History
History — How the Story Changed
Yatsen IPO'd in November 2020 as the DTC scale story in Chinese beauty — Perfect Diary as flagship, experience stores opening, customer counts compounding. By late 2021 the flagship was already deteriorating; by 2022 management had quietly retired the original thesis and reframed Yatsen as a premium skincare turnaround. The transformation is now four years old: skincare crossed 50% of revenue in 2025, full-year non-GAAP profit was reached for the first time, and the founder put personal money in alongside Trustar Capital in March 2026. The reframing was honest and the numbers eventually backed it — but the equity destroyed in the process is permanent: the ADS has lost ~97% from IPO, the ADS ratio had to be re-pegged 5-for-1 in 2024 to defend the listing, and a 2022 securities-fraud investigation hangs in the background of the period the story changed.
1. The Narrative Arc
The visual reframe is simple: Yatsen lost 36% of revenue in 2022, has not yet recovered to the 2021 peak, but has fundamentally changed what is inside the revenue line. In FY2020 skincare was a side bet; in FY2025 it is the majority of the business.
The single most important pivot: the company management presented in 2020 (digital-native DTC color cosmetics scale) no longer exists. The company today (premium multi-brand skincare with cost discipline) is what management started building in Q4 2021 — and the four-year gap is when the equity value evaporated.
2. What Management Emphasized — and Then Stopped Emphasizing
Quietly dropped: the original IPO trifecta — "DTC customer count" (a hero metric in 2020), "experience stores" (a growth narrative in 2020-2021, recast as "closure of underperforming offline stores" from 2022 onward), and "homegrown Chinese beauty brands" (a cultural-tailwind frame that simply vanished after the 2022 reset).
Replaced with: "strategic transformation," "brand equity," "R&D-led product innovation," "pricing discipline," and from late 2025 a re-emergence of "global positioning." The grammar of the story changed from quantity (customers, stores, brands launched) to quality (margins, hero products, scientific credibility).
3. Risk Evolution
What grew: the listing/structural stack — VIE enforceability, HFCAA/PCAOB, NYSE minimum-price compliance, ADS volatility, history of losses. These are now front-loaded in the FY2025 risk summary, where the IPO disclosure barely mentioned them. The ADS ratio change in March 2024 (1:4 → 1:20) materialised the risk: management was actively defending the listed price.
What shrank: offline experience stores went from a marquee risk (the growth lever) to a near-zero mention as the stores were closed. COVID-19 dominated FY2022 and disappeared by FY2025. Acquisition integration spiked in 2022-2023 around Eve Lom and Galenic, then partially receded after two impairments cleaned the balance sheet.
What never went away: brand reputation and product-trend risk — appropriate for a company whose flagship can deteriorate inside two quarters, as Perfect Diary did in 2021.
4. How They Handled Bad News
The handling has been more candid since 2022 than before. The Q2 2021 Perfect Diary admission — buried inside a routine analyst call without a preview — is the single most damaging communication event in the company's history, and the one that drew the securities-fraud investigation. Since the strategic transformation began, management has tended to pre-guide the bad number (the Q1 2022 -38.3% print was already inside the prior quarter's -35% to -40% guidance) and name the acquisition that failed (Eve Lom, twice). That is a meaningful improvement, even when the underlying numbers remained ugly.
5. Guidance Track Record
Credibility score (1–10)
Trajectory: Improving
Why 6.5 / 10: Yatsen's quarterly revenue guidance has been consistently in-range or beating since 2022 — a real and unusual record for a Chinese ADR that has lost most of its market cap. Strategic promises (skincare migration, margin expansion, R&D credibility, eventual profitability) have all been delivered on a 3-4 year lag, not the 1-2 years originally implied. Honesty around bad news has improved markedly since 2022 (impairments named, brand named, magnitude pre-guided). The score is held below 7 by three lingering issues: (i) the Q2 2021 Perfect Diary admission was the kind of late disclosure that draws fraud investigations, and that investigation has not been formally cleared; (ii) Eve Lom was impaired twice — the first impairment did not surface all the trouble, and the second came one year later with identical wording; (iii) the ADS ratio change in 2024 was framed neutrally when the underlying message was listing-price defense.
6. What the Story Is Now
What the reader should believe: the operating turnaround is real and visible in the gross margin, the skincare share, and the FY2025 non-GAAP profit. Management has been more honest about misses since 2022 than they were before, and guidance has been credible for five consecutive quarters.
What the reader should discount: the valuation implications of "turnaround." The cash balance has fallen by ~80% since the IPO, GAAP profitability is still in front of the company, the convertible note financing implies management does not believe internal cash flow is enough, and the only listed Chinese beauty pure-play has been outgrown by larger competitors over the same five years. The skincare narrative has worked — but the equity story is still about whether the company can grow its way out of the hole the IPO-era strategy dug.
The honest summary: Yatsen is a credibility-improving operating turnaround inside a permanently impaired equity story. The story management tells today (premium multi-brand, R&D-led, margin-disciplined) is supported by the numbers. The story management told in 2020 (DTC scale leader of homegrown Chinese beauty) is not coming back — and the four years between the two stories cost ~97% of the share price.