Duty-Free and Cosmetics Stocks 'Down' Amid China's Consumption Slowdown... Eyes on Guanggunje

[Asia Economy Reporter Ji Yeon-jin] As the analysis points out that the poor performance of domestic duty-free shops and cosmetics companies in the third quarter this year was largely due to the slowdown in Chinese consumption, attention is focused on November 11, the largest shopping period in China, known as Guanggunjie.

On the 8th, Jongdae Park, a researcher at Hana Financial Investment, diagnosed that "the poor performance of duty-free shops and cosmetics companies in the third quarter was largely influenced by the slowdown in Chinese consumption," adding, "Concerns about a trend of consumption slowdown have been raised due to the contraction of the Chinese real estate market and the Chinese government's consumption restraint policies aimed at resolving polarization. In particular, the consumption slowdown of overseas cosmetics was also burdened by China's patriotic consumption craze called 'Guochao'."

Guochao has recently become more than just consuming domestic products; it has become a link that connects the people and national culture. According to Baidu's 2021 Guochao search big data, the top 10 most notable Guochao-related issues ranked domestic digital products, fashion, and cosmetics as first to third. However, it is pointed out that concerns about Guochao in cosmetics may be limited. Cosmetics can be purchased online and are applied to the face, so they are not visible like cars, shoes, or clothes. Because of this, during the 2017 THAAD retaliation measures, 'Whoo' sold well, according to analysis. A representative Guochao brand in cosmetics is 'Florasis,' which is produced by Cosmax.

Cosmetics exports increased by 20% year-on-year last month, but since exports include duty-free shop volumes, it is pointed out that there are limitations in using this as an indicator of Chinese consumption. For this reason, November 11's Guanggunjie is expected to be an important consumption indicator. Opinions on Guanggunjie are divided. Overall, there are many voices of concern, but some companies are reportedly showing confidence. Amorepacific's Sulwhasoo and Aekyung Industry's 'Age 20's' have already significantly shifted to their Chinese subsidiaries, and LG Household & Health Care sold 100 billion KRW worth of Whoo's representative product 'Cheongidan Hwahyun' during the pre-sale on October 20 last month through China's top beauty influencer Wei Ya.

Researcher Park said, "Recently, distribution cosmetics companies have had poor investment returns due to third-quarter poor performance, Chinese consumption slowdown, and inflation concerns," adding, "In times of great uncertainty, a strategy of being as defensive as possible is reasonable, and companies with valuation room, small Chinese sales proportions, and high earnings visibility can fall into this category."

However, if Guanggunjie sales exceed 10%, concerns about the slowdown in Chinese consumption are expected to ease somewhat, and it was added that this could act as a stock momentum for major cosmetics and duty-free shop companies such as Amorepacific, Cosmax, and Hotel Shilla.

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