AmorePacific performance suffers from weak domestic demand

By Amanda Lim contact

- Last updated on GMT

AmorePacific performance suffers from weak domestic demand
AmorePacific Group’s said its performance in 2018 suffered because of weak domestic demand, fierce competition and increased labour costs.

The South Korean beauty conglomerate saw revenue increase by 3% while operating profit fell by 19.2%, failing to meet its 2018 goals of 10% revenue growth and 24% operating profit growth.

Domestic downer

AmorePacific’s brands failed to impress the local market. The company’s operating profit fell 32% to ₩283.7bn due to increased expenses such as personnel costs, while domestic sales remained stagnant at ₩3347.2bn.

The company’s portfolio suffered locally mostly due to its premium beauty range, which consists of Laniege, Iope and Mamonde. The overall sales declined 11.3% due to the withdrawal of IOPE's home shopping channels, said the firm.

However, AmorePacific highlighted that sales of colour cosmetics expanded with the launch of several products such as Laneige Layering Cover, Laneige Stained Glossy and Mamonde All Stay Foundation.

The Group’s Daily Beauty portfolio, which consists of brands like Lye, Mise-en-scene and Happy Bath, showed steady sales growth online. However, poor offline sales ultimately dragged overall sales of the Daily Beauty portfolio down.

Overseas fared better

Business abroad expanded for AmorePacific. Sales grew 8.2% to ₩1.9704 trillion and operating profit increased by 6.4% ₩206.7 billion.

“Overseas business expanded both sales and operating profit last year thanks to robust sales growth of major brands despite investment costs for new global markets,” ​said the company.

In particular, sales in the North American achieved solid growth of 28%. The company attributed the growth to its efforts to strengthen its skin care-focused brands such as Laneige, Mamonde and Innisfree.

However, the Group saw growth decline in Europe. Sales fell 19% to ₩29bn won due to the termination of the Lolita Lempika brand license. For 2019, the brand said it plans to secure competitiveness through brand renewals and brand expansion.

Asia remains strong

The brand continued to grow in Asia, achieving sales growth of 8%.

Flagship luxury brand Sulwhasoo experienced revenue growth with new online and offline stores in China and ASEAN. Additionally, its anti-aging products continued to be popular among consumers.

Laneige continued its success in Asia and entered new markets such as India, the Philippines and Australia. The company said the launch of new products and solid sales of 'Water Sleeping Mask' products helped the brand achieve growth.

In China and ASEAN, Mamonde strengthen its position in the market by expanding into multi-brand shops like Watsons, Sephora and Eveandboy, as well as growing its online retail channels.

Innisfree enhanced its brand appeal by relaunching products with Jeju heritage ingredients. It also accelerated into new markets like Japan, Australia and Philippines, while expanding online and offline in China and the ASEAN region.

Etude saw robust sales growth in Japan, Thailand, Malaysia and the Middle East. The company said it plans to strengthen its connection with the consumer by launching exclusive products for each country and expanding personal colour services.

Brands still suffered

Even though brands managed to do well overseas. It was not enough to compensate for the issues domestically.

Innisfree, Etude House, Espea and Estrade experience overall sales decline of 7%, 16%, 3% and 12% respectively. This was mostly due to the poor performance of its storefronts.

To increase visits to its stand-alone stores, the company plans to introduce a new Innisfree membership system targeted at millennials and renovate its Etude House stores. Additionally, it plans to continue expanding the brand’s personalised make-up service, Colour Factory.

For Espea and Estrade, AmorePacific said it plans to increase its presence in multi-brand shops, which has been gaining popularity in Korea recently.

The company said: “We plan to discover new beauty categories that will become future growth engines such as 'sleeping beauty' and 'personalised cosmetics', and actively respond to growing distribution channels such as duty-free and e-commerce to reinvigorate the domestic beauty market.”

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