AmorePacific's Q3 Operating Profit Falls 15% to 51.7 Billion Won... Accelerating Structural Improvement

[Asia Economy Reporter Seungjin Lee] Amorepacific Group recorded sales of 1.2145 trillion KRW and an operating profit of 51.7 billion KRW in the third quarter of 2021. Compared to the same period last year, sales increased by 0.5%, while operating profit decreased by 15.3%.

In the third quarter of this year, Amorepacific achieved solid sales growth in the domestic market, driven by strong performance in online and duty-free channels. In overseas markets, despite sales growth in North America, sales and operating profit declined due to challenges in the Asian region.

However, in China, total sales targeting Chinese consumers?including local subsidiaries, duty-free, and direct overseas purchases?increased, demonstrating steadily growing demand from Chinese customers for Amorepacific brands. Major subsidiaries improved profitability due to an increased proportion of online sales. The group's total cosmetics division sales for the third quarter amounted to 1.1144 trillion KRW.

Asia Performance Declines Due to COVID-19... North America Sales Up 12%

Amorepacific, the group's core affiliate, achieved sales of 1.1089 trillion KRW, up 1.9% year-on-year. Operating profit was 50.3 billion KRW, down 10.2% from the previous year. Domestic business posted sales of 721.5 billion KRW, up 7.3%, and operating profit of 58.7 billion KRW, up 63.0%. Overseas business recorded sales of 384.1 billion KRW, down 9.2%, and operating profit of 8.5 billion KRW, down 56.6%.

In the domestic market, online channels grew by about 30%, and strong performance in duty-free channels contributed to overall sales growth. Sales expanded centered on growth channels, and cost efficiency improvements in traditional channels led to a significant increase in operating profit in the cosmetics division. Pure domestic online sales achieved growth of over 10%. Functional premium lines were focused on and nurtured in brands such as Ryo, Mise-en-sc?ne, Happy Bath, and Illiyoon, laying a foundation for growth.

In overseas markets, North America's strong performance was a notable achievement. Conversely, in the Asian region, sales declined due to store rationalization efforts and temporary closures or shortened operating hours in some countries caused by COVID-19. Nevertheless, overall demand from Chinese customers continued to increase, showing encouraging signs.

In China, the launch of Sulwhasoo’s ‘Jaumsaeng Cream’ led to approximately 50% growth in total Sulwhasoo sales. Innisfree sales declined due to offline store reductions, resulting in a decrease in total sales in China. However, when combining the performance of local subsidiaries, duty-free, and direct overseas purchases, total sales targeting Chinese consumers showed an increase.

In the ASEAN region, strong sales of Sulwhasoo’s Jaumsaeng line stood out in Thailand and Indonesia. Online channels across the entire ASEAN region also achieved solid growth.

In North America, expansion of on- and offline sales channels resulted in 12% sales growth. Laneige achieved high sales by entering the new channel ‘Sephora at Kohl’s,’ and Sulwhasoo diversified its channels by entering new e-commerce platforms. In Europe, Laneige and Goutal Paris showed strong online sales, maintaining a slight sales growth trend.

Closing Offline Stores, Expanding Online

Innisfree strengthened collaboration with digital platforms, increasing sales in online malls. Overall sales declined due to offline store restructuring. The deficit narrowed due to offline channel efficiency improvements and an increased proportion of online sales. Etude increased e-commerce and multi-brand shop sales through enhanced digital marketing. Overall sales declined due to offline store reductions. The deficit narrowed due to reduced fixed costs such as store operation expenses.

Espoir expanded overall sales through high growth in e-commerce platform sales and strong sales of new products. Profitability in offline channels improved, leading to a successful return to profitability. Amos Professional achieved sales growth for Ayunchae through strengthening its product portfolio and expanding ‘Ayunchae Mall’ operations. However, overall brand sales and operating profit declined due to duty-free store reductions to focus on salon business. O’Sulloc saw high online sales growth driven by strong sales of Chuseok gift sets and enhanced live commerce.

For the remainder of this year, Amorepacific Group plans to continue pursuing management strategies focused on strong brand development, digital transformation, and business structure improvement. The group will also continue efforts to improve profitability through business structure reforms and foster new growth engines such as health functional foods and derma cosmetics.

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