YSG Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Net Revenues: Increased by 5.1% year-over-year to RMB 1.14 billion, driven primarily by a 40.4% rise in skincare revenues.

Color Cosmetics Revenue: Decreased by 35.8% year-over-year due to brand portfolio optimization and SKU rationalization.

Gross Profit: Fell by 0.8% to RMB 843.8 million, with gross margin decreasing to 73.9% from 78.3% due to higher inventory provisions in color cosmetics.

Operating Loss: Increased to RMB 131.9 million, with an operating loss margin of 11.5%, compared to 5.1% in the prior year.

Net Loss: Expanded to RMB 90.8 million, with a net loss margin of 8% compared to 1.8% in the prior year.

Cash Position: As of June 30, 2026, cash and short-term investments totaled RMB 1.06 billion, slightly up from RMB 1.05 billion at the end of 2025.

2Strategic Updates and Business Highlights

Skincare Focus: Skincare now represents 71.5% of total revenues, highlighting a strategic shift towards higher quality and sustainable growth.

R&D Investment: Maintained at 3.2% of total net revenues, with recent recognition of Yatsen's Global Innovation R&D Center as a national high-tech enterprise.

Product Launches: Introduced new products across various skincare lines, including eye creams and essence masks, to address evolving consumer needs.

Brand Engagement: Successful marketing initiatives, such as a live streaming event with CCTV.com, significantly boosted consumer engagement and sales.

3Forward Guidance and Outlook

Q3 2026 Revenue Forecast: Expected to be between RMB 898.6 million and RMB 998.4 million, indicating a potential year-over-year decrease of 0% to 10%. This outlook reflects current market conditions and operational challenges.

4Bad News, Challenges, or Points of Concern

Declining Color Cosmetics Revenue: The significant drop in color cosmetics revenue raises concerns about the effectiveness of the brand portfolio strategy.

Increased Operating Losses: The widening operating and net losses indicate ongoing profitability challenges, particularly in the color cosmetics segment.

Competitive Pressures: The beauty industry is experiencing a deceleration in growth, with many competitors also reporting revenue declines, highlighting a challenging market environment.

Rising Traffic Costs: Increased online traffic costs are impacting marketing efficiency, necessitating a strategic shift to reduce reliance on expensive channels.

5Notable Q&A Insights

Channel Expansion Strategy: Management emphasized plans to diversify channels for skincare brands, including B2B and offline distribution, to mitigate high traffic costs.

Response to Rising Traffic Costs: The company is reallocating resources to skincare brands and improving marketing efficiency through enhanced content creation and CRM strategies, rather than cutting investments indiscriminately. This summary encapsulates YSG's financial performance, strategic initiatives, and challenges faced during Q2 2026, providing a clear overview for stakeholders.