Yujiahui replied to SZSE that the inventory quality will be improved

With the coming of the traditional sales season in the fourth quarter, the stock quality of yujiahui will improve. On the evening of December 11, yujiahui Co., Ltd. (hereinafter referred to as "yujiahui") issued a reply to the reply of Shenzhen Stock Exchange to the inquiry letter of the third quarter report of 2019, saying that the layout and adjustment of yujiahui had certain impact on the income structure, gross interest rate level, expense and other aspects, resulting in the short-term fluctuation of the company's performance. At the same time, with the coming of the traditional sales season in the fourth quarter, the stock quality of yujiahui will improve. In response to the inquiry of Shenzhen Stock Exchange on the reasons for the sharp decline in performance, the reply to the announcement said that from January to September 2019, in terms of the category structure of yujiahui, the proportion of revenue decreased from 65.77% to 52.74%, while other categories such as water cream rose from 34.23% to 47.26%, and the change in category structure was mainly caused by the growth of international brand agency business. From the perspective of sales unit price, the price of yujiahui's facial mask and water cream category has not changed much compared with that of last year. As the gross profit margin of facial mask category is higher than that of water cream, the overall gross profit margin has declined compared with the same period last year with the change of the proportion of various categories, which has a certain impact on the company's performance in this period.

At the same time, under the environment of rapid development and constant change of domestic cosmetics market, intensified industry competition and increased uncertainty, yujiahui has always focused on the development strategy of multi brand, Omni channel and multi category, and continued to invest heavily in brand construction, business development, organization construction, team adjustment, international brand agency and other fields. In the short term, these arrangements and adjustments have a certain impact on yujiahui's income structure, gross margin level, expense and other aspects, resulting in the company's short-term performance fluctuations. In response to the inquiry of Shenzhen Stock Exchange about inventory, yujiahui pointed out in the announcement that its inventory turnover days are higher compared with the industry, mainly because compared with other traditional cosmetics enterprises, the sales channels are mainly online, accounting for more than 95%. In order to meet the needs of terminal timeliness and diversity, and improve the shopping experience of consumers, it is necessary to maintain a library matching the business development Store goods. From the perspective of sales mode, yujiahui is mainly engaged in direct sales and agency sales, with the distribution business accounting for only about 10%, far lower than other traditional beauty enterprises. For the company mainly engaged in online sales, the inventory in the third quarter is mainly generated by the stock preparation in the peak sales season, and the inventory is the peak of the whole year. With the arrival of the traditional sales season in the fourth quarter, the inventory quality will be improved.

Therefore, the change of yujiahui's inventory turnover rate is mainly influenced by factors such as constantly enriching product categories, expanding business models, and focusing on online sales, which meets the needs of its business development. Bao Yuezhong, an expert in FMCG retail, believes that it is a normal market operation to prepare goods for the peak sales season in the first three quarters, but in the current market environment, it is hard to say whether the goods can be consumed in the end. Referring to the data of 2018, the inventory of 720 million yuan at the end of the third quarter only consumed 20% by the end of the year, and there is still a surplus of 566 million yuan. Song Qinghui, an economist, said it was difficult to consume most of the inventory in the fourth quarter, and it can be expected that a large inventory backlog will continue at the end of this year. The reporter of Beijing business daily interviewed the person in charge of yujiahui about whether the inventory could be consumed in a large amount, but as of the publication, no reply had been received. In addition, the announcement also said that the increase of yujiahui's inventory is mainly due to the company's continuous enrichment of product categories, expansion of business models and other factors, in line with the needs of its business development. For some inventory with long stock age, yujiahui will strengthen inventory management, conduct rolling analysis on inventory by week and control new production orders; instruct the sales department to formulate targeted activity plans to increase sales flexibility; incorporate inventory indicators into the performance evaluation of the business department and establish accountability mechanism to further improve inventory management level and improve inventory quality.

In an interview with Beijing business daily, song Qinghui previously said that high inventory turnover days mean that the company's liquidity is weak, which has a great negative impact on the company's cash flow. As a matter of fact, the cash flow and net profit of yujiahui over the past year do not match. The rationality of this situation has also been questioned by Shenzhen Stock Exchange. When yujiahui replied to Shenzhen Stock Exchange, it said that the net cash flow of operating activities in one year after another was negative, which was mainly due to the increase of inventories of 294 million yuan and 180 million yuan respectively in 2018 and January September 2019, and the change of operating receivables and payables due to the increase of inventories and rapid growth of offline business, which was in line with the actual business situation of the company and reasonable. At the same time, yujiahui said that at present, the asset liability ratio is low, the risk is small, the operation is relatively stable, and the large net outflow of cash from operating activities has no significant impact on its operation.