Declaration of Decoupling from China: Amore and LG Household & Health Care Find Breakthroughs in North America, Japan, and Europe

Q3 Sales and Operating Profit Both Decline Year-on-Year
Expanding Brand and Improving Structure Outside China Market

[Asia Economy Reporter Moon Hyewon] The two major domestic cosmetics companies, Amorepacific and LG Household & Health Care, continued to struggle in the third quarter of this year due to the slowdown in the Chinese consumer market and other factors. Highly dependent on the Chinese market, these two companies have declared a "China exit" following the prolonged lockdown policies in China, and are focusing on strengthening brand competitiveness and improving their business structures in the US and Europe.

According to the industry on the 1st, Amorepacific Group's operating profit in the third quarter was 33 billion KRW, down 36.2% compared to the same period last year. The cumulative annual operating profit also decreased by 45.4% during the same period, recording 193.3 billion KRW.

The domestic business recorded sales of 587.1 billion KRW, down 18.6%, affected by sluggish duty-free channels. The decline in sales from high-profit channels such as duty-free led to a decrease in operating profit. Overseas business also saw a 12.8% drop to 334.8 billion KRW, as sales in the Asian region declined due to the slowdown in Chinese consumption.

During the same period, LG Household & Health Care also posted poor results. Third-quarter sales were 1.8703 trillion KRW, and operating profit was 190.1 billion KRW, down 7.0% and 44.5% respectively from the previous year. In particular, the operating profit of the core cosmetics division plummeted by more than 60%, and sales of the flagship brand "Whoo" dropped by about 35%. The cumulative decline for this year is 41%.

The downturn for the two cosmetics companies has continued since last year. Offline store operations in China were gradually suspended due to COVID-19, and domestic market consumption was sluggish. The duty-free business was hit hard by the decrease in foreign tourists. Amorepacific's overseas business accounts for about 34% of total sales, with China making up 70% of that. LG Household & Health Care also generates about 50% of its sales from China.

To make matters worse, Chinese regulatory authorities are increasingly tightening the registration standards for imported cosmetics.

The rise in raw material prices and high exchange rates have also increased management burdens, which is analyzed as another influencing factor. Additionally, as competitors from countries like Japan accelerate their entry into China, the position of Korean cosmetics companies within China is gradually narrowing. Both companies are strengthening their market penetration in North America, Europe, and Japan to reduce their dependence on China.

Amorepacific is restructuring its Innisfree and Etude brand stores in China and seeking breakthroughs in the North American market. Last month, it acquired the US clean beauty brand Tata Harper and is strengthening its online channel focus centered on Laneige and Sulwhasoo.

Concrete results are also emerging in the North American market. Amorepacific nearly doubled its sales in the North American market in the third quarter compared to the previous year. Laneige ranked first in total sales in the "Beauty & Personal Care" category during the "Amazon Prime Day" held in July.

As part of its North American business expansion, LG Household & Health Care acquired the US cosmetics company New Avon in 2019 and acquired a 65% stake in the US cosmetics company The Cr?me Shop in April. The Cr?me Shop is rapidly increasing its interested customer base (460,000 Instagram followers) through new product launches and channel expansion in the US.

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