What happened

Shares of Miniso Group (MNSO -2.80%) were climbing today after the Chinese discount retail chain posted better-than-expected results in its third-quarter earnings report.

As of 2:55 p.m. EST, the stock was up 34.7%.

So what

Miniso operates more than 5,000 stores total, including over 3,000 in China and the remainder in other countries. While the China business has struggled amid crushing COVID-19 lockdowns, the international business has picked up the slack and drove total revenue in the quarter up 4.5% to $389.7 million, which beat estimates at $383.4 million.

Revenue from overseas markets jumped 47.6% to $129.4 million, while China revenue declined 8.8% to $260.4 million due to Covid-related complications. However, growth in Top Toy, another Chinese retail chain it launched at the end of 2020, was strong with sales up 13.3%.

Gross margin surged from 27.4% to 35.7% thanks to a greater share of its business coming from overseas markets, which are more profitable. On the bottom line, adjusted earnings per share jumped from $0.08 to $0.19, beating the consensus at $0.13. 

CEO Guofu Ye said, 

We kicked off fiscal year 2023 with an encouraging set of results headlined by strong margin performance. In spite of the short-term headwinds brought on by the pandemic in China, we remained focused on our long-term strategic goals: delivering on our globalization strategy, bolstering the strength of our product offerings and optimizing our store network.

Now what

Miniso continues to add new stores briskly both in China and other markets, showing it still sees a sizable growth opportunity ahead. 

Over the last year, it's added 425 Miniso stores, 234 of which were in China, and it also opened 37 Top Toy stores. The company primarily franchises its stores, making it easy to expand rapidly.

Miniso didn't offer guidance, but the strong growth abroad and improving gross margin are clearly positive signs for the business. Meanwhile, the China retail business should bounce back once Covid restrictions are lifted, which will be a tailwind for Chinese stocks broadly.