Is MINISO Group (MNSO) a Buy for Long-Term Investors Amid Aggressive Buybacks and Mixed Earnings?

MINISO Group (MNSO) has emerged as a compelling case study in the retail sector, balancing aggressive shareholder returns with ambitious growth initiatives. For long-term investors, the question is whether the company’s capital allocation strategy—marked by substantial buybacks and dividends—can coexist with sustainable revenue expansion and margin improvement.

Capital Allocation: A Shareholder-Friendly Approach

MINISO’s buyback program has been one of its most notable strategies in 2025. In the first half of the year alone, the company returned RMB 1.07 billion to shareholders through buybacks and dividends, representing 84% of adjusted net profit [1]. This aggressive repurchase activity, coupled with an interim dividend of RMB 640 million (50% of H1 adjusted net profit), underscores a clear commitment to rewarding shareholders. The board has authorized buybacks of up to 10% of total outstanding shares, with all repurchased shares set for cancellation, signaling a focus on reducing share count and boosting per-share value [1].

By Q3 2025, the company had already spent $12 million on buybacks, with $304 million remaining under its authorization [2]. This disciplined approach aligns with broader trends in retail, where companies increasingly prioritize capital returns to offset stagnant earnings growth. However, the sustainability of such a strategy hinges on the company’s ability to generate consistent cash flow.

Earnings Performance: Strong Revenue, Weak Margins

While MINISO’s revenue growth has been robust, its profitability has shown signs of strain. In Q2 2025, total revenue surged 23.1% year-over-year to RMB 4.97 billion, driven by a 20% increase in MINISO brand revenue and an 87% surge in TOP TOY brand sales [1]. Overseas revenue, a critical growth driver, rose 28.6% to RMB 1.94 billion, with North America and Europe posting mid-single-digit same-store sales growth.

Despite these gains, net income attributable to shareholders fell 16.7% year-on-year to $489.7 million, a decline attributed to higher tariffs and operational costs [1]. Adjusted operating profit for Q2 stood at RMB 850 million, with a margin of 17.2%, below the company’s long-term target of ~20% [2]. This highlights a key risk: while revenue expansion is impressive, margin compression could limit the funds available for buybacks and dividends in the future.

Growth Initiatives: Balancing Expansion and Efficiency

MINISO’s capital allocation strategy extends beyond buybacks. The company has invested heavily in store expansion, adding 30 MINISO stores in mainland China and 94 overseas in Q2 2025, with a focus on large-format MINISO LAND locations [1]. These stores, which account for 5% of China’s store count, have outperformed average sales efficiency metrics, suggesting a successful diversification strategy.

Equally important is the company’s proprietary IP strategy, which includes nine artist IP contracts and a goal to generate RMB 100 million in sales from one IP (Yu Yu Chan) within a year [1]. This shift toward high-margin, IP-driven products could enhance profitability, though it remains unproven at scale.

Financial Leverage: A Double-Edged Sword

MINISO’s debt-to-equity ratio of 0.95 as of June 2025 indicates significant financial leverage, though its interest coverage ratio of 107.5x suggests strong capacity to service debt [1]. The company’s liquidity is further bolstered by a current ratio of 4.95 and cash reserves of RMB 7.47 billion as of H1 2025 [3]. These metrics imply that while leverage is present, it is not yet a critical risk.

However, the sustainability of buybacks depends on maintaining this liquidity. Analysts project revenue growth of 19.4% annually through 2028 and improved operating margins to 15.6% by 2028 [3]. If these forecasts materialize, MINISO could balance growth and shareholder returns effectively. Conversely, a slowdown in revenue or margin deterioration could force the company to scale back buybacks.

Conclusion: A Buy for the Long-Term?

For long-term investors, MINISO Group presents a nuanced opportunity. The company’s aggressive buybacks and dividends are attractive, particularly given its strong cash reserves and disciplined capital allocation. Its expansion into high-margin IP-driven products and large-format stores also offers growth potential.

However, the risks are non-trivial. The decline in net income and operating margins, coupled with rising debt levels, necessitate close monitoring. Investors must weigh the short-term allure of buybacks against the long-term viability of MINISO’s growth strategies.

If the company can execute its IP and store expansion plans while stabilizing margins, MNSO could deliver robust returns. For now, it remains a speculative buy, best suited for investors with a high tolerance for volatility and a belief in the power of strategic reinvention in the retail sector.

Source:
[1] MINISO (MNSO) Q2 2025 Earnings Call Transcript [https://www.fool.com/earnings/call-transcripts/2025/08/21/miniso-mnso-q2-2025-earnings-call-transcript/]
[2] MINISO Group Q2 Revenue Jumps 23 Percent [https://www.nasdaq.com/articles/miniso-group-q2-revenue-jumps-23-percent]
[3] Global Retail Expansion And Premium IP Will Unlock Opportunity [https://simplywall.st/community/narratives/us/retail/nyse-mnso/miniso-group-holding/74srslnr-global-retail-expansion-and-premium-ip-will-unlock-opportunity-unp3]