A Member of Pat McKeough’s Inner Circle recently asked for his advice on a retail company that offers over 8,000 design-led lifestyle products across 11 categories.
Pat likes the company’s strengthening international sales and its ability to attract young, price-sensitive consumers, both of which bode well for its long-term future. However, Pat notes the company operates in a highly competitive market.
Miniso Group Holdings (ADR), (Symbol MNSO on New York; www.miniso.com), is a fast-growing retailer that opened its first store in China in 2013. It now has 5,133 stores in its global network, including more than 3,197 in China. The company itself operates just 147 of the stores, with the rest managed by franchisees.
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Miniso aims to attract shoppers with a variety of design-led lifestyle products. It offers over 8,000 core items, the vast majority of which are under its flagship brand “Miniso.” These products span 11 major categories, including home decor, small electronics, textile, accessories, beauty tools, toys, cosmetics, personal care items, snacks, fragrances and perfumes, plus stationery and gifts.
Note that Miniso has attracted some commentary over the years because everything about the firm—from its name, branding and products to its website—suggests it is Japanese. However, the company started up in China. In fact, it’s very similar to Japanese lifestyle chain stores such as Muji and 100-yen store Daiso.
On October 14, 2020, Miniso launched its IPO and began trading on the New York exchange at $20.
The company’s backers include China’s Tencent, which owns 4.8% of Miniso’s stock after the IPO. Tencent is China’s biggest social network and online games company; it operates the popular WeChat mobile messaging application.
Meanwhile, in December 2020, Miniso launched its sub-brand Top Toy, a toy store for children and young adults. Top Toy now has 92 stores. All are in China, although Miniso plans to expand the brand internationally.
Top Toy sells collectible art toys aimed at post-1980s consumers. It currently sells more than 2,000 products, a mixture of its own brands and external brands such as Marvel and Disney. The prices are far higher than toys sold at Miniso stores, ranging from $10 to as much as $1,000.
Inner Circle: Company should see rising revenue with zero-COVID policies now ending
The company’s revenue in fiscal 2021 (years end June 30), its first year as a public company, rose 1.0%, to $1.41 billion from $1.39 billion in 2020. Excluding one-time items, Miniso made $74.9 million, or $0.26 a share, in 2021. That was down 50.5% from $150.4 million, or $0.58 a share, in 2020. The earnings fall was because of higher costs due to the pandemic, as well as lower sales for its higher-profit-margin international business because of lockdowns.
The company operates in a highly competitive market. However, it continues to attract young, price-sensitive consumers. More than 80% of its store visitors in China are under the age of 40. Miniso keeps its stores fresh and attracts shoppers by aiming to add 100 new items every seven days.
Recommendation in Pat’s Inner Circle: Miniso Group Holdings (ADR) is a hold.
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