Third Quarter Revenue and Operating Profit Drop by 8% and 57%, Respectively
Duty-Free Channel Inventory Adjustment Lowers Share from 26% to 8%
LG Household & Health Care continued to post sluggish results in the third quarter. This was due to a sharp decline in sales in the cosmetics division, caused by adjusting inventory volumes in the duty-free channel, which also led to a decrease in operating profit. LG Household & Health Care plans to continue restructuring its cosmetics channels through the end of this year, and then embark on a full-scale turnaround starting next year.
According to the Financial Supervisory Service's electronic disclosure system on November 10, LG Household & Health Care recorded an operating profit of 46.2 billion won in the third quarter, a 57% drop compared to the same period last year. Revenue was 1.58 trillion won, and net profit was 23.4 billion won, down 8% and 68%, respectively, over the same period. The company’s profitability is believed to have deteriorated as the cosmetics business division undertook intensive restructuring efforts.
Intensive Restructuring Continues in Cosmetics... Household Products and Beverage Divisions Rebound
The cosmetics business division posted sales of 471 billion won, a 27% decrease from the same period last year, and operating profit turned to a loss at minus 58.8 billion won. Last year, the cosmetics business division accounted for about 40% of total sales, but in this third quarter, its share dropped significantly to 30%.
Brands VDL and CNP showed double-digit sales growth in the multi-brand shop (MBS) channel, but as the company restructured its business by reducing high-burden duty-free inventory, both sales and operating profit are estimated to have dropped sharply. The share of duty-free sales, which was 26% in the third quarter last year, fell to 8% this year.
Instead, LG Household & Health Care is focusing on strengthening its market competitiveness by continuously launching new products from basic and color cosmetic brands popular among Millennials & Gen Z, such as CNP, VDL, and Hince. As a result, the sales share of these premium brands expanded from 28% to 32%. In the third quarter, the main brands’ sales shares were: The History of Whoo at 38%, The Face Shop at 12%, Belif at 5%, and CNP at 5%.
The Home Care & Daily Beauty (HDB) business division recorded sales and operating profit growth of 4.1% and 6.8%, respectively, reaching 596.4 billion won and 42.4 billion won. As overseas business performance expanded, driven by core daily beauty brands, overall results improved. The premium oral care brand 'Yusimol' continued robust sales growth, especially in domestic H&B stores and the Japanese market, while the premium derma scalp care brand 'Dr.Groot' expanded its customer base by moving from popularity in North American online channels to offline channels.
The beverage (refreshment) business division posted third-quarter sales of 512.5 billion won and operating profit of 62.6 billion won, up 2.4% and 16.9%, respectively, from the previous year. Despite a continued downturn in the ready-to-drink (RTD) market, sales increased as marketing activities were strengthened around key distribution channels during the seasonal peak. In addition, efficient management of various costs led to a significant improvement in operating profit.
An LG Household & Health Care official stated, "Restructuring the beauty business is a necessary process for a new leap forward," adding, "With new leadership, we will focus on enhancing business competitiveness and achieving mid- to long-term performance recovery."
Former L'Oreal Executive Lee Seonju Appointed CEO... Will She Lead a Turnaround?
Lee Sunju, the new CEO.
On this day, LG Household & Health Care announced through a temporary shareholders’ meeting and board of directors that Lee Seonju had been newly appointed as CEO.
CEO Lee is a marketing expert and business leader who has built a 30-year career in both global and domestic cosmetics industries, leading the growth of various brands such as Kiehl’s, Yves Saint Laurent, Mediheal, and AHC. Most recently, she led the specialty coffee brand Terarosa.
LG Household & Health Care expects CEO Lee to leverage her experience at global cosmetics companies to drive overseas market expansion and strengthen the competitiveness of the struggling cosmetics division. The company stated, "We recruited her as the right person to lead a 'step-up' in the cosmetics business, recognizing her outstanding marketing sense derived from diverse brand marketing and business experience."
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