Impact of Weakened Consumer Demand in Beauty and Beverage Divisions
Growth in Overseas Sales Including Japan and North America
LG Household & Health Care saw its profitability decline in the first quarter of this year due to the ongoing domestic and global economic downturn.
On April 28, LG Household & Health Care announced in a regulatory filing that its consolidated operating profit for the first quarter of this year was provisionally tallied at 142.4 billion won, a decrease of 5.7% compared to the same period last year. During the same period, sales fell by 1.8% to 1.6979 trillion won, and net profit dropped by 8.5% to 103.5 billion won.
By business segment, both the Beauty and Refreshment (beverage) divisions saw declines in both sales and operating profit, which the company attributed to a high base effect and sluggish consumer demand, respectively. In contrast, HDB (Household Daily Beauty), which has been receiving positive responses overseas, particularly for its premium brands, recorded increases in both sales and operating profit. In terms of overseas sales, North America returned to growth, while Japan posted strong growth of 23.2%. Meanwhile, sales in China declined by 4.1%.
Specifically, the Beauty division's first-quarter sales decreased by 3.4% year-on-year to 708.1 billion won, while operating profit fell by 11.2% to 58.9 billion won. Although the main overseas and domestic channels grew, sales declined due to poor performance in so-called "traditional channels" such as duty-free shops and door-to-door sales. Operating profit also declined in line with the decrease in sales.
In overseas markets, CNP, a derma cosmetic brand, as well as color cosmetics brands Hince and VDL, saw significant growth in Japan. Domestically, new growth channels such as online platforms and health & beauty (H&B) stores continued to expand.
HDB sales increased by 2.2% year-on-year to 573.3 billion won, while operating profit rose by 13.7% to 36.6 billion won. Despite sluggish domestic consumption, both sales and operating profit increased as overseas markets saw strong sales, particularly for daily beauty premium brands such as Physiogel, Eucerin, and Dr.Groot.
The Refreshment division's first-quarter sales shrank by 4.1% year-on-year to 416.4 billion won, and operating profit decreased by 10.8% to 46.9 billion won. The company explained that overall beverage consumption slowed due to the economic downturn, and continued cost pressures from rising raw material and subsidiary material prices led to declines in both sales and operating profit. However, major brands such as Coca-Cola Zero and Monster Energy maintained solid demand, and new products catering to the tastes of the MZ generation (Millennials + Generation Z), such as Sprite Zero Chill and Powerade Zero Lime, have also received positive responses, according to the company.
An LG Household & Health Care representative stated, "We are strengthening our competitiveness by expanding products that align with market trends to broaden our domestic and international customer base," adding, "We will seek growth by strengthening our market response with tailored marketing strategies for each distribution channel and by developing products that can provide differentiated customer experiences."
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