Mixue Group Shares Plummet as Rising Costs Erode Profitability

Mixue Group's shares fell more than 7% in Hong Kong on Friday after the company reported a 14.7% drop in first-half net profit to 2.32 billion yuan ($345.2 million). The Chinese ice cream and tea chain saw revenue rise 2.3% to 15.22 billion yuan, but profitability was squeezed by rising costs.

The increase in expenses was largely driven by investments aimed at improving product quality, as well as higher marketing and staff costs. Selling and distribution expenses jumped 22.9%, while administrative expenses surged 39.4%. Despite the decline in profit, Mixue proposed a special dividend of 2.65 yuan per share, totaling about 1.01 billion yuan.

The company's global store network reached nearly 63,987 locations by the end of June, surpassing McDonald's in total outlets and exceeding Dunkin's store count by more than four times. However, overseas stores declined 7.5% year over year, which may raise questions about Mixue's ability to replicate its domestic model abroad.