On the evening of August 25, DeRucci Health Sleep Co., Ltd. (001323.SZ) released its semi-annual report for the first half of 2026.

The company posted total revenue of 2.491 billion yuan for the first half, a modest 0.56% year-on-year increase. However, net profit attributable to shareholders fell sharply by 48.13% to 186 million yuan, while net profit excluding non-recurring items declined 36.40% to 181 million yuan.

A closer look at the income statement shows the pressure did not stem primarily from gross margin weakness. The overall gross margin for the period stood at roughly 51.76%, slipping only about 0.14 percentage points from a year earlier. The more pronounced shift appeared on the expense side: total operating expenses across four major line items reached 1.08 billion yuan, an increase of approximately 142 million yuan year-on-year, lifting the expense ratio to 43.34%—a jump of 5.48 percentage points.

Within that total, selling expenses climbed 18.91% to 791 million yuan, and advertising spending surged 40.49% to 274 million yuan. Research and development expenses rose 13.78% to 114 million yuan. The company attributed the elevated spending to brand promotion, AI research efforts, and overseas market development—yet the corresponding revenue uplift during the period remained muted.

Losses related to financial assets further amplified the earnings decline. In the first half, the combined total of investment income and changes in fair value stood at roughly negative 9.86 million yuan, compared with a positive 74.42 million yuan in the same period last year—a swing of about 84.28 million yuan. This also helps explain why the drop in net profit attributable to shareholders exceeded the decline in non-recurring-item-adjusted profit.

Product mix performance diverged across categories. Mattress revenue grew 7.83% to 1.354 billion yuan, remaining the company's primary revenue pillar, although its gross margin contracted 3.53 percentage points to 60.02%. Bed frame revenue dipped 3.19%, sofa sales tumbled 28.65%, and bedding products expanded 19.96%. On a company-defined basis, AI-related product revenue reached 236 million yuan, a substantial 95.69% increase year-on-year.

Overseas operations continued their upward trajectory. International revenue rose 22.69% to 134 million yuan, accounting for 5.37% of total sales, while domestic revenue slipped 0.46%. As of the end of the reporting period, the company operated 53 overseas stores, adding 16 on a net basis during the six-month stretch. While international expansion has begun to contribute incremental growth, the domestic market remains the foundational driver.

External demand conditions remain subdued. According to data from the National Bureau of Statistics, retail sales of furniture from enterprises above a designated size fell 3.7% year-on-year during the first half. New commercial housing sales area declined 11.6%, with residential properties down 12.4%. These metrics do not directly align with mattress sales figures, but they still offer a meaningful read on the broader durable-consumption environment.

Cash flow painted a more encouraging picture. Net cash flow from operating activities rose 43.82% to 124 million yuan, supported by slightly higher revenue and reduced income tax payments. That said, accounts receivable grew 39.28% from the end of last year to 132 million yuan, which the company linked to the expansion of its e-commerce channel and overseas operations.

The central tension for DeRucci in the first half lies in the timing gap between relatively stable revenue and front-loaded expenses. Mattresses, AI products, and overseas ventures have all demonstrated growth, but mattress margins are under pressure and non-core categories are losing ground. Whether selling expenses convert into sustained revenue, AI offerings can broaden their profit contribution, and overseas expansion maintains receivables quality are questions that will require validation in the reports to come.