"Goodbye Corona"... L'Or?al's Performance Shows Cosmetics Recovery Trend

[Asia Economy Reporter Ji Yeon-jin] As COVID-19 vaccination expands, the cosmetics industry is showing signs of recovery. The first-quarter earnings announced by L'Or?al, the world's largest cosmetics company, indicate that demand for cosmetics is reviving.

[Image source=Yonhap News]

According to Yuanta Securities on the 18th, the combined return of the cosmetics sector in the first quarter rose 2% compared to the KOSPI, continuing a strong trend. The combined operating profit for the first quarter is expected to increase by 52% to 820 billion KRW, estimated to exceed market expectations (710 billion KRW) by about 15%.

In particular, retail sales of cosmetics in China grew by 41% until February. Domestic cosmetics retail sales also turned positive for the first time in February, marking an entry into a growth trajectory one year after the severe impact of COVID-19. Since most channels showed favorable trends in March, the cosmetics sector is considered to have entered the early stage of consumer recovery.

The first-quarter performance of the global cosmetics company L'Or?al supports this outlook. L'Or?al's sales in the first quarter reached 7.61 billion euros, growing 5% year-on-year. Excluding exchange rate effects, the growth rate reached 10%, the highest growth rate since 2000.

The Asia region (accounting for 37% of sales) increased by 24% year-on-year, and China surged by 38%. Regions with severe lockdowns due to the COVID-19 pandemic, such as Western Europe (-2%), still recorded negative growth, but North America grew by 6%. Park Eun-kyung, a researcher at Samsung Securities, stated, "Despite the fact that masks are still worn worldwide, demand for cosmetics has been strengthening since the third quarter of last year, and especially from the first quarter of this year, a recovery in demand for color cosmetics has been observed."

Park Eun-jung, a researcher at Yuanta Securities, said, "Last year, domestic cosmetics companies saw a 5% average decrease in direct and indirect employment compared to the same period last year, and small and medium-sized companies decreased by 27%

," adding, "In the first quarter of this year, performance is improving due to the base effect and cost efficiency, and in the second quarter, with the addition of full-scale consumer recovery, profit momentum is expected to be maximized."