Investments in skincare offset drop in makeup

The Chinese beauty company announced that total net revenue for 2021 rose 11.6% to RMB 5.84 billion ($916.4 million), while gross profit rose 15.9% to reach 3.90 billion RMB ($611.8 million).

This is despite the drop in net sales and gross profit recorded in the fourth quarter (Q4).

Total net revenue for the fourth quarter of 2021 decreased by 22.1% to RMB 1.53 billion (US$239.8 million) and gross profit decreased by 23.7% to RMB 993 million ( US$155.8 million).

The drop was mainly due to lower sales of its color cosmetics brands, including Perfect Diary and Little Ondine. Fourth quarter challenges resulted in a 2.3% decline in net sales in 2021.

“The fourth quarter was a challenging quarter, marked by weak consumer demand and intense competition in the color cosmetics segment,”said Huang Jinfeng, Founder, Chairman and CEO of Yatsen.

However, this was partially offset by the 327.7% increase in total net revenue from its skincare brands, which include Abby’s Choice, Galénic, DR.WU and Eve Lom​.

“Despite the challenges, we increased our full-year revenue and gross margin, driven by significant growth in our skincare brands,” Huang said.

Over the past two years, Yatsen has expanded its skincare portfolio in anticipation of the easing of the color cosmetics category in China.

The company debuted in skincare with the launch of Abby’s Choice in June 2020. The brand was developed using data and insights gathered from its existing consumer base.

The company followed up with the acquisition of French skincare brand Galénic in October of the same year.

It also took over the Chinese arm of Taiwanese dermal beauty brand DR.WU in January 2021 and acquired prestige skincare brand Eve Lom from Manzanita Capital in March 2021.

First quarter outlook

For the first quarter of 2022, the company said it expects its total net revenue to decline about 35% to 40% year-on-year to about RMB866.7 million ($137 million). and 938.9 million RMB ($148.4 million).

The company expects a decline while the previous year ‘revenge spending’phenomenon has established a high basis for comparison. At the same time, he expected the demand for colored cosmetics to soften.

Additionally, the company said it would limit promotional discounts on its products and focus on improving operating margin.

Huang concluded: “Looking forward, we will remain very focused on improving operating margin, optimizing our cost structure and investing in branding and R&D to ensure our long-term success.”

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