What happened
Shares of Yatsen Holding Limited (YSG 3.82%) were falling sharply today after the Chinese beauty company missed revenue estimates in its fourth-quarter earnings and offered weak guidance for the current quarter.
As of 1:05 p.m. ET, the stock was down 36.1% today.
Image source: Getty Images.
So what
Yatsen, which owns Chinese beauty brands like Perfect Diary and Abby's Choice, reported revenue in the quarter down 22.1% to $239.8 million, missing estimates at $252 million.
The beauty company was one of several consumer-facing companies in China to post disappointing results in the quarter. China's economy is slowing and the country has imposed significant COVID-related restrictions, which has impacted the beauty industry.
NYSE: YSG
Key Data Points
On the bottom line, Yatsen's adjusted operating loss expanded from $45.2 million to $56.6 million, and it posted an adjusted loss per share of $0.08, compared to the consensus per-share loss of $0.06.
CEO Jinfeng Huang said, "The fourth quarter was a challenging quarter, marked by soft consumer demand and intense competition in the color cosmetics segment."
A broader sell-off in Chinese stocks today may also be weighing on Yatsen. Investors are responding to an SEC announcement of the pending delisting of five Chinese stocks.
Now what
For the current quarter, management expects sales to continue to slide, calling for revenue to decline 35%-40% to $136 million-$147 million, compared to the analyst consensus at $146 million.
Management said that it faced difficult comparisons with the year-ago quarter when the company benefited from pent-up demand for beauty products as some COVID-19 restrictions began to lift. It also cited industrywide weakness in color cosmetics and its strategy of limiting discounts to improve operating margin for the weak top-line guidance.
Yatsen now trades for less than a $1 a share, meaning it could be forced to delist or do a reverse split in order to stay in compliance with New York Stock Exchange regulations. In other words, the stock could easily head lower from here, especially with revenue declining and losses mounting.
