Pop Mart Falls 3% After Warning on 5% Rise in Costs

Pop Mart International Group (09992.HK) shares fell 3.38 percent after management projected a 0.5 percentage point decline in gross margin, citing rising raw material costs.

"Affected by the international macro environment, prices of raw materials such as PVC, fabrics and packaging have risen to varying degrees," management stated during the company's first-quarter business update conference call.

Raw material costs are expected to increase by 3 to 5 percentage points compared with the prior year, the company said. The stock closed at HKD157.4, reversing from a session high of HKD171, with turnover of HKD3.054 billion. Short selling accounted for 43.8 percent of the turnover.

The margin warning amplifies investor concerns about the sustainability of Pop Mart's growth, which has been heavily reliant on its popular Labubu character series amid signs the collectible toy craze is cooling. The stock has retreated about 50 percent from its August 2025 peak, reflecting anxiety over the durability of its top IP.

This concern is heightened by the fact that Labubu's "The Monsters" IP family grew to contribute 38 percent of total revenue in 2025, up from 23 percent in 2024, according to company filings. The recent cost pressures prompted UBS to trim its earnings forecast for Pop Mart, though it maintained a HKD237.5 price target. Other analysts are divided, with HSBC lowering its 2026 growth forecast to under 24 percent while Citi Research maintains a "Buy" rating with a HKD415 target.

Pop Mart has been actively working to diversify its portfolio beyond its flagship character. Sales from its Skullpanda IP more than doubled to HK$3.54 billion in 2025, while the Crybaby and Dimoo lines also saw significant growth. The company is also expanding its global footprint and moving into entertainment with a planned Labubu movie in partnership with Sony Pictures.

The cost pressures add a new headwind to a stock already down significantly from its 2025 peak. Investors will now watch the August interim results for proof that IP diversification can offset slowing growth from its main brand.

This article is for informational purposes only and does not constitute investment advice.