The Cruel COVID-19 Saga... Beauty Industry Faces Deficit Shock "A Thorny Path Ahead in the Second Half"

[Asia Economy Reporter Yujin Cho] The four major domestic beauty companies received disappointing results for the second quarter of this year. The market contraction due to the COVID-19 recession and the rapid changes in domestic and international consumption environments caused the growth engines of beauty companies to lose momentum. Although the four beauty companies are striving to escape the crisis by strengthening online channels, it is expected that the deficit shock will continue into the second half of the year.

Able C&C announced in its semi-annual report on the 14th that its consolidated operating loss for the second quarter was 10.2 billion KRW, turning to a deficit compared to the same period last year. During the same period, sales decreased by 31% to 77.7 billion KRW, and net loss turned to a deficit of 10.9 billion KRW. For the entire first half, sales were 161.2 billion KRW, down 21% from the same period last year, and operating loss and net loss turned to deficits of 22.4 billion KRW and 20.4 billion KRW, respectively.

The poor performance of Able C&C was attributed to deteriorated operations caused by COVID-19. A representative of Able C&C said, "Offline and overseas market sales were severely impacted by COVID-19." As performance plummeted due to the COVID-19 aftermath, the company is focusing on structural improvements to create a turning point, including recent personnel restructuring.

Earlier, on the previous day, Aekyung Industrial also announced a second-quarter operating loss of 1.3 billion KRW, turning to a deficit. Sales recorded 121.9 billion KRW, down 22.5% compared to the same period last year, and net loss turned to a deficit of 4 billion KRW. The deterioration in performance was linked to the worsening slump in its core business of color cosmetics. According to domestic A Home Shopping, Age 20’s Essence Cover Pact, Aekyung Industrial’s largest cosmetics sales source, was excluded from the top 10 sales list for the first time in the first half of this year.

Amorepacific, which announced its results earlier, also saw its overseas business operating profit turn to a loss, with second-quarter operating profit dropping 60% to 35.2 billion KRW. In contrast, LG Household & Health Care recorded an operating profit of 303.3 billion KRW, a 0.6% increase, managing to perform relatively well among the four major beauty companies.

A common concern in the industry is that the key to escaping deficits lies "outside." Beauty companies are restructuring their business models from offline to online and focusing on business stabilization, but to stop the deficit streak, a phase transition following the stabilization of COVID-19 is essential. An industry insider said, "For performance improvement, the recovery of duty-free sales due to free movement between countries and securing competitive advantages in China, which was a growth engine for domestic beauty companies, are urgently needed."

The industry expects the deficit trend to continue for the time being in the second half of the year. According to securities analysts’ estimates, all four major domestic beauty companies are expected to record negative growth in operating profit in the third quarter. LG Household & Health Care, which was the only company to show positive growth in the second quarter, is expected to see a -1.45% decrease, while Aekyung Industrial and Amorepacific are projected to record operating profit declines of -11.48% and -41.30%, respectively.

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