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Forget the lipstick effect. This year’s most promising recession-proof trade does not involve beauty purchases that chase away the blues, but elflike plush toys with rabbit ears and a mischievous grin.
Meet the Labubu. Made by Beijing-based toymaker Pop Mart, the pint-sized creature has sparked a collecting frenzy among Gen Z and millennial shoppers across Asia, the US and Europe. Fans line up for hours for new releases. Rihanna, Dua Lipa and Lisa from the K-pop group Blackpink have been spotted dangling Labubu key chains off their designer bags.
Pop Mart, in turn, has enjoyed meteoric growth. Sales more than doubled last year to $1.8bn while profit more than tripled. Its Hong Kong-listed shares have soared more than 500 per cent over the past 12 months despite global economic uncertainty and trade war concerns. With a market valuation of $38bn in dollar terms, Pop Mart is worth more than twice the combined value of US toy giants Mattel and Hasbro.
Labubu dolls are sold in a variety of sizes, colours and themes through Pop Mart’s website, a global network of 530 stores and 2,472 “roboshops” (vending machines). Part of their allure is that many are sold in “blind boxes”. Buyers don’t know what they have until the box is opened. The format drives repeat purchases, especially from those chasing a complete collection.
At 33 times forward earnings, Pop Mart may look expensive, trading at well over twice the multiple of Mattel and Hasbro. But, while collectible toy fads come and go, Pop Mart may be able to channel the staying power of Hello Kitty rather than go the way of Beanie Babies.
Toy companies are a bit like media companies. Their sales are ultimately driven by having winning intellectual property — or character brands. While Labubu was the breakout star last year, with sales up more than 700 per cent at $422mn, Pop Mart’s other character lines — such as Molly, Skullpanda and Crybaby — all reported booming sales as well.
Pop Mart also has plenty of room to grow overseas. About 39 per cent of the company’s sales come from outside mainland China at the moment. North America, Europe and Australia each make up a small sliver.
That cash-strapped consumers splurge on small luxuries in tough times has long been known. That a grinning doll in a sealed box could fit the bill is, perhaps, a sign of how glum things look outside.
pan.yuk@ft.com
