Mixue shares fall 8.37 percent as rising costs erode first-half profit
Shares in the tea and ice cream chain fell sharply after a 14.7 percent drop in first-half profit highlighted the financial strain of its aggressive global expansion and quality investments.
Mixue Group saw its shares close 8.37 percent lower on Thursday following the release of its first-half financial results. The company reported that profit for the six months ended June fell 14.7 percent year on year to 2.32 billion yuan, or $345.2 million.
Revenue edged up 2.3 percent to 15.22 billion yuan, but top-line growth failed to offset surging operational expenses. Cost of sales increased at a faster rate than revenue as the company invested heavily in product quality. Meanwhile, selling and distribution expenses jumped 22.9 percent due to higher marketing and staff costs, while administrative expenses rose 39.4 percent.
The margin compression signals the heavy price of scaling the world's largest store network for a beverage chain. With nearly 63,987 locations globally at the end of June, Mixue now operates more outlets than McDonald's and more than four times the footprint of Dunkin. Maintaining this massive physical footprint while funding international growth is clearly testing the company's near-term profitability.
Despite the profit decline, management is returning capital to investors. The company proposed a special dividend of 2.65 yuan per share, though this remains subject to shareholder approval. This payout may help cushion the blow for equity holders following the sharp sell-off in the stock.
The financial results arrive as Mixue accelerates its push beyond mainland China, where the majority of its stores are currently located. The operator had 4,378 overseas locations at the end of June and plans to deepen its presence in Southeast Asia while expanding into central Asia and the Americas. To support this geographic diversification, the company intends to build a more localized supply chain for its international markets.
Beyond physical retail expansion, Mixue is attempting to monetize its brand identity. The company plans to transform its Snow King mascot into a global cultural brand. This strategy includes developing animated series, comics, movies, featured merchandise, and potentially theme parks to drive engagement beyond its signature affordable drinks and King Cone vanilla ice cream.
