Beauty Big 2's Mixed Results Amid COVID-19

[Asia Economy Reporter Yujin Cho] The beauty industry giants Amorepacific and LG Household & Health Care received contrasting results for the third quarter. Amid sluggish domestic demand due to the impact of the novel coronavirus (COVID-19), LG Household & Health Care, which saw some recovery in Chinese demand centered on duty-free sales, performed well, while Amorepacific continued to experience a sharp decline in operating profit.

On the 28th, Amorepacific, a major affiliate of Amorepacific Group, announced through its earnings disclosure that its consolidated operating profit for the third quarter was tentatively estimated at 56 billion KRW, down 47.9% compared to the same period last year. During the same period, sales decreased by 22.4% to 1.0886 trillion KRW, and net profit dropped 93.1% to 7 billion KRW. The sharp decline in operating profit was attributed to the impact of COVID-19, which caused a decrease in sales from offline channels such as duty-free, department stores, and door-to-door sales.

An Amorepacific official explained, "Due to the impact of COVID-19 and the restructuring of distribution channels, sales from offline channels such as duty-free, department stores, and road shops declined, leading to a decrease in operating profit. Overseas, the continued spread of COVID-19 also caused overall sales and operating profit to decrease."

On the other hand, LG Household & Health Care continued its profit growth despite the adverse effects of COVID-19. LG Household & Health Care, which announced its earnings earlier on the 22nd, reported a consolidated operating profit of 327.6 billion KRW for the third quarter, a 5.1% increase compared to the same period last year. Sales during the same period grew 5.4% year-on-year to 2.0706 trillion KRW, and net profit increased 6.7% to 231.7 billion KRW.

Operating profit has maintained growth for 62 consecutive quarters since the first quarter of 2005, except for a single contraction in the first quarter of 2014. Although the cosmetics business declined 6.7% year-on-year, strong performance in the household goods and beverage businesses sustained the overall operating profit growth. A LG Household & Health Care official stated, "The improvement in operating profit was due to the reduction in the decline of operating profit in the cosmetics business, which was the most affected by COVID-19, from 15.3% in the first half to 6.7% in the third quarter, and the continued strong performance of the household goods and beverage businesses."

The reason behind LG Household & Health Care's strong performance amid the COVID-19 situation is attributed to the improved performance of luxury brands such as 'Whoo' in China. According to LG Household & Health Care, the sales decline rate in the duty-free channel, which accounts for one-third of cosmetics sales, drastically decreased from 31% in the first half of this year to 2% in the third quarter. Despite it being the off-season for cosmetics in China, digital channels centered on Whoo, O Hui, and CNP achieved good results, leading to a 22% sales growth. In particular, Whoo achieved excellent results in China's leading digital channels, ranking first in basic cosmetics on Alibaba's Tmall Super Brand Day in August.

Amorepacific is determined to establish a foothold for performance improvement through innovative product launches and synergy marketing between online and offline channels. The notable growth in online channels due to strengthened digital marketing this year is encouraging. An Amorepacific official said, "We plan to continue efforts to diversify markets, such as Sulwhasoo entering India's Nykaa and Etude entering multi-brand shop channels in China and Malaysia."