'Cosmetics Big 2' Mixed Fortunes Following Performance

LG Household & Health Care up 15.8% in One Month
Amorepacific down 13%

[Asia Economy Reporter Minji Lee] LG Household & Health Care and Amorepacific, representing domestic cosmetics companies, are showing a ‘stock price polarization’ phenomenon. While LG Household & Health Care is on the rise, hitting a 52-week high, Amorepacific’s stock price is on a downward trend.

According to the Korea Exchange on the 2nd, LG Household & Health Care’s stock price rose about 15.8% from the 2nd of last month to the day before. On the previous day, it rose intraday to 1,784,000 KRW, marking a 52-week high. On the other hand, Amorepacific’s stock price fell 12.9% over the past month. It has been declining steadily since hitting 300,000 KRW on May 30.

The difference in the stock prices of the two companies was determined by their Q2 earnings. According to financial information provider FnGuide, LG Household & Health Care’s expected Q2 sales are projected to increase 16% year-on-year to 2.0694 trillion KRW, which is higher than the May forecast of 2.0645 trillion KRW. Conversely, expectations for Amorepacific have lowered; although the company is expected to grow about 17% compared to last year, its sales are estimated at 1.2391 trillion KRW, lower than the consensus two months ago of 1.2478 trillion KRW.

The Chinese market showed contrasting results. LG Household & Health Care earned about 90 billion KRW during the ‘618 event,’ the second largest online shopping event after Singles’ Day last month, estimated to be a 70% increase from a year ago. Especially, strong demand from Chinese consumers for cosmetics brands ‘Whoo’ and ‘Su:m’ is expected to boost operating profit in the cosmetics sector to 232.2 billion KRW, a 30% increase year-on-year. Mi-jin Cho, a researcher at NH Investment & Securities, said, “Sales to China, including duty-free shops and local markets, are growing rapidly. Although digital channel marketing expenses will increase, strong demand for ‘Whoo’ in China has driven the improvement in cosmetics sector performance.”

Amorepacific’s cosmetics brand ‘Sulwhasoo’ failed to meet market expectations during the 618 event. Although sales were expected to increase by 40-50% compared to the previous year during the event, actual growth was around 30%. Marketing expenses for the cosmetics brand ‘Innisfree’ increased during the event period, worsening profitability. Hye-jin Jung, a researcher at Hyundai Motor Securities, explained, “The increased marketing cost burden to strengthen brand power in the Chinese market was a major factor lowering earnings estimates. The stock price fell as psychological factors supporting the rise weakened due to reduced expectations for earnings growth.”

However, with the rise in vaccination rates and the resumption of overseas travel in the second half of the year, growth in the duty-free channel is expected to be prominent, reviving expectations for earnings growth. Hyemi Kim, a researcher at Cape Investment & Securities, explained, “With the spread of travel bubbles and rapid recovery of Chinese arrivals, the number of customers in the duty-free channel is likely to surge. In Amorepacific’s case, although market expectations were previously high, the reopening and sustained growth trend of the Sulwhasoo brand suggest the possibility of a stock price rebound.”

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