POP MART is stepping off the accelerator. Founder Wang Ning, during an August 20 earnings call, acknowledged the company is navigating significant operational pressure, with the second half of the year expected to be even more challenging. He framed the company's situation as a Formula 1 car needing a pit stop after running too fast, a stance that aligns with his earlier declaration that 2026 would be a "year of consolidation".

Despite the tempered outlook, the first-half results still show a company in robust health. Revenue reached RMB 17.17 billion, a 23.8% increase year-over-year, with adjusted net profit hitting RMB 5.16 billion and a gross margin of 69.7%. While these figures are solid for the consumer sector, they fell short of market consensus, which had predicted revenue of around RMB 19.98 billion and net profit of approximately RMB 6.64 billion. The shortfall is attributed to two main factors: a RMB 720 million foreign exchange loss (compared to a RMB 120 million gain the prior year), and a noticeable slowdown in the overseas business, which has become a core concern for investors.

Wang Ning emphasized that the company is prioritizing long-term health over short-term market expectations. "We received a lot of unexpected traffic last year, which drove rapid growth, but it also exposed issues in our organization and management," he said, adding that while performance pressure is real, the company's operational fundamentals have strengthened significantly. To signal confidence and provide support, the board announced a share buyback plan of no less than RMB 2 billion and no more than RMB 5 billion over the next six months, a first for the company's earnings calls since its listing.

The second quarter saw a sharp deceleration, with analysts estimating year-over-year revenue growth of just 1.6%, a dramatic slowdown from the first quarter. The pressure on profitability is also evident. Gross margin dipped slightly from 70.3% to 69.7%, due to a lower mix of high-margin overseas sales and rising raw material costs. Selling and distribution expenses climbed 23.1%, driven by a 43.3% increase in rental costs and a 45.7% rise in employee compensation, reflecting an expansion of the sales team from 6,219 to 9,734 staff members. Wang Ning remains steadfast, stating the company will not make decisions that harm its development just to meet market forecasts.

A key shift is happening within the IP portfolio. The THE MONSTERS family, led by the viral LABUBU, generated RMB 4.45 billion in revenue, a 7.5% decline year-over-year, marking the first drop for the IP since its explosive rise. Despite high-profile activations like the World Cup opening ceremony, a partnership with Brazilian footballer Ronaldo, and global tours, LABUBU's hype is normalizing. In its place, a new star has emerged. The "Hirono" IP, a character created by illustrator Da Xin, generated RMB 2.65 billion in revenue, a staggering 580.6% increase, making it the company's second-largest IP. Its success story, from a supporting role in a 2020 picture book to a top-tier blind box franchise, mirrors LABUBU's path but at a faster pace. Its "Animal Farm" plush series launched on the night of the earnings report, adding to its momentum.

The strength of the IP matrix is broadening. A total of six IPs each surpassed RMB 1 billion in revenue, and 11 IPs each exceeded RMB 100 million. CRYBABY grew 34% to RMB 1.63 billion, DIMOO rose 46.5% to RMB 1.62 billion, SKULLPANDA increased 27.1% to RMB 1.55 billion, and Hirono jumped 38.5% to RMB 1.01 billion. Plush toys have become the dominant category, generating RMB 9.82 billion in revenue, a 60% increase and now accounting for 57.2% of total revenue, far exceeding the 30.2% share of traditional figures. The "Qiao Qiao" plush keychain from PUCKY, nicknamed the "electronic wooden fish" by fans for its tapping interaction, was one of the standout hits of the first half. This diversification is easing concerns about single-IP dependence.

The overseas business is clearly in a transitional phase. Revenue in the Asia-Pacific region fell 9.7% to RMB 2.58 billion, while the Americas saw a 16.5% decline to RMB 1.89 billion. Online channels were hit hardest, with Asia-Pacific online revenue down 39.8% as "external traffic dividends fade" and "core IP heat returns to normal". However, offline expansion continues aggressively, with store counts in the Americas doubling from 41 to 86 and in Europe growing from 18 to 45, leading to respective offline revenue increases of 19.5% and 49.8%. This shift from online to offline has contributed to rising inventory and costs.

The domestic market, in contrast, is thriving. Mainland China revenue grew 47.3% to RMB 12.2 billion, with store count only increasing by a net 10 to 455, highlighting significantly improved per-store efficiency. The online blind box app saw revenue surge 83.3% to RMB 2.06 billion, while Douyin and Tmall grew 74% and 37.1% respectively. Wholesale and other income soared 111.7%, driven by new ventures like the city theme park, POP BAKERY, and POPOP accessories. Registered members in mainland China grew from 72.58 million to 82.44 million, with a 51.6% repurchase rate, and members now contribute 92.9% of sales. This domestic strength has shifted the revenue mix, with China now accounting for about 71% of total revenue, a subtle reversal from the global expansion story of a year ago.

To support the stock, the RMB 2 billion to 5 billion buyback plan is significant. Even at its lower limit, it would surpass the company's cumulative buybacks since its listing, which stood at approximately HK$1.744 billion as of April 2026. In March, following a 23% single-day stock drop, the company repurchased shares worth about HK$1.397 billion over six consecutive trading days. In the first half of this year, POP MART bought back and cancelled 11.22 million shares for a total of about HK$1.74 billion, at prices ranging from HK$140.9 to HK$194.9 per share. The company maintains a strong balance sheet with RMB 12.44 billion in cash and equivalents and no bank borrowings, but declared no interim dividend. Despite the disappointing results, institutional support remains. Duan Yongping's H&H International Investment increased its stake from 5.55% to 7.70% on August 6, while Morgan Stanley, while cutting its price target from HK$247 to HK$214, maintained an "overweight" rating, viewing the overseas slowdown as a "one-time online demand reset, not a business model invalidation".

From the phenomenal surge of 2025 to the deliberate consolidation of 2026, POP MART is learning to manage its high base. Wang Ning's focus on "health" is reflected in this report, which shows both the strength of a maturing IP matrix and the realities of overseas retrenchment and rising inventory. The buyback plan is less a declaration of future glory than a safety cushion for a star company returning to a steady state.