[Click eStock] LG Saenghwal Geongang, 'E-commerce' Supports Despite COVID Impact

LG Household & Health Care's 'Whoo' Confirms Local Demand in China During Guanggunje
"Offsetting Offline Sales Slump Caused by COVID-19"

[Asia Economy Reporter Minwoo Lee] Amid the global consumption contraction caused by fear of the novel coronavirus infection (COVID-19), attention is being drawn to the e-commerce performance of LG Household & Health Care.

On the 4th, Yuanta Securities maintained a 'Buy' investment rating and a target price of 1,508,000 KRW for LG Household & Health Care. Since the success or failure in the Chinese cosmetics market last year was determined by e-commerce, it is judged that LG Household & Health Care, a strong player in e-commerce, can recover the sales gap in the first quarter and achieve results through this channel.

The impact of COVID-19 is not insignificant. Among LG Household & Health Care's business areas, the duty-free sector, China, and domestic offline channels are significantly affected by COVID-19. In particular, the duty-free sector, which contributes greatly to profits, is the most concerning. Eunjeong Park, a researcher at Yuanta Securities, stated, "Overall inbound traffic decreased by 40% in February compared to last year, and passenger numbers through major Chinese airlines dropped by nearly 80%. As the number of confirmed cases in Korea increased, 36 countries designated Korea as a travel-restricted country, making it inevitable that sales related to inbound customers will remain sluggish until COVID-19 is completely eradicated."

However, since most companies in China resumed operations and factory restarts from the 11th, after the Lunar New Year holiday last month, normalization is expected around May to June. It is understood that Chinese e-commerce will offset some of the offline sales decline, and differentiation will occur centered on companies that experienced strong demand in e-commerce. Researcher Park explained, "LG Household & Health Care's domestic No.1 luxury brand 'Whoo' ranked 4th among luxury brands on Tmall during last year's Singles' Day, following Est?e Lauder, Lanc?me, and SK-II in terms of sales volume." She added, "Due to the favorable e-commerce trend, the e-commerce proportion, which was in the low 20% range in 2018, expanded to the high 20% range in the fourth quarter, resulting in nearly double growth in e-commerce sales." Given the confirmed demand for e-commerce in China, it is expected that the offline sales leakage can be offset.

This content was produced with the assistance of AI translation services.