Qianye Lin: That’s very helpful. May I just add one more question. So, what do you see the operating margin for the color cosmetics in the long run?
Donghao Yang: Well, for the color makeup business, generally, the margin profile is lower compared to that of skincare brands. So, if you look at both major international color makeup brands, typically, the operating margin could be in the low to mid-teens and net margin mid to high-single digits as a reference point.
Qianye Lin: I have no more questions. Thanks.
Donghao Yang: Thank you.
Operator: The next question comes from Olivia Tong with Raymond James. Please go ahead.
Devin Weinstein: Hi. Good evening. This is Devin Weinstein on for Olivia and I appreciate you taking our questions. I wanted to start out asking you perhaps a bit more broadly what you are seeing on the consumer front as China continues to reopen? What you are seeing across the beauty category across the different sub categories makeup, skincare? And perhaps how the consumer is shifting their spending behavior between channels? And second question would be your view on promotion as travel continues to recover and consumer mobility improves? And perhaps how your expectations for promotion across e-commerce and brick and mortar channels would vary? Thank you.
Irene Lyu: So, the first question on €“ the outlook of the beauty market in China. So, we are currently cautiously optimistic about the outlook in 2023 and probably more confident in the long-term growth of China beauty market. So, the recent lift of the quarantine and travel restrictions definitely created more social activities, which is a positive factor for both the makeup and skincare categories. However, there is still uncertainty on the path to full recovery. So, as it reopened in last December, followed by an outbreak of the pandemic and the rebound of the consumption of beauty have really been very clear in the first quarter of 2023. We do see a rebound of traffic in offline, plus the consumption level and the spending falls back to the pre-COVID situation.
But we think as the reopen continues and people’s disposable income continues to recover, we do expect a rebound of the beauty market probably happen in the latter half of this year. That’s why we plan to allocate more marketing resources and also new launches in the second half of this year. So, regarding your second question on promotions, so we think we have talked about this couple of times in the past earnings call. We still expect the international players to continue their heavy promotions, which began during the pandemic because we think it’s still one of the key drivers for the wealth in China, and China growth is the key driver for the global growth. So, if they still continue with the heavy promotions, they may lose the pricing competitiveness, and as a result, losing market share.
And also as the travel retail channel is likely to accelerate, the international players may adjust their price policy to balance the travel retail e-commerce in the China market. That’s our current €“ on the outlook and the current competitive landscape in China.
Devin Weinstein: Thank you. Appreciate your time.
Irene Lyu: Thank you.
Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.
Irene Lyu: Thank you once again for joining us today. If you have any further questions, please feel free to call at Yatsen directly or at Piacente Investor Relations. Our contact information for IR in both China and the U.S. can be found in today’s press release. Thank you and have a great day.
Operator: The conference has concluded. You may disconnect your line.
