'Beauty Big 2 Peak Season' Mixed Results Amid COVID-19

[Asia Economy Reporter Yujin Cho] The beauty giants Amorepacific and LG Household & Health Care received contrasting results in the first quarter. The first quarter, which includes the Chinese Lunar New Year (Chunje), is considered the peak season of the year for these two companies, whose main focus is duty-free business, but this year the situation changed due to the spread of the novel coronavirus disease (COVID-19).

Amorepacific Group announced on the 28th that its consolidated operating profit for the first quarter of this year was tentatively estimated at 67.9 billion KRW, a 66.8% decrease compared to the same period last year. During the same period, sales amounted to 1.2793 trillion KRW, down 22.1%, and net profit was 94.8 billion KRW, down 41.9%.

COVID-19 dealt a direct blow to duty-free sales, leading to a sharp decline in performance. Just before Chunje (Chinese Lunar New Year), the biggest shopping season in China, COVID-19 spread and prolonged, affecting domestic duty-free and local demand in China. The fact that Chinese people were stuck during the peak travel season of Chunje directly impacted the sharp drop in domestic duty-free sales, and the suspension of operations at local stores in China led to a decrease in overseas business sales and operating profit.

Despite the adverse effects of COVID-19, Amorepacific Group is determined to strengthen brand competitiveness by continuously launching new products both domestically and internationally. In the first quarter, it launched Sulwhasoo Sulrin Eye Cream in China and Sulwhasoo Jinsul Myungjak line in Thailand, securing competitiveness in the anti-aging category. It is also strengthening online channels in China through various brand activities on platforms such as Tmall.

On the other hand, LG Household & Health Care posted an operating profit of 333.7 billion KRW in the first quarter, a 3.6% increase compared to the same period last year. Although the growth rate is modest compared to its historical performance growth, it managed to maintain growth in sales, operating profit, and net profit. Sales have grown for 58 consecutive quarters since the third quarter of 2005, and operating profit has increased for 60 consecutive quarters since the first quarter of 2005.

LG Household & Health Care stated, "Despite the Chinese market not operating normally due to the impact of COVID-19, the beauty business minimized the shock of sales and operating profit decline thanks to strong demand for luxury brands."

By segment, cosmetics sales recorded 1.0655 trillion KRW, down 6.4% year-on-year, and operating profit was 221.5 billion KRW, down 10.0%.

Due to the impact of COVID-19, which intensified from February, sales in major channels in both domestic and overseas cosmetics markets plummeted, and the duty-free channel was severely hit, especially due to the significant decrease in foreign tourists including Chinese visitors. On the other hand, the ultra-premium lines of 'Su:m37' and 'O Hui' grew based on high demand, and the dermocosmetics brand CNP also drove performance with a 13% sales increase.

Sales in the household goods business grew 19.4% year-on-year to 479.3 billion KRW, and operating profit increased 50.7% to 65.3 billion KRW. Increased demand for hygiene products contributed to the performance growth. Beverage sales grew 5.0% year-on-year to 350.5 billion KRW, and operating profit rose 43.9% to 46.8 billion KRW.

Industry insiders expect that the damage to the main revenue sources, duty-free and the Chinese market, will continue into the second quarter and the second half of the year. An Amorepacific official said, "Although some offline stores and production facilities in China have partially resumed operations, it is difficult to accurately grasp the current situation." The official added, "Laneige, located in the large shopping mall Jing’an Plaza in Shanghai, recently reopened, but offline traffic remains sluggish."

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