MINISO Group Holding's 2024 Earnings: A Missed Opportunity

MINISO Group Holding Limited (NYSE: MNSO; HKEX: 9896) recently announced its unaudited financial results for the full year ended December 31, 2024. While the company reported impressive revenue growth and a record-high gross margin, the earnings fell short of expectations. Let's dive into the details and understand what went wrong.

Revenue Growth and Gross Margin

MINISO Group achieved a 22.8% year-over-year increase in revenue, reaching RMB16,994.0 million (US$2,328.2 million). The gross profit also saw a significant increase of 34.0% year over year, reaching RMB7,637.1 million (US$1,046.3 million). The gross margin hit a record high of 44.9%, up from 41.2% in 2023. This improvement was driven by effective IP strategy and revenue structure adjustments.

Operational Challenges

Despite the impressive revenue growth and gross margin, MINISO Group faced several operational challenges that contributed to the earnings miss. One of the key issues was the slight pressure on same-store sales, which experienced a low-single digit decline compared to the previous year. This decline indicates a challenge in maintaining sales growth within existing stores, which is crucial for overall revenue performance.

Additionally, general sales and administrative expenses increased by 52%, with sales expenses growing by 59% and administrative expenses by 29%. This significant increase in expenses likely impacted the company's profitability, as higher costs can erode margins and reduce net income.

Global Expansion Strategy

MINISO Group's global expansion strategy, particularly in the US market, has significantly impacted its overall financial performance and profitability in 2024. The company's overseas revenue grew by 42%, with the US market delivering triple-digit compound growth from 2021 to 2024. This growth contributed to a 23% overall revenue increase, reaching approximately CNY17 billion. The company achieved a 3.7 percentage point improvement in gross profit margin, reaching 44.9%, driven by effective IP strategy and revenue structure adjustments. MINISO's adjusted operating profit increased by 17% in 2024, maintaining a healthy profitability level with an adjusted net profit margin of 16%.

The company's global expansion strategy has also led to a net increase of 1,219 stores in 2024, with a significant portion of these new stores being in overseas markets. The number of MINISO stores in overseas markets achieved a 3,000-store milestone, reaching 3,118 as of December 31, 2024, with an opening of 631 net new stores in the Full Year. This expansion has helped the company to achieve a record high revenue of around RMB17.0 billion in the Full Year.

Financial Performance

For the full year, sales were CNY 16,994.03 million compared to CNY 13,838.8 million a year ago. Net income was CNY 2,617.56 million compared to CNY 2,253.24 million a year ago. Basic earnings per share from continuing operations were CNY 8.44 compared to CNY 7.24 a year ago. Diluted earnings per share from continuing operations were CNY 8.4 compared to CNY 7.2 a year ago.



Conclusion

In conclusion, MINISO Group Holding's 2024 earnings missed expectations due to operational challenges such as the decline in same-store sales and the significant increase in general sales and administrative expenses. However, the company's global expansion strategy, particularly in the US market, has significantly impacted its overall financial performance and profitability. Despite the earnings miss, MINISO Group's impressive revenue growth and record-high gross margin indicate a strong foundation for future growth. Investors should keep an eye on the company's operational efficiency and cost management as it continues to expand globally.