YATSEN, the parent company of Chinese beauty brand Perfect Diary, received a notification from The New York Stock Exchange that its American Depositary Shares (ADS) were trading below compliance standards. If the company’s stock price is unable to recover the share price and the average share price is above $1.00 within 6 months, it is at risk of delisting.
Under the rules of The New York Stock Exchange, if the average closing price is less than $1.00 for 30 consecutive trading days (excluding Saturdays and Sundays), the company will be considered below the compliance standard.
Upon receipt of the notice, YATSEN must recover its share price and average share price to more than $1.00 within 6 months. During the six months of correction period, compliance is considered to have returned if the stock closes at $1 or more on the last trading day of any month and has an average closing price of at least $1 in the first 30 trading days of the last trading day of the month.
If compliance is not restored before the expiry of the six months of correction period, the YATSEN will initiate stock suspension and delisting, which means that YATSEN is facing the risk of delisting.
Founded in 2016, YATSEN owns a lot of skincare brands like Perfect Diary, Little Ondine, Abbys Choice, Galenic, DR. WU(Chinese mainland business), EVE LOM, Pink Bear, and EANTiM. In 2020, the scale of DTC consumers of YATSEN reached about 32.3 million. In addition, YATSEN is the first Chinese beauty group to land on the American stock market.
Founded in 2017, as the main brand of YATSEN, Perfect Diary has been on a roll since its birth.
During the Double Eleven Shopping Festival in 2018, Perfect Diary, which was established just one year ago in 2017, became the first makeup brand with sales revenue of more than 100 million on Tmall.
During the Double Eleven Shopping Festival in 2019, Perfect Diary became the first domestic brand to top the makeup list on Tmall.
At 15:14 on November 1, 2020, the payment amount of Perfect Diary’s flagship store exceeded $47.08 million, becoming the first makeup brand on Tmall to break $47.08 million with the sales volume topping in the beauty category. During the Double Eleven Shopping Festival in 2021, Perfect Diary’s cumulative sales exceeded $94.16 million, ranking first in the makeup categories on Tmall.
As of 2020, Perfect Diary’s market share in the Chinese beauty market reached 6.7%, becoming the second-largest makeup single brand after Maybelline, while the overall market share of Perfect Diary’s parent company, YATSEN, reached 8.3% in the same period, ranking fourth in market share, making it the only local enterprise in the top five of the beauty group.
During the Double Eleven Shopping Festival in 2021 on Tmall, Perfect Diary won the top one place in domestic brands in the makeup categories on Tmall with the omnichannel sales volume of the star products of the “NEW! 207 PERFECT DIARY README LIQUID LIPSTICK EVER-STAY PD029” achieving 974,000 pieces and the “SLIM LIPSTICK” 1.074 million pieces respectively.
With the rise of new brands, the revenue share of the main brand Perfect Diary continued to decline, from 99.2% in 2018 to 79.8% in the third quarter of 2020.
Although the main brand has achieved remarkable results, the financial report data of YATSEN is not so good. From 2018 to 2021, YATSEN’s sales revenue was $99.65 million, $476 million, $821 million, and $916 million respectively, while the net profit was in a loss of $6.3 million, $11.82 million, $422 million, and $243 million respectively. Only the profit in the year before the listing is positive, which can be described as a total change when it is listed.
In addition, the high proportion of marketing has always been the point where YATSEN and Perfect Diary have been criticized by the outside world. According to the 2021 financial report, the marketing expenses of YATSEN were $629 million, an increase of 17.41% over 2020, accounting for 68.60% of the revenue. Perfect Diary invested its 60% of sales revenue in 2020 in marketing.
In this regard, YATSEN said that the beauty industry itself is an industry that relies on brand influence to drive the growth of sales. At present, the average marketing expenses of cosmetics companies are about 40% to 50%. However, as a new consumer brand of domestic beauty, it is in the early stage of brand growth and the overall marketing expense rate is higher than that of mature cosmetics companies. Therefore the claim that Perfect Diary marketing costs are much higher than in the industry doesn’t hold true.