Perfect opportunity: Perfect Diary bets on China’s makeup rebound to ‘turn around’ recent slump

Speaking during the firm’s fourth quarter (Q4) earnings conference, the company announced that its makeup division, which includes Perfect Diary, Little Ondine, and Pink Bear, recorded a revenue decline of 56.9% to RMB513.4m.

This reflected “the continued softness in the market demand for colour cosmetics products, as well as intensified industry competition from both domestic and international brands,” ​said Huang Jinfeng, founder, chairman, and CEO of Yatsen Holdings.

The decline of its colour cosmetics business was attributed to the weak consumer sentiment in China’s beauty industry. Huang highlighted that on Tmall, colour cosmetics sales fell by double digits while skin care experienced a single-digit decline.

However, the firm was confident that the consumer market was “well on its way to recovery in 2023” ​and would positively affect its makeup business, especially its flagship brand Perfect Diary.

“We're working very hard to try to turn around our biggest brand, Perfect Dairy,”​ said Haung.

“T​he opening up of the lockdown policy​ will help us in​ our efforts to turn around Perfect Diary this year. At some point in time down the​ road,​ Perfect Diary can​ return to its growth trajectory.​

“As we move into 2023, we will continue to build on our skin care portfolio's success while addressing the challenges in the colour cosmetics landscape… ​Going forward, with a more sustainable business model in mind, we will continue to develop our colour cosmetics product portfolio to capitalise on anticipated consumption rebound in 2023.”​

Irene Lyu, head of strategic investments and capital markets added that the firm was expecting to see a clear recovery in the latter half of the year.

“We do see a recovery of consumption in the makeup business.  We think that recovery will be more prominent in the second half of this year. So, for that, we have a healthy new product pipeline, and we're still adjusting the product mix and channel mix for this brand.”​

She noted that its new lineup of products will debut in the second half of 2023.

“Our major new product pipeline for colour cosmetics is expected in the second half of this year. For the product mix, we would like to increase the contribution from facial makeup. We do have some new products on that area in later half of this year.”​

Skin care success

Conversely, revenues from its skin care brands, which include Dr. Wu, Galénic and Eve Lom, increased​ by 42.4% to RMB471.6m (USD68.4m).

According to the firm, the skin care portfolio accounted for 33.5% of 2022 revenues, more than doubling year on year.

“We do expect our revenue contribution from our skin care brands to exceed at least 50%, or maybe even higher in the longer term,” ​said director and CFO, Yang Donghao.

Lyu concluded: “We're currently cautiously optimistic about the outlook in 2023 and probably more confident in the long-term growth of China beauty market.”​