‘TS Shampoo’ TS Trillion, Three Consecutive Quarters of Losses... Insufficient Despite Son Heung-min and GD①[Companies at a Crossroads]

[Asia Economy Reporter Jang Hyowon] TS Trillion, the seller of ‘TS Shampoo,’ has recorded losses for three consecutive quarters. Despite spending large amounts on advertising by hiring football player Son Heung-min and singer G-Dragon as models, it seems difficult to recover its performance.

According to the Financial Supervisory Service’s electronic disclosure on the 18th, TS Trillion posted an operating loss of 1.47 billion KRW in the first quarter of this year. This is a 516% increase compared to 20 million KRW in the same period last year. During the same period, sales increased by 35% to 17.3 billion KRW, but the cost of goods sold more than doubled from 5.2 billion KRW to 10.6 billion KRW, leading to a decrease in gross profit.

Selling and administrative expenses also increased, with advertising expenses showing a significant rise. In the first quarter of this year, TS Trillion spent 3.87 billion KRW on advertising, which is 75% higher than 2.2 billion KRW in the same period last year. Advertising expenses account for 22% of total sales. For consumers, this means that when purchasing a product priced at 10,000 KRW, 2,200 KRW is paid as advertising costs.

TS Trillion uses singer G-Dragon as the model for TS Shampoo. Singer Hyerigo is the model for Tima Mask, and actor Lee Jang-woo is the model for all products except TS Shampoo and for masks. Until last month, football player Son Heung-min was the model for TS Shampoo.

Despite having famous celebrities and athletes as models, the company has continued to post losses for three consecutive quarters. On a consolidated basis, TS Trillion recorded an operating loss of 4.6 billion KRW in the third quarter of last year and 3.3 billion KRW in the fourth quarter. It also posted an operating loss of 200 million KRW in the first quarter of last year, recording losses in every quarter except the second quarter.

Since listing on KOSDAQ, the company has recorded losses in all quarters except one. This is a significant deviation from the performance forecasts TS Trillion announced to the market at the time of listing.

TS Trillion was listed on the KOSDAQ market in December 2020 through a merger with HiJe 4th Special Purpose Acquisition Company (SPAC). At that time, TS Trillion projected sales of 82.7 billion KRW and operating profit of 10.5 billion KRW for 2021. However, actual sales were 49.9 billion KRW with an operating loss of 7.6 billion KRW. The company turned to losses starting from the first quarter of last year, right after listing. TS Trillion forecasted an operating profit of 12.7 billion KRW for this year, but it has recorded a loss of about 1.5 billion KRW since the first quarter.

As losses continue, the financial structure has also deteriorated. As of the end of the first quarter this year, TS Trillion’s debt ratio stood at about 779%, sharply rising from around 340% at the end of last year. This is because the total liabilities increased from 50.6 billion KRW at the end of last year to 60.9 billion KRW in the first quarter, while total equity decreased from 14.9 billion KRW to 7.8 billion KRW. The decrease in total equity is analyzed to be due to derivative valuation losses from convertible bonds being reflected in net losses for the period.

Meanwhile, TS Trillion sells products such as Gold Plus TS Shampoo, New Premium TS Shampoo, All New TS Shampoo, as well as TS Good Dye, TS Guard Tima Color Mask, and others.