Duty-Free Store Slump and Domestic Demand Weakness... LG Household & Health Care Q3 Operating Profit Down 17%

Decline in Duty-Free Store Sales Due to Worsening Duty-Free Market
Beverage Sector Affected by Domestic Demand Slump

LG Household & Health Care posted results below its third-quarter outlook this year. While the duty-free channel, a major cosmetics sales channel, experienced sluggish conditions, the beverage business was also affected by weak domestic demand.

LG Household & Health Care announced on the 29th that its consolidated operating profit for the third quarter of this year was preliminarily estimated at 106.1 billion KRW, down 17.4% from the same period last year. Sales for the same period decreased by 1.9% to 1.7136 trillion KRW, and net profit fell 19.4% to 73.5 billion KRW.

LG Household & Health Care logo.

LG Household & Health Care’s third-quarter operating profit fell short of securities firms’ forecasts. The securities firms had projected LG Household & Health Care’s third-quarter operating profit this year to be around 142.3 billion KRW.

Looking at sales by business division, sales in all three sectors?cosmetics (Beauty), household goods (Home Care & Daily Beauty, HDB), and beverages (Refreshment)?declined slightly. In terms of operating profit, the cosmetics division saw a 42.8% increase due to improved profitability in overseas operations. Conversely, operating profits in the household goods and beverage divisions decreased by 11.8% and 27.5%, respectively.

By region, domestic sales in the third quarter were 1.2534 trillion KRW, down 3.7% from the same period last year. Overseas sales recorded 460.2 billion KRW during the same period, up 3.5%. By country, sales in the Chinese market increased by 12.1% to 153.9 billion KRW, and Japan recorded 96.1 billion KRW, up 10.1%.

Deohu Gongjinhyang Royal Court Set.
[Photo by LG Household & Health Care]

The cosmetics division’s third-quarter sales fell 2.9% year-on-year to 650.6 billion KRW, while operating profit rose 42.8% to 11.4 billion KRW. Overall sales declined due to the slowdown in the duty-free market and streamlining of overseas operations. However, growth continued in key domestic sales channels such as online and health & beauty (H&B) stores.

In China, sales growth continued online centered on the premium cosmetics brand 'The History of Whoo.' LG Household & Health Care increased marketing investments in the third quarter as well, but operating profit rose by more than 40% due to improved overseas profitability.

To respond to the North American market, the cosmetics division nurtured strategic brands and products and launched new products exclusive to North America. The Face Shop sold the 'Migamsu' cleansing line on Amazon, with key products achieving top rankings in their categories. The brand also entered major local distribution channels such as Walgreens, CVS, Walmart Canada, and Kroger. Additionally, it introduced the 'Ultimate Line' skincare products containing functional ingredients.

Furthermore, belif launched new products including the 'Aqua Balm Cooling Eye Gel' and 'Super Drops Glow Serum.' CNP led the Amazon lip butter category for 20 consecutive weeks with its functional lip care product 'Lipserin.'

The household goods division posted third-quarter sales of 562.6 billion KRW, down 1.3% year-on-year, and operating profit of 41.2 billion KRW, down 11.8%. Premium brands such as Physiogel and Usimol continued to grow, but overall sales declined due to the ongoing effects of streamlining North American operations conducted last year. Operating profit also decreased compared to the same period last year due to increased fixed costs.

In the household goods division, Physiogel launched the next-generation moisturizing barrier cream 'DMT Regenerative Cream.' Usimol drove sales growth in Japan with the whitening toothpaste 'Whitening Purple Corrector.' The laundry detergent brand Pigeon released functional new products such as the 'Moraxella Odor Removal Booster.'

The beverage division recorded third-quarter sales of 500.4 billion KRW, down 1.1% year-on-year, and operating profit of 53.5 billion KRW, down 27.5%. Sales slightly declined as beverage consumption decreased amid sluggish domestic economic conditions. However, zero-calorie drinks like 'Coca-Cola Zero' and the energy drink 'Powerade' showed strong sales. Operating profit contracted due to rising raw material costs and intensified competition in the beverage market.

The beverage division strengthened brand marketing and continued launching new products in the third quarter. Powerade, the official sports drink of the Paris Olympics, conducted Olympic-related marketing activities such as cheering campaigns and special package releases. Ambasa introduced its zero-calorie drink 'Ambasa Zero by Fanta' for the first time.

Meanwhile, LG Household & Health Care’s cumulative sales for the first three quarters of this year stood at 5.202 trillion KRW, down 0.7% from the same period last year. Operating profit decreased 3.8% to 415.6 billion KRW. Net profit for the same period rose 3.5% year-on-year to 293.8 billion KRW.