JIANG Yiman

Pop Mart shares fell on Wednesday after executives acknowledged slowing overseas momentum, despite reporting first-quarter revenue growth of up to 80%.

Speaking during an earnings call on May 13, chief operating officer SI De said last year's international surge was driven largely by the viral success of Labubu from the company's THE MONSTERS franchise.

But many overseas customers remained unfamiliar with Pop Mart's broader IP portfolio, while newly hired overseas staff also lacked deeper understanding of the company beyond the recent Labubu craze, he said.

"As traffic declined, performance also saw a noticeable pullback," Si said.

Pop Mart shares initially rose nearly 4% in Hong Kong before reversing to trade down about 1.9% at HK$159.

The company said first-quarter revenue rose 75% to 80% year on year, slowing sharply from growth of 165% to 170% a year earlier.

Overseas growth also moderated from last year’s explosive pace. Revenue in Asia-Pacific markets outside mainland China rose 25% to 30%, compared with growth of as much as 350% a year earlier, while growth in the Americas slowed to 55% to 60% from roughly 900%.

Management also warned gross margin could decline by 1 to 2 percentage points this year due to higher raw material costs, logistics expenses and tariffs.

To extend the life of the franchise, Pop Mart said it would continue expanding Labubu into films, theme parks and new product categories. A Labubu movie is currently in script development, while two new related products are planned for the second half of the year.

Investor sentiment has remained divided.

Veteran Chinese investor Duan Yongping recently boosted confidence in the company after revealing he had sold out of China Shenhua Energy and shifted fully into Pop Mart shares.

But some international banks remain cautious.

Deutsche Bank reiterated a "sell" rating and cut its target price to HK$140, warning that weakening overseas demand and fading domestic IP momentum could weigh on growth.

UBS maintained a "buy" rating but also lowered its target price, saying investors were waiting for clearer signs that quarterly sales declines had bottomed out.