Amorepacific, Disappointing Q1 Results but Confirms 'Online' Direction
Recorded Sales of 1.1309 Trillion KRW and Operating Profit of 60.9 Billion KRW... Decreases of 22% and 67% Year-on-Year, Respectively
[Asia Economy Reporter Kum Boryeong] Amorepacific's first-quarter performance fell short of consensus due to the impact of the novel coronavirus disease (COVID-19), but the direction of its online business was confirmed.
According to IBK Investment & Securities on the 30th, Amorepacific's consolidated first-quarter results showed sales of 1.1309 trillion KRW and operating profit of 60.9 billion KRW, representing decreases of 22.1% and 67.4% respectively compared to the previous year.
The main reason for the poor results was the direct impact of COVID-19. Domestic sales decreased by 19%, with cosmetics and duty-free sales dropping by 22% and 30% respectively. Overseas sales also declined by 28.3%, with Asia down 31% and Europe down 7%.
On the other hand, digital sales increased by as much as 80%, demonstrating high growth centered on digital channels. An Ji-young, a researcher at IBK Investment & Securities, said, "Focusing on digital and luxury lineups, Sulwhasoo ranked first among Korean brands in the Tmall domestic flagship store in March." She added, "Based on this trend, digital marketing in China is expected to be strengthened in the second quarter, and the 618 Jingdong Day event at the end of June will serve as a catalyst for Amorepacific's momentum recovery."
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Amorepacific is expected to maintain its store restructuring policy to improve offline channel efficiency while focusing on online channels. Kim Hyemi, a researcher at Cape Investment & Securities, said, "It is positive that the decline in offline channel sales is being rapidly replaced by online channels. In the domestic cosmetics sector, the high dependence on duty-free sales is being offset by a significant increase in digital sales, and in China, the online channel share expanded to about 40% in the first quarter of this year." She added, "To improve profitability, the offline channel efficiency work mentioned earlier this year will be carried out, with plans to reduce 15 domestic Aritaum directly operated stores and 90 Innisfree stores in China by the end of this year compared to the previous year."
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