AmorePacific Q3 Earnings Also Impacted by COVID-19... "Optimism for Next Year Remains"

[Asia Economy Reporter Kum Bo-ryeong] Amorepacific is analyzed to have difficulty recovering its performance in the third quarter as well.

According to NH Investment & Securities on the 30th, Amorepacific's third-quarter performance is estimated at consolidated sales of 1.1325 trillion KRW and operating profit of 34.8 billion KRW. Compared to the previous year, sales decreased by 19.2% and operating profit by 67.6%. The third quarter faces a high base burden due to strong duty-free sales last year.

The resurgence of COVID-19 affected Amorepacific. Mi-jin Cho, a researcher at NH Investment & Securities, explained, "The resurgence of COVID-19 is expected to be a major factor delaying overall performance recovery as the pure domestic sales decline expands compared to the second quarter."

However, it is expected to be better than the second quarter. In the second quarter, high-margin duty-free channel sales decreased by about 30% year-on-year, and global competition peaked alongside the recovery of local consumption in China. In the third quarter, Sulwhasoo is expected to grow double digits based on digital channels in China, but Innisfree's sales decline is expected to continue, resulting in an estimated overall sales decrease of about 8% year-on-year.

Although short-term performance weakness continues, the mid- to long-term directional shift is evaluated positively. The possibility of further stock price decline is also expected to be limited. Researcher Cho said, "Due to the prolonged COVID-19 situation longer than expected, the performance rebound is delayed. Especially, domestic Aritaum and offline Innisfree stores in China continue to experience traffic decline and closure of low-profit stores, making it difficult for sales growth rates to rebound for the time being." However, "Although no performance recovery signals appear in the third quarter, the weakness is already reflected in the stock price, so the possibility of further stock price decline is judged to be limited. Channel restructuring has been delayed, causing a direct hit from COVID-19, but recent shifts to online channels and active responses to expanding the Chinese duty-free channel maintain expectations for performance recovery next year," she added.