US ▾
YSG
Earnings call · Jun 2026 (Q2 FY26)

Yatsen Holding Q2 FY26 earnings call YSG

Sep 2, 2026 Source

Executive summary

Yatsen Q2 FY26 — Skincare Drives Growth Amidst Challenging Industry

Yatsen navigated a challenging beauty market in Q2 FY26, achieving moderate revenue growth primarily fueled by its skincare portfolio, which now constitutes over 70% of total sales. The company is actively optimizing its color cosmetics business and streamlining operations, while strategically investing in R&D and high-growth channels like Douyin. Management is focused on improving profitability and marketing efficiency amidst rising online traffic costs.

Highlights

5

  • Total net revenue grew 5.1% year-over-year to RMB 1.14 billion.

  • Skincare portfolio revenue increased 40.4% year-over-year, now representing 71.5% of total net revenues.

  • R&D expenses maintained at 3.3% of total net revenues, with Yatsen's Global Innovation R&D Center recognized as a national high-tech enterprise.

  • Fulfillment expenses decreased to 4.9% of total net revenues from 5.8% in the prior year, due to improved logistics efficiency.

  • General and administrative expenses decreased to 6.8% of total net revenues from 7.7% in the prior year, driven by lower share-based compensation.

Concerns

5

  • Gross margin decreased to 73.9% from 78.3% year-over-year, primarily due to higher inventory provisions in the color cosmetics business.

  • Color cosmetics brands net revenue decreased 35.8% year-over-year.

  • Selling and marketing expenses increased to 70.7% of total net revenues from 66.5% in the prior year, driven by strategic investments and higher traffic acquisition costs on Douyin.

  • Loss from operations widened to RMB 131.9 million from RMB 55.5 million year-over-year, with operating loss margin at 11.5% compared to 5.1%.

  • Non-GAAP net loss was RMB 99.4 million, compared to non-GAAP net income of RMB 11.5 million in the prior year.

Guidance & targets

CategoryTargetConfidence
Total Net Revenues
RMB 898.6 million to RMB 998.4 million
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Skincare brands
The continued strength of our skincare brands further reinforced skincare as a core pillar of our business and a key driver of our overall growth.
% of total net revenues: 71.5%
—40.4%——
Color cosmetics brands
Reflected the company's proactive brand portfolio optimization and deliberate SKU rationalization as part of its strategic initiatives.
—-35.8%——

Product announcements

ProductTypeDetails
Reviving Eye Creamlaunch
3 new essence maskslaunch
Vital Do Fresh Hydration Cream and Skin Infusion Serumlaunch

Risks & headwinds

Challenging Industry Backdrop and Competitive Landscape Q2 FY26

many leading participants in the domestic beauty industry, also reporting growth deceleration or revenue declines

Mitigation:continued strategy progress with total net revenue growing 5.1% year-over-year, skincare portfolio delivered exceptional performance

Higher Inventory Provision in Color Cosmetics Q2 FY26

impacted gross margin to 73.9% from 78.3%

Mitigation:proactive brand portfolio optimization and SKU exit rationalization

Structural Obsolescence Challenges in Color Cosmetics ongoing

null

Mitigation:actively streamlining our color cosmetic portfolio to improve profitability, and refocus our resources on the higher growth skincare business

Rising Online Traffic Costs ongoing

Selling and marketing expenses as a percentage of net revenues rose to 70.7% from 66.5%

Mitigation:shifting more resources to higher growth and higher return skincare brands; expanding to B2B channels and professional channels; improving content creation, CRM retention, and budget allocation, stronger financial discipline and AI agents

What to watch in Q3 FY26

Total Net Revenues Guidance

Q3 FY26
Current RMB 1.14 billion (Q2 FY26 actual)
Target RMB 898.6 million to RMB 998.4 million (Q3 FY26 guidance)

Why it matters

This guidance represents a potential year-over-year decrease, and its achievement will indicate the company's ability to manage ongoing industry headwinds and strategic shifts.

Looking at our business outlook for the third quarter of 2026, we expect our total net revenues to be between RMB 898.6 million and RMB 998.4 million, representing a year-over-year decrease of approximately 0% to 10%.

Q&A highlights

How will Yatsen expand channels for skincare and what strategies are in place to improve marketing efficiency given rising online traffic costs?

Management outlined plans to diversify skincare channels beyond core online platforms to include B2B (JD, WeChat Shop, Douyin B2B), offline distribution, duty-free, and professional channels, citing DR. WU's success with a higher B2B mix. To address rising traffic costs, they are shifting resources to skincare, expanding into less expensive channels, and improving content, CRM, and budget allocation with AI.

“So to give you an example, DR. WU has already shown that a higher B2B mix can support both growth and profitability. So this is a model we will selectively apply to our other skincare brands.”

asked by Maggie Huang · answered by Jinfeng Huang

2 min read 7 chapters

Detailed narrative

Strategic Transformation & Skincare Focus

Yatsen's strategy to pivot towards skincare is proving effective, with the segment now representing 71.5% of total net revenues. This shift is driven by sustained investment in brand building, product innovation, and channel development, aiming for higher quality and more sustainable growth. The company views skincare as a core pillar and key driver of its overall growth, reinforcing the effectiveness of its strategic transformation.

R&D and Innovation

The company maintained R&D expenses at 3.3% of net revenues, focusing on scientific foundations. Its Global Innovation R&D Center received national recognition as a national high-tech enterprise and specialized, sophisticated, distinctive, and innovative designation in Shanghai. DR. WU published three research studies in international SCI index journals, validating its scientific capabilities. New product launches included Galénic's Reviving Eye Cream, DR. WU's essence masks, and Eve Lom's second-generation Vital Do collection expansions.

Brand Engagement

Yatsen strengthened brand equity through high-impact consumer engagement initiatives. DR. WU partnered with CCTV.com for a dedicated live streaming event, which attracted a cumulative audience of 178 million viewers and generated significant sales uplift. Galénic engaged consumers with a pop-up experience on Wuzhizhou Island in Sanya, and Eve Lom participated in the British Beauty Festival, further elevating its premium positioning. These initiatives aim to broaden brand reach and deepen consumer connection across key markets.

Profitability Optimization

Gross margin was impacted by higher inventory provisions in the color cosmetics business, but underlying gross margin remained broadly stable excluding this one-time effect. The company is actively streamlining its color cosmetic portfolio and refocusing resources on the higher-growth skincare business to improve profitability. Efforts include optimizing cost structure, refining resource allocation across channels, and accelerating the integration of AI across operational workflows to drive continuous productivity gains.

Channel Expansion Strategy

To counter rising online traffic costs, Yatsen plans to diversify channels for its skincare brands. This includes increasing B2B channels such as JD, WeChat Shop, and Douyin B2B, as well as expanding into offline distribution, duty-free, and professional channels like drugstores for DR. WU and boutique stores in department stores for Galénic. This strategy aims to reduce reliance on expensive online traffic and build a more balanced and sustainable business model.

Marketing Efficiency

Yatsen is responding to rising online traffic costs, an industry-wide trend, in three ways: shifting more resources to higher-growth and higher-return skincare brands; expanding into B2B and professional channels to reduce reliance on expensive online traffic; and improving content creation, CRM retention, and budget allocation through stronger financial discipline and AI agents. The goal is to support strong skincare growth with better efficiency and stronger profitability over time.

Leadership Change

Ms. Wang Li has been appointed as the company's Chief Financial Officer, effective today. Ms. Wang brings over 15 years of experience in the consumer and beauty industry, most recently serving as CFO of Proya Cosmetics. Her financial expertise is expected to further support Yatsen's ongoing efforts to optimize its cost structure, improve resource allocation, and drive sustainable profitable growth.

AI-generated summary of the company's earnings call. Not investment advice.