Duty-Free and China Slump... Amorepacific Group's 3Q Operating Profit Down 12.7% (Comprehensive)

Sales of 963.3 Billion KRW in the Same Period... 5.7% Decrease
Growth in the US, Europe, and Japan... Struggles in China
Subsidiaries like Espoir See Operating Profit Increase
Incorporation of COSRX Subsidiary... Overseas Expansion

Amorepacific Group received a disappointing report card for the third quarter of this year. The recovery of the duty-free channel and the Chinese market was delayed, resulting in continued poor performance.

Amorepacific Headquarters, Yongsan-gu, Seoul.
[Photo by Amorepacific]

Amorepacific Group announced on the 31st that its operating profit for the third quarter of this year recorded 28.8 billion KRW, down 12.7% compared to the same period last year. Sales for the same period decreased by 5.7% to 963.3 billion KRW.

According to Amorepacific Group, sales grew in various overseas markets such as the United States, Europe, the Middle East, and Japan in the third quarter of this year. However, sales declined in duty-free, global e-commerce, and the Chinese market, leading to an overall decrease in group sales. Among Amorepacific brands, Laneige, Hera, Estra, Primera, Illiyoon, and Labo H performed well. Among subsidiaries, Etude continued its strong growth, achieving a threefold increase in operating profit.

The domestic business of the main affiliate Amorepacific recorded sales of 543.2 billion KRW, down 7.5% from the same period last year, due to declining sales in the duty-free and global e-commerce channels. The overall domestic operating profit fell by 34.5% due to a decrease in operating profit in the cosmetics division and a turnaround to losses in the daily beauty division. On the other hand, sales in the multi-brand shop (MBS) channel grew by more than 50%, and sales in the pure domestic e-commerce channel also increased.

In the luxury brand sector, Hera and Primera showed remarkable performance with increased sales driven by strong sales in the MBS channel. Hera strengthened its brand identity through a new brand campaign with global ambassador Jennie. Primera also attracted attention by launching a brand campaign with its new ambassador, Le Sserafim’s Sakura. Sulwhasoo made its presence felt by launching a new ‘Jinsul line’ and hosting the ‘Night of Art and Heritage’ event in collaboration with the Amorepacific Museum of Art.

Amorepacific’s overseas business showed strong sales growth in the Americas, Europe, the Middle East, and Japan, but sales in Asia, centered on China, declined, resulting in sales of 317.7 billion KRW, down 4% year-on-year. Despite increased marketing expenses in the U.S., Europe, and the Middle East, the overall operating loss was reduced as the deficit in the Asian region decreased.

In the U.S., which achieved 35% sales growth, key brands such as Sulwhasoo, which launched the ‘6th Generation Yunjo Essence,’ and Innisfree, which expanded its presence in the MBS channel, led the growth. Notably, Laneige launched at Sephora Mexico, establishing a foothold for entry into the Latin American market. In Europe and the Middle East, sales increased by 41%, centered on Laneige, which raised brand awareness through the ‘Water Bank’ campaign. Additionally, in Japan, sales of Laneige and Innisfree expanded, and new brands such as Hera and Estra were launched, resulting in overall sales growth of more than 30% based on localization standards.

Major subsidiaries focused on securing future growth engines through new product launches and expanded marketing investments. Innisfree strengthened its image as a high-performance naturalism brand by launching the ‘Retinol Cica Scar Barrier Cream.’ Etude’s overall sales grew with the launch of the new ‘Bear Q Collection’ and strong sales of key products such as the ‘Curl Fix Mascara.’ Operating profit also tripled due to sales expansion and improved channel profit structure. Espoir continued its growth in the domestic e-commerce channel, achieving overall sales growth and improved operating profit.

Specifically, Innisfree’s third-quarter operating profit was 3.7 billion KRW, down 55.4% from the same period last year, but Etude’s was 4.5 billion KRW, up 204.5%, Espoir’s (1.4 billion KRW) increased by 22.9%, and Amos Professional’s (4.1 billion KRW) rose by 14.1%, respectively.

On the same day, Amorepacific also announced that it would acquire the remaining 288,000 shares held by the largest shareholder and related parties of COSRX for 755.1 billion KRW.

Amorepacific acquired a 38.4% stake in the skincare brand COSRX in September 2021 and was granted a call option to purchase the remaining shares. It has now decided to exercise this call option. As a result, Amorepacific will hold 93.2% of COSRX’s shares, and with this additional acquisition, COSRX will be incorporated as a subsidiary of Amorepacific.

Amorepacific plans to accelerate its global market expansion through multifaceted collaboration with COSRX, which has global competitiveness. COSRX operates in more than 140 countries including North America, Southeast Asia, Europe, and Japan, with overseas sales accounting for more than 90% of its total sales.

Kim Seunghwan, CEO of Amorepacific, said, "We plan to further maximize COSRX’s unique capabilities while combining Amorepacific’s vision and business management know-how to nurture it into an attractive brand loved by global customers."

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