FAST NEWS: Yatsen posts quarterly loss, shares plunge

The Latest: Yatsen Holding Ltd. (YSG.US), parent of the “Perfect Diary” cosmetics community, reported Wednesday its revenue rose 1% year-on-year to 773 billion yuan ($107 million) in the first quarter of this year. It recorded a net loss of 125 million yuan for the period, reversing a 50.7 million yuan profit in the same period of 2023.

Looking Up: The company’s gross margin for the period improved to 77.7%, up 3.4 percentage points from 74.3% in the year-ago period, as it sold more higher-margin products.

Take Note: Its administrative expenses jumped 244% to 140 million yuan, rising to 18.1% of total revenue from 5.3% in the same period last year. The big jump owed primarily to share-based compensation expenses and unusually low administrative costs in the year-ago period.

Digging Deeper: Yatsen is one in a crowded field of Chinese cosmetic sellers that are willing to burn through cash for branding purposes to stay ahead of the competition, leading to high marketing costs for the group. At the same time, the “Perfect Diary” cosmetics retailing operator is trying to control costs by optimizing its own offline stores while also increasing its promotion on social media. Despite a return to more normal consumption patterns post-pandemic, the company has been unable to return to its high revenue levels from 2020 and 2021 as current consumer sentiment remains weak.

Market Reaction: Yatsen’s shares plunged 27.9% to $3.28 in New York on Wednesday after the results were published. It currently trades near the lower end of its 52-week price range.

Translation by A. Au

To subscribe to Bamboo Works weekly free newsletter, click here