[Asia Economy Reporter Seungjin Lee] LG Household & Health Care recorded its highest-ever performance last year despite the economic downturn caused by the novel coronavirus disease (COVID-19). This is largely attributed to a stable portfolio composition and improved performance in China.
LG Household & Health Care Achieves Record High Performance... 16 Consecutive Years of Growth
LG Household & Health Care announced on the 28th that its sales last year grew 2.1% year-on-year to KRW 7.8445 trillion, and operating profit increased by 3.8% to KRW 1.2209 trillion. Net profit also rose by 3.2% during the same period, reaching KRW 813.1 billion.
In particular, the fourth quarter of last year recorded the highest performance among all fourth quarters in history. Sales and operating profit increased by 4.0% and 6.3% year-on-year, respectively, to KRW 2.0944 trillion and KRW 256.3 billion. While most domestic cosmetics companies posted sluggish results due to the impact of COVID-19, LG Household & Health Care maintained its growth streak for 16 consecutive years.
The cosmetics business, which struggled early last year, quickly recovered its performance. The cosmetics division's fourth-quarter sales decreased by 0.9% year-on-year to KRW 1.3245 trillion, but operating profit increased by 5.4% to KRW 225.4 billion. Sales had declined by 6.4% in the first quarter and further dropped to 16.7% in the second quarter. However, the sales decline narrowed to 1.5% in the third quarter, and by the fourth quarter, sales had recovered to levels comparable to previous years.
The household goods division drove performance growth with a high growth rate. The household goods division achieved annual sales of KRW 1.8733 trillion and operating profit of KRW 205.3 billion, growing 25.9% and 63%, respectively, compared to the previous year. The beverage division also posted sales and operating profit growth of 4.3% and 26.2%, respectively, reaching KRW 1.5132 trillion and KRW 192.8 billion. This highlighted the portfolio of Vice Chairman Cha Seok-yong of LG Household & Health Care, which consists of cosmetics, household goods (HDB), and beverages (refreshment).
China Plays the Biggest Role in Driving Performance
LG Household & Health Care's cosmetics sales were significantly influenced by performance in China. Fourth-quarter sales of cosmetics in China increased by 41% year-on-year, with an annual increase of 21%. This is attributed to the success of digital channels that have been continuously invested in within China.
In particular, during China’s largest shopping event, the ‘Singles’ Day’ held in November last year, six luxury cosmetics brands including Whoo, Su:m37, O Hui, belif, VDL, and CNP recorded sales of KRW 260 billion, a 174% increase compared to the previous year. Additionally, the resumption of activities by Chinese daigou (personal shoppers) and the expansion of the North American business were also cited as factors contributing to improved performance.
An LG Household & Health Care official explained, "For the first time since the start of the business, we achieved first place in the domestic market across all three sectors: beauty, HDB, and refreshment. Despite the COVID-19 crisis, strong performance in global markets such as China and the United States helped minimize the impact of the crisis."
Meanwhile, as performance in China played a decisive role in driving overall sales, the cosmetics industry has begun unveiling various plans targeting the Chinese market this year.
Amorepacific has reduced the total number of Innisfree stores in China to 141, down from 430 at the end of last year, and plans to close an additional 170 unprofitable stores this year. Instead, the company aims to target young customers in the Chinese market through digital transformation. Amorepacific recently launched a limited edition product called the 'Protection Box' in collaboration with the global fashion brand Off-White, which is popular among young people in China.
Aekyung Industrial has formed a partnership with the Chinese domestic cosmetics company Proya Cosmetics. Through this agreement, Aekyung Industrial plans to expand the offline market for its flagship cosmetics brand ‘AGE 20’s’ in China via Proya Cosmetics’ offline stores and distribution channels. They also plan to conduct joint marketing activities with Proya Cosmetics to enhance brand awareness.
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