is central to its international expansion and operational control. DOS now contribute 22% of total revenue, with management emphasizing their role in capturing sales opportunities in key markets like the U.S. and Mexico. While this model increases labor and rental costs, it allows Miniso to implement merchandising, branding, and customer experience initiatives more effectively than the franchise model.
2. Larger Store Formats and Channel Optimization
The company is prioritizing larger, flagship store formats, both domestically and abroad. These stores deliver higher efficiency, with new openings averaging 27% better performance than legacy units. Simultaneously, Miniso is closing smaller, underperforming stores and renovating existing locations to boost productivity and align with evolving consumer expectations.
3. IP-Driven Product Strategy
IP (Intellectual Property) collaborations and in-house IP development are at the heart of Miniso’s product differentiation. Successful launches such as the Stitch Collection and homegrown brands like Pan Pan and Dun Dun Chicken have driven both sales and brand affinity. Management is expanding exclusive licensing while investing in proprietary IP to build recurring demand and margin resilience.
4. Global Supply Chain Diversification
To mitigate U.S. tariff risk and logistical volatility, Miniso has accelerated local sourcing in the U.S., with direct procurement now accounting for 40% of local product. This pivot reduces dependency on China and supports margin stability, even as upfront inventory costs rise. The company is also leveraging tax planning and supply chain integration to offset tariff headwinds.
5. Capital Allocation and Shareholder Returns
Miniso has maintained its commitment to shareholder returns, balancing aggressive store investment with dividends and share buybacks. The company’s disciplined approach to capital allocation signals confidence in long-term cash flow and profit growth, despite near-term margin compression.
Key Considerations
This quarter underscores Miniso’s willingness to accept short-term margin pressure in exchange for long-term international scale and brand control. The operational complexity of running more DOS, especially in diverse markets, will test management’s execution on cost control and local adaptation.
Key Considerations:
- Margin Dilution from Direct Stores: Rapid DOS revenue growth is compressing group margins, but management sees room for operational leverage as scale builds.
- China Same-Store Stabilization: Domestic comps are improving, but regional disparities persist, with northern China still lagging recovery.
- Tariff and Supply Chain Risk: U.S. tariffs remain a wild card, but local sourcing and inventory build-up provide near-term insulation.
- IP and Product Innovation: Sustained investment in IP-driven products and in-house brands is vital for maintaining pricing power and differentiation.
- Store Portfolio Rationalization: Ongoing closures and renovations aim to optimize productivity, not just expand the network.
Risks
Margin compression from DOS expansion, rising labor and rental costs, and ongoing international supply chain volatility present near-term risks. U.S. tariff escalation or regulatory shifts could further impact cost structure. Execution risk is elevated as Miniso adapts its China playbook to diverse overseas markets and integrates new business lines such as YH, whose performance will be consolidated from Q2 onward.
Forward Outlook
For Q2 2025, Miniso expects:
- Continued revenue acceleration as H2 seasonality and new store productivity ramp.
- Further improvement in domestic same-store sales, with the goal of turning positive growth for the full year.
For full-year 2025, management reiterated its focus on:
- Achieving double-digit revenue growth, driven by both China and overseas markets.
- Gradual improvement in operating profit margin as DOS efficiency scales and expense ratios stabilize.
Management highlighted that “improvement in operating profit margin still depends on the profitability of our directly operated stores and also investment into the new stores.” They expect margin headwinds to moderate as the DOS model matures and cost control measures take hold.
Takeaways
Miniso’s Q1 2025 results reflect a deliberate tradeoff: accelerated international and DOS-led growth at the expense of near-term margin. The company’s strategic levers—store format innovation, IP-driven product development, and supply chain localization—are shaping a new global retail model, but require disciplined execution to deliver sustainable profitability.
- Business Mix Shift: The pivot to DOS and overseas markets is diluting group margins but building a foundation for global brand scale and operational control.
- IP and Store Innovation: Differentiated merchandise and larger, experiential stores are driving consumer engagement and higher productivity per location.
- Execution Watchpoint: Investors should monitor DOS margin improvement, U.S. supply chain adaptation, and the integration of new business lines like YH for signs of sustainable profit growth.
Conclusion
Miniso’s Q1 marks an inflection point in its global expansion strategy, with direct-operated stores and international markets now central to growth. While this transition is weighing on margins, management’s focus on operational excellence, product innovation, and capital discipline positions the company for long-term value creation—provided execution risks are managed as the business scales.
Industry Read-Through
Miniso’s experience highlights the complexities of globalizing a value retail model, especially as direct control replaces franchising and supply chains diversify beyond China. The margin tradeoffs and operational challenges faced by Miniso are likely to be mirrored by other retailers expanding internationally, particularly those reliant on low-cost sourcing or seeking to scale proprietary brands. The focus on IP-driven merchandise and experiential retail formats signals where consumer-facing brands must invest to maintain relevance and pricing power in competitive markets. U.S. tariff and supply chain volatility remain sector-wide risks, reinforcing the need for local adaptation and resilient logistics strategies.