French cosmetics maker L’Occitane’s profit beats expectations as sales strategy pay off
- US, Russia and China were the fastest-growing markets for L’Occitane
L’Occitane International reported a 21.8 per cent growth in annual net profit on the back of strong sales, handily beating estimates.
The Hong Kong-listed French cosmetics said on Monday that profit attributed to shareholders stood at €117.6 million (US$131.88 million) for the year ended March compared to €96.5 million a year earlier. Analysts polled by Bloomberg had a consensus estimate of 14.5 per cent growth in net profit to €108.33 million.
Net sales jumped 8.7 per cent to €1.42 billion, boosted by its online channels such as e-commerce and marketplaces.
“The United States, Russia and China were the fastest-growing markets, with sales growth at constant exchange rates of 31.8 per cent, 12.2 per cent and 12.1 per cent, respectively,” Thomas Levilion, chief financial officer of L’Occitane, said during a press conference.
The company in January spent US$900 million to acquire premium British skincare brand Elemis to broaden its reach into new markets and expand its distribution channels. Elemis sells both directly to consumers through its websites and wholesale to various distribution channels.
The deal, which was the company’s largest takeover since its listing in 2010, has combined benefits to both firms, said Andre Hoffmann, vice-chairman of L’Occitane.
He said the synergy between L’Occitane and Elemis comes from their shared R&D resources and global network.
“Elemis is a very digital-focused company. Globally they do about 30 per cent of their revenue online versus L’Occitane which is 15 [per cent]. So I think that L’Occitane can also learn a lot from Elemis,” said Hoffmann.
In previous years, L’Occitane collaborated with celebrity brand ambassadors such as Lu Han, a former member of the South Korean-Chinese boy band EXO, and expanded to sell via e-commerce channels in an attempt to boost profits.
Its same store sales growth grew by an average of 1.8 per cent year on year across all markets. China took the lead with a growth of 6.9 per cent but that was far below the 15.1 per cent jump a year earlier. Other Asian countries including Taiwan, Hong Kong and Japan saw a drop of 2.7 per cent, 2.6 per cent and 0.3 per cent respectively. Sales in Europe fell, including a 2.1 per cent drop in France.
“We were affected by external factors like the French protests that blocked shops in main streets,” said Hoffmann.
Even though China and other major Asian markets saw slower growth, the company is still positive about the outlook despite the ongoing US-China trade war.
“A direct impact is difficult to assess … there will be a knock-on impact if consumers and businesses do not feel confident. But we remain optimistic,” said Hoffmann.
Hoffmann said that they will opening more stores and introducing new products such as hair care and body care.
L’Occitane’s shares closed unchanged at HK$13.80 before the results were announced.
