Pop Mart revenue falls as much as 50% as the Labubu craze fades

What happened

The Financial Times (FT) reported that sales at Pop Mart sank by up to half in the latest quarter as enthusiasm for Labubu cooled. The Hong Kong-listed toymaker's own business update, published Tuesday, put the drop in third-quarter revenue at 45% to 50% year on year, based on unaudited figures. Every region shrank. The Americas were down 70% to 75%, Asia-Pacific 65% to 70%, Europe and other markets 50% to 55%, and mainland China 25% to 30%. Inside China, online sales fell 45% to 50%, while sales in physical stores slipped only 5% to 10%. The stock stood at about HK$132.50 on October 27, Chaincatcher reported.

What it means

Part of the fall is simple math. A year ago Pop Mart was riding a global Labubu frenzy, and Bloomberg noted that revenue in the same quarter of 2025 had grown by around 250%. Comparing against such a high base, known as a tough comparison, was always going to look ugly. The surprise is the size of the drop. JPMorgan, in a note dated October 21, had expected revenue to shrink by about 37%, according to Tiger Brokers' preview. The reported range is clearly worse than that.

The split between regions tells the real story. When Pop Mart reported its first-half results in August, revenue in Greater China was still up 47.3%, while overseas sales had started to fall. Now the overseas business is shrinking much faster, and even China has turned negative. Within China, online sales fell far more steeply than sales in physical stores, which held up comparatively well.

Margins are the next worry. On its earnings call, management said gross margin in the second half should come in below the first half, though by no more than two percentage points, Chaincatcher reported. Gross margin is the share of revenue left after the cost of making the products. The company pointed to a smaller share of sales coming from higher-priced overseas markets and to price cuts on some products abroad. It is also opening many large stores in key overseas cities, which pushes up rent, staff and fit-out costs, so overall expenses are set to rise as a share of sales.

Pop Mart is trying to show it is more than one character. In the first half, The Monsters family, which includes Labubu, brought in 26% of revenue, down from 34.7% a year earlier, while Twinkle Twinkle grew 580.6% to 2.65 billion yuan, the company said. Bloomberg noted that Pop Mart has called 2026 a year of adjustment, but HSBC trimmed its revenue forecasts for 2027 and 2028 by 8% and 9% before the update, a sign some analysts expect the slowdown to last.

The bull case

Pop Mart still has several brands that each earned more than 1 billion yuan in the first half, and store sales in China held up far better than online demand. Its chief operating officer, Si De, said the Chinese market looks steady for the full year and is expected to grow. The company also plans to buy back between 2 billion and 5 billion yuan of its own shares, which can support the stock while the business resets.

The bear case

The decline was steeper than analysts such as JPMorgan had expected, and it now reaches every region, including China. Margins are set to narrow as overseas sales shrink and big new flagship stores add fixed costs. New characters have yet to prove they can fill the gap left by Labubu, and HSBC's forecast cuts suggest the slump could stretch into 2027, which may weigh on the shares for longer.