Today (October 28th), Shanghai Jahwa released its financial report for the third quarter of 2024. The report shows that from January to September this year, Shanghai Jahwa achieved a revenue of 4.477 billion yuan ($626.9 million), a decrease of 12.07% compared to the same period last year; the net profit was 163 million yuan ($22.82 million), a decrease of 58.72% year-on-year. In the third quarter of this year (July to September), the company’s net profit was -75.2997 million yuan ($-10.54 million). It is reported that this is the first time Shanghai Jahwa has recorded a loss in the third quarter since its listing.
Q3 Reports First Loss
According to data released by the National Bureau of Statistics, the total retail sales of the cosmetics industry in the first nine months of this year amounted to 306.9 billion yuan ($42.97 billion), a 1% year-on-year decline. Although the overall cosmetics market has shown a downward trend, it is evident that Shanghai Jahwa’s decline has exceeded the market average.
CHAILEEDO’s analysis of Shanghai Jahwa’s performance in the first three quarters of the past five years shows that from January to September of 2020 to 2024, Shanghai Jahwa’s revenues were 5.362 billion yuan ($750.8 million), 5.83 billion yuan ($816.3 million), 5.354 billion yuan ($749.7 million), 5.091 billion yuan ($712.9 million), and 4.477 billion yuan ($626.9 million) respectively, with year-on-year growth rates of -6.51%, 8.73%, -8.17%, -4.91%, and -12.07%.
It can be seen that except for 2021, Shanghai Jahwa’s revenue showed varying degrees of decline in the first three quarters of the other four years. However, the company’s revenue decline in the first three quarters of this year was the greatest, marking a double-digit decrease for the first time. During the same period, there were significant fluctuations in net profits, showing an alternating pattern of decline and growth, with changes exceeding 20%. Overall, in the first nine months of this year, the company’s net profit decline rate was the largest in nearly five years, at 58.72%.
As is well known, on June 1st of this year, Lin Xiaohai officially took over as Chairman and CEO of Shanghai Jahwa. This means that the performance in the third quarter of this year is the first report card under Lin Xiaohai’s full leadership. However, the current performance is not ideal. The financial report shows that in the third quarter of this year (July to September), Shanghai Jahwa’s revenue was 1.156 billion yuan ($161.9 million), a 20.93% year-on-year decrease, and the net profit was -75.2997 million yuan ($-10.54 million), a significant decline of 180.85%. It is worth noting that this is the first time since its listing in 2001 that Shanghai Jahwa has recorded a loss in the third quarter (note: the third quarter report was not disclosed in 2001).
Regarding the pressure on performance, Shanghai Jahwa stated that the main reasons were: first, domestic business faced significant industry pressure, leading to a decrease in revenue and gross profit due to internal business pressure and strategic adjustments, resulting in a year-on-year decrease in net profit; second, overseas business was affected by low birth rates overseas, increased competition in infant and child categories, and ongoing inventory reductions by distributors, causing both revenue and gross profit margins to decline. To maintain market share, the company continued to increase brand marketing spending, leading to a year-on-year decrease in net profit; third, changes in the fair value of funds and stock investments made by the company and a decrease in investment income year-on-year; fourth, a decrease in investment income from affiliated companies invested by the company.
“Expected to achieve performance growth in the second quarter of next year.”
In addition, at today’s Shanghai Jahwa financial report meeting, Lin Xiaohai also directly addressed the poor performance situation. He stated, “Although from the data perspective, the performance is indeed under pressure, but when dissected, aside from the market influences, the overall operational quality of the enterprise has improved.” Data indicates that during the reporting period, Shanghai Jahwa proactively underwent transformational adjustments, with a 20.36% year-on-year decrease in year-end inventory, a 27.14% year-on-year decrease in accounts receivable, and a 28.6% year-on-year growth in operating cash flow for the January to September period. “The operational quality has significantly improved, laying a solid foundation for future business efforts.”
As widely known, since Lin Xiaohai took the helm, substantial adjustments have been made to the internal structure of Shanghai Jahwa, with significant organizational changes within various business units. Especially in the second quarter of this year, the company intensified efforts in the reform of business unit structures and conducted deeper optimizations of the domestic business architecture.
During this financial report meeting, Lin Xiaohai also introduced that the company’s organizational structure and new personnel appointments have been largely completed. The four major businesses included in the front-end business are personal care (including Liushen, Maxam, and Jia Jie brands), cosmetics (including Dr. Yu, HEBORIST, VIVE, and HERBORIST DERMA brands), innovation (including Giving, HomeAegis, gf brands), and overseas (Tommee Tippee). Looking at the performance for the third quarter of 2024 (July to September), Shanghai Jahwa’s personal care, cosmetics, innovation, and overseas departments respectively achieved revenues of 532 million yuan ($74.49 million), 95 million yuan ($13.3 million), 151 million yuan ($21.14 million), and 374 million yuan ($52.37 million).
Furthermore, from a business strategy perspective, Lin Xiaohai emphasized that Shanghai Jahwa will continue to focus on core brands, brand building, online channels, and efficiency improvement.
In the third quarter of this year, in terms of brand building, Dr. Yu significantly strengthened its investment in professional dermatological research and established advantages through cooperation with key tertiary hospitals nationwide. In August, HEBORIST continued to promote brand rejuvenation with new-generation stars. Additionally, in the third quarter, VIVE achieved rapid growth.
In the online channel sector, Shanghai Jahwa primarily improved and expanded its Douyin live streaming matrix. For instance, in the third quarter of this year, Liushen achieved double-digit growth in GMV through e-commerce channels, with the flagship store on Douyin experiencing a three-digit growth compared to the previous year thanks to the July cooling festival. Dr. Yu accelerated the development of influencer matrices on Xiaohongshu and Douyin platforms.
Regarding the current performance of the brands under the Double 11 campaign, Lin Xiaohai also mentioned that they have “met expectations.” He stated, “The company’s online channels are expected to recover growth in the fourth quarter of this year, while offline channels will require one to two quarters of adjustment and are expected to achieve overall performance growth in the second quarter of next year.”
While it may be premature to judge the success of Shanghai Jahwa’s reforms based solely on one quarter’s performance, in an environment of foreign capital scrutiny and intensified competition among local enterprises, maintaining the position of a leading Chinese cosmetics company is no easy task.
