Yatsen Holding Limited (YSG) Q2 Earnings call transcript Aug 20, 2024

In the latest earnings call, Yatsen, a leading beauty brand in China, provided insights into its performance during the second quarter of 2024. The call, led by Vice President, Head of Strategic Investment and Capital Markets, Irene Lyu, and featuring Founder, Chairman and CEO, Jinfeng Huang, and CFO and Director, Donghao Yang, highlighted a challenging macro environment and the company's strategic focus on channel optimization, product development, and brand building.

Macro Environment and Financial Performance

The beauty industry in China experienced mixed results during the second quarter. Retail sales rebounded in May, driven by the early start of the 618 Shopping Festival and the cancellation of certain events. However, the overall market performance saw a significant year-over-year decline. Yatsen reported a 7.5% year-over-year decrease in total net revenues, reaching RMB 794.5 million. The company's Skincare brands maintained steady performance, while net revenues from Color Cosmetics and Galénic, DR.WU, and Eve Lom showed growth. Despite these positive signs, the profit performance of the China beauty market impacted Yatsen's revenue, leading to a revised revenue guidance in July.

Strategic Focus and Brand Building

Jinfeng Huang provided an overview of the company's strategic focus, emphasizing the importance of channel optimization and cost reduction to drive improved profitability. Yatsen's Skincare brand continued to perform well, with Galénic's renewable shipment oil gaining visibility on the Douyin platform and the release of new products from other brands. The company's R&D efforts were also highlighted, with the official inauguration of the Yatsen Global Innovation R&D Center in Shanghai, marking the brand's first global R&D hub. This investment in research and development is a testament to Yatsen's commitment to product innovation and technological advancement.

Product Development and Channel Expansion

The earnings call also shed light on Yatsen's product development pipeline for the second half of 2024. The company plans to launch new products across both its Color and Skincare brands, with a focus on expanding into more TV channels to optimize its channel mix and achieve better profitability. This strategic focus on product development and channel expansion is crucial for Yatsen's growth and profitability in the competitive beauty industry.

Investor Questions and Future Outlook

During the Q&A session, investors expressed concerns about the company's promotion strategy and revenue growth in the second half of the year. In response, management emphasized their focus on optimizing the channel mix and product mix to achieve profitable revenue growth. The company's outlook for the third quarter reflects a cautious yet optimistic stance, with expectations of maintaining or slightly increasing revenue, while focusing on reducing losses and achieving profitability.

Conclusion

Yatsen's second quarter earnings call provided a comprehensive overview of the company's performance and strategic direction in the challenging macro environment. The company's focus on product development, channel optimization, and brand building, coupled with its commitment to research and development, positions Yatsen well for future growth. As the beauty industry continues to evolve, Yatsen's strategic moves are expected to drive sustainable growth and enhance its competitive position in the market.