MNSO (09896) operating decline highlights: net profit continues to drop, inventory at new high, short-term debt significantly increased, domestic entity subjected to 5 million yuan execution.

At the beginning of 2026, the dual-listed company MNSO (09896, MNSO.US) in both the Hong Kong and US stock markets encountered a "head-on hit." According to the Chinese Executive Information Disclosure Network, on January 14th, its core entity in China, MNSO (Guangzhou) Limited, was listed as a debtor by the Yuexiu District People's Court in Guangzhou, with an execution amount of 4.9688 million yuan. This seemingly small execution case actually involves related risks of the controlling party of MNSO. According to Tianyancha information, the case involves Guangzhou Mingyou Business Development Co., Ltd., which has become a dishonest debtor, and Zhu Hai Siyi Enterprise Management Co., Ltd., controlled by the controlling party of MNSO, Ye Guofu, holds a 30% stake in the dishonest company, causing a situation where "a city gate catches fire and the fish in the pond are affected." What is more serious is that this execution event may not be an isolated case, but rather a microcosm of MNSO's declining business performance since 2025. Combining the public financial data from its 2024 annual report and quarterly reports since 2025, it is not difficult to discover that this retail giant, which once expanded rapidly with the label of "high-quality at a low price," is now trapped in multiple dilemmas of declining performance, high debts, tight cash flows, and inventory backlog, deteriorating financial health, and escalating operational risks. 1. Revenue growth cannot hide continuous profit decline, and the rapid increase in three expenses erodes profit margins. At first glance, MNSO's revenue has maintained double-digit growth since 2025, seemingly continuing its expansion trend. However, the quality of revenue growth is very low, with a continuous significant decline in net profit attributable to the parent company, revealing the severe weakening of its profitability. Financial data shows that in the first three quarters of 2025, MNSO's net profit attributable to the parent company (pre-adjustment) were 416 million yuan, 906 million yuan, and 1.347 billion yuan, with year-on-year declines of 28.52%, 22.57%, and 25.68% respectively. This marks three consecutive quarters of double-digit decline, with the decline always higher than the revenue growth rate during the same period. It is noteworthy that the performance in a single quarter is even bleaker, with the net profit attributable to the parent company in the third quarter of 2025 being only 441 million yuan, a year-on-year decline of over 30%, further expanding the decline, putting continuous pressure on profit margins. The core issue of the profit decline lies in the rapid growth of sales expenses, management expenses, and financial expenses, forming a severe erosion of profits. Among them, the significant increase in sales expenses is particularly noticeable. For the first three quarters of 2025, sales expenses reached 1.021 billion yuan, 2.181 billion yuan, and 3.611 billion yuan, with year-on-year growth rates of 46.72%, 43.29%, and 43.37% respectively, far exceeding the revenue growth rate during the same period, acting as the "main force" consuming profits. Revealed information shows that the surge in sales expenses mainly stems from the massive investment in overseas direct-operated stores, especially the expansion of stores in strategic overseas markets such as the United States, leading to a significant increase in expenses related to rent, labor, logistics, etc. Just in the third quarter of 2025, the advertising and promotion expenses, licensing expenses, and logistics expenses saw year-on-year growths of 43.3%, 20.8%, and 23.3% respectively. The growth in management expenses cannot be ignored either, with year-on-year increases of 26.55%, 20.33%, and 29.43% in the first three quarters of 2025, mainly due to the increase in personnel-related expenses brought about by business expansion and the rise in operating costs due to intensified competition in the domestic market. The growth rate of financial expenses is even more astonishing, with a staggering increase in financial expenses influences by the substantial increase in interest-bearing liabilities. In the first three quarters of 2025, financial expenses increased by 296.27%, 477.52%, and 656.57% year-on-year respectively, reaching 2.33 billion yuan by the end of the third quarter. Compared to the same period the previous year, this represents an increase of more than six times, becoming another important driver of the decline in profits. In fact, MNSO's profit dilemma had already laid the groundwork in 2024. Although it achieved revenue of 16.994 billion yuan in 2024, a year-on-year growth of 22.8%, and net profit attributable to the parent company remained positive, core profitability indicators were showing signs of loosening, with adjusted net profit margin decreasing from 17.0% in 2023 to 16.0% in 2024. Upon entering 2025, the weak revenue growth contrasted sharply with the rigid growth in expenses, worsening the dilemma of "increase in revenue but not in profit", highlighting the company's declining operational efficiency and the vulnerability of its profit model. 2. Both short-term and long-term debts soar, with an asset-liability ratio exceeding 60%, shrinking cash in hand, and cash flow under pressure. While profits continue to decline, MNSO's debt size has seen an "explosive" growth, with the asset-liability ratio soaring and debt repayment pressure increasing sharply, with financial risks nearing the caution line. The significant growth in short-term debts is particularly striking. By the end of 2024, MNSO's short-term borrowings were only 567 million yuan. However, after entering 2025, short-term debts showed a monthly climbing trend, reaching 649 million yuan at the end of the first quarter, skyrocketing to 1.707 billion yuan by the end of the second quarter, and further increasing to 1.886 billion yuan by the end of the third quarter. Compared to the end of 2024, short-term debt pressures have increased exponentially, with the rapid growth of short-term debts putting pressure on its financial chain. The growth in long-term debts is equally shocking. By the end of 2024, MNSO's long-term borrowings were only 4.31 million yuan, almost negligible. However, by the end of the third quarter of 2025, long-term borrowings had surged to 5.622 billion yuan. The significant increase in long-term debts, on one hand, stems from the capital requirements brought about by its overseas expansion and business acquisitions (such as acquiring assets related to Yonghui Superstores), and on the other hand, it reflects that the company's operating cash flow is insufficient to support its development, and can only rely on long-term borrowings to cover the capital gap. It is disclosed that in the first half of 2025, due to the impact of the Yonghui acquisition, total assets of MNSO saw a substantial increase but also raised the level of liabilities. The double increase in debt size directly led to a continuous rise in the asset-liability ratio. By the end of 2024, MNSO's asset-liability ratio was 42.85%, at a relatively reasonable level. However, by the end of the second quarter of 2025, the asset-liability ratio had risen to 59.1%, further increasing to 62% by the end of the third quarter, a nearly 19 percentage point increase in just 9 months. A too high financial leverage may lead to a decrease in its ability to withstand risks. Once the market environment deteriorates or financing channels tighten, it may face debt repayment risks. In sharp contrast to the soaring debt is the continuous shrinkage of cash in hand, and the substantial deterioration in operating cash flow. The downward trend in cash in hand is very obvious. By the end of 2024, MNSO had cash and cash equivalents of 6.328 billion yuan, with relatively sufficient reserves. By the end of the first quarter of 2025, cash and cash equivalents were 6.839 billion yuan, 7.115 billion yuan by the end of the second quarter, but dropped significantly to 3.1 billion yuan by the end of the third quarter, a 56.4% decrease from the second quarter, and a 51% decrease from the end of 2024. In just a few months, the cash scale was nearly halved. Behind the shrinking cash is the continuous deterioration of operating cash flow. In 2024, MNSO's net operating cash flow was 2.168 billion yuan, matching the net profit. However, in 2025, net operating cash flow continued to decline, with 10.14 billion yuan in the first half of the year, a 21.61% year-on-year decrease. By the end of the third quarter, the year-on-year decline in net operating cash flow had further expanded to 36%, reaching only 1.3 billion yuan. The decline in operating cash flow is mainly due to the capital occupation caused by the backlog of inventory and the reduction in cash collection due to weak revenue growth, reflecting the continuous weakening of the company's core business profitability and cash generating ability. 3. Inventory value hits a new high, inventory pressure highlights concerns about unsold products. In addition to the declining profit, soaring debt, and tight cash flow, MNSO's inventory size continues to rise and has reached a historical high, potentially further dragging down the company's business performance and cash flow. Financial data shows that by the end of 2024, MNSO's inventory size was 2.75 billion yuan. By the end of the first quarter of 2025, the inventory size slightly increased to 2.833 billion yuan, further increasing to 2.836 billion yuan by the end of the second quarter. By the end of the third quarter, it had surged to 3.288 billion yuan, representing a 20.07% growth from the end of 2024, with a staggering 43.13% year-on-year increase, hitting a historical high. By the end of the third quarter of 2025, its inventory size accounted for 23.89% of total current assets and 11.47% of total assets, with a large amount of capital tied up in inventory, further exacerbating the tight cash flow situation. High inventory not only ties up a vast amount of capital but also faces the risk of devaluation, which could affect profit margins. Behind the high inventory is the issue of unsold products and decreasing inventory turnover efficiency. It is disclosed that in 2024, the inventory turnover days in MNSO's domestic stores increased by 5 days to 75 days, while for overseas stores, the inventory turnover days reached a high of 187 days, a year-on-year increase of 56 days, indicating a significant decrease in inventory turnover efficiency. The sharp increase in overseas store inventory turnover days is mainly due to the direct-operated business model adopted for overseas expansion, which has increased the difficulty in logistics and supply chain management, making the problem of unsold products more prominent. In the domestic market, the company faces competition from similar brands like KKV and Green Party. Market share is being diverted, with weak end-demand leading to a backlog of products. It is worth noting that MNSO's vigorous implementation of its IP strategy has not effectively addressed the issue of unsold products. Despite collaborating with over 150 global IPs such as Walt Disney Company and Harry Potter, with over 40% of IP products being sold overseas, sales of some IP derivatives (such as Harry Potter related products) did not meet expectations, becoming an important part of the inventory backlog. Meanwhile, its sub-brand TOP TOY achieved revenue growth and broke even for the first time, but its contribution to overall profit and inventory turnover remains limited, failing to effectively alleviate the pressure of high inventory. From a nearly 5 million yuan execution against a domestic entity to three consecutive quarters of significant profit decline; from a soaring increase in long and short-term debts, exceeding the caution line for the asset-liability ratio, to a halving of cash in hand and continued deterioration of operating cash flow; from reaching a historical high in inventory, to concerns about unsold products and inventory pressure, MNSO's current operational challenges can be said to be facing unprecedented challenges.