Shares of Chinese lifestyle retailer MINISO Group Holding Limited (MNSO) plummeted as much as 19% in pre-market trading on September 24, 2024, after the company announced plans to acquire a 29.4% stake in supermarket chain Yonghui Superstores for around RMB 6.3 billion ($880 million).

The deal would make MINISO the largest shareholder in Yonghui, a leading fresh produce and daily necessities retailer operating around 850 supermarkets across China. While MINISO touted the strategic value of expanding into the essential goods retail space, the move marks a significant diversification away from its core business of trendy, design-oriented lifestyle products.

Investors appeared concerned about the hefty price tag for the stake as well as potential integration challenges involved in combining MINISO's lifestyle brand with Yonghui's grocery operations. BofA Global Research double downgraded MINISO to Underperform from Buy, citing elevated near-term risks from the deal and questioning the company's capital allocation strategy. Jefferies also downgraded MINISO to Hold from Buy, stating that the company might be better off investing in its own capacity rather than branching out to "less favorable and premature investments." Both brokerages lowered their price targets on the stock.