Digital Shift And Rising Costs Will Hinder Offline Retail

Key Takeaways

• Rising online shopping and digital habits threaten long-term revenue growth and in-store traffic for MINISO's chiefly offline retail model.
  
• Expanding internationally amid supply chain, cost, and brand challenges risks earnings volatility, pressure on margins, and weakened market differentiation.
  
• Global revenue gains, strategic IP partnerships, and supply chain diversification position the company for resilient profitability and growth, while operational agility supports expanding margins and cash flow.

Catalysts

An investment holding company, engages in the retail and wholesale of lifestyle products and pop toy products in China, rest of Asia, the Americas, Europe, Indonesia, and internationally.

• The continued acceleration of global e-commerce and digital penetration threatens MINISO's offline retail model, placing long-term pressure on foot traffic and same-store sales growth and risking a structural decline in revenue as more consumers shift to online channels over time.
  
• Persistent global supply chain disruptions, emerging protectionist trade measures, and inflation in logistics and labor costs are likely to result in sustained upward pressure on input and operating costs, which will eventually compress gross and net margins and reduce earnings consistency.
  
• MINISO's aggressive international expansion-particularly through directly operated stores in markets where brand recognition remains mixed-raises the risk of operational inefficiencies, higher SG&A, and declining store productivity, which may drive earnings volatility and potential impairment charges in underperforming regions.
  
• The core product strategy relying on fast-fashion-inspired, low-cost goods increases vulnerability as consumer sentiment shifts toward sustainable and ethically sourced products, which could erode brand perception and diminish future revenue from key demographics most attuned to these issues.
  
• The surge in urban retail saturation and proliferation of copycat competitors in developing markets threatens MINISO's ability to differentiate, likely leading to weakened pricing power, compressed net margins, and gradual deceleration of top-line growth in an increasingly commoditized retail landscape.

MINISO Group Holding Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on MINISO Group Holding compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming MINISO Group Holding's revenue will grow by 17.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 13.9% today to 13.7% in 3 years time.
• The bearish analysts expect earnings to reach CN¥3.9 billion (and earnings per share of CN¥11.86) by about August 2028, up from CN¥2.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.1x on those 2028 earnings, down from 18.0x today. This future PE is lower than the current PE for the US Multiline Retail industry at 18.0x.
• Analysts expect the number of shares outstanding to decline by 1.47% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.56%, as per the Simply Wall St company report.

MINISO Group Holding Future Earnings Per Share Growth

Risks

• The company is demonstrating robust global revenue growth, with overall revenue up 19% year-over-year and overseas revenue surging by 30%, indicating that strong international expansion and rising brand recognition can drive sustainable increases in sales and ultimately support revenue growth.
  
• Persistent improvements in same-store sales, especially the narrowing of declines and the recent shift toward positive trends in China, highlight operational agility and suggest that both core business resilience and store upgrades can help defend or grow net margins and earnings over the long term.
  
• MINISO's strategic pivot to large-format, IP-led flagship stores and heavy investment in high-profile IP collaborations has enhanced customer traffic and elevated average store efficiency, which can fuel higher sales per location and improve the company's overall profitability.
  
• Supply chain diversification, including greater local sourcing in the U.S. and proactive inventory management in response to potential tariffs, reduces geopolitical and cost risks, supporting more stable gross margins and protecting long-term earnings potential.
  
• The capability to balance network optimization-closing underperforming stores while opening larger, higher-earning outlets-and demonstrated margin improvement in direct-operated overseas stores lays a foundation for operating leverage, which may translate to expanding net income and healthier cash flow over time.

Valuation

• The assumed bearish price target for MINISO Group Holding is $17.31, which represents two standard deviations below the consensus price target of $22.61. This valuation is based on what can be assumed as the expectations of MINISO Group Holding's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $26.6, and the most bearish reporting a price target of just $16.5.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be CN¥28.7 billion, earnings will come to CN¥3.9 billion, and it would be trading on a PE ratio of 12.1x, assuming you use a discount rate of 9.6%.
• Given the current share price of $20.14, the bearish analyst price target of $17.31 is 16.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.