Perfect Diary's Parent Company Gets Riches in Its Skincare
- Chaileedo Press
- May 25, 2022
- 3 min read
Chinese makeup brand Perfect Diary's parent company YSG unveiled its results for Q1 in 2022, its net loss decreased 8.7% to $43.7 million from $47.8 million in the same period last year. YSG stated that its net revenue of skincare brands grew 68.5% in the first quarter, offsetting the impact of declining sales of some color cosmetics brands.
On May 24, YSG reported its results for the first quarter that ended March 31. For the first quarter, YSG's total net revenue declined 38.3% to $134 million. Its net loss decreased 8.7% to $43.7 million from $47.8 million in the same period last year.
For the 38.3% decline in total revenue, YSG explained that the net revenue of color cosmetics (including Perfect Diary, Little Ondine and Pink Bear) decreased by 45.6% due to weak industry-wide demand for color cosmetics and the recovery of the COVID-19 in major cities, which affected sales in offline stores.
However, YSG also said that the net revenue of skincare brands grew 68.5% in the first quarter, offsetting the impact of declining sales of some color cosmetics brands. The total net revenue of YSG's skincare brands including Abby's Choice, DR.WU (mainland China business), Galénic and Eve Lom increased 68.5% to $27.4 million in the first quarter of 2022 from $16.2 million in the same period last year. According to the results report, the total net revenue of skincare brands increased 68.5% to $27.4 million in the first quarter from $16.2 million in the same period last year and increased to 20.5% of total net revenue from 7.5% last year.
As mentioned in YSG's 2021 earnings report, the skincare segment's annual revenue increased 361.7% year-over-year, and its contribution to total revenue expanded from 4.0% to 21.3%.
This is also a side reflection that the multi-brand strategy that YSG continues to promote has paid off. As the second growth of YSG, the skin care section has performed well. Several of its skincare brands achieved higher growth than the overall market - Galenic Q1 omnichannel sales increased by over 6000% year-on-year. EVE LOM China business Q1 omnichannel sales increased by 145% year-on-year. DR.WU Q1 sales increased by over 120% year-on-year. Steady growth to become the company's profit contributor is now a successful case of the company's brands achieving sustainable development.
In addition, in terms of R&D expenses, R&D expenses in Q1 were $5.4 million, up 29.24% year-over-year, and increased to 4.0% of total net revenue from 1.9% in the same period last year, ahead of the R&D expenses of some Chinese peers in absolute terms and as a percentage, and even ahead of the R&D percentage of some international peers in the same period. The increase is mainly due to the increase in personnel costs, raw materials, equipment and equity incentive expenses.
In YSG's 2021 financial report, the company's full-year R&D investment increased 113.6% year-over-year to more than $21.3 million. As mentioned in the financial report, as of the release of the 2021 financial results, YSG owned 118 patents worldwide, including 39 invention patents (some of which are in the process of being transferred).
In the 2021 earnings report, YSG said that benefiting from the rapid growth of the skincare category and continued improvement in brand power, the company's full-year gross margin increased 2.5 percentage points year-over-year to 66.8% and net loss narrowed 42.5% year-over-year. Under the repeated impact of the pandemic and the weak consumer demand for beauty products, YSG became one of the few beauty companies in the industry to achieve sustained revenue growth.
And in this 2022 first-quarter earnings report, YSG made an analysis of the current state of the industry, saying: Given the weak industry-wide demand for color cosmetics and the continued negative impact of the COVID-19 on its offline experience stores, online order fulfillment capabilities and supply chain, it expected total net revenue for the second quarter to be between $121.2 million and $144 million, down approximately 37% to 47% year-over-year.
Previously, YSG released the beauty industry's first Environmental, Social and Government report (hereinafter referred to as ESG report). Since its establishment in 2016, YSG has been committed to fulfilling its commitments to consumers, employees and society, and has integrated ESG concepts into its corporate decisions, continuously improving its ESG management in the process of promoting green development and practicing social responsibility.
As the first ESG report released in China's beauty new consumer industry, the report showcases YSG's achievements and contributions in key areas such as product responsibility, social welfare, employee care and environmental sustainability.
As the importance of ESG has become widely popular in the past decade, the good performance of ESG can reflect a company's comprehensive management capability and future long-term sustainability level. Standing at the new starting point of its new five-year strategy, YSG has made its ESG report public for the first time, demonstrating its commitment and confidence in creating "sustainable beauty".
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