A ‘difficult’ Q3: LG H&H’s latest sales dip a consequence of ‘intensified logistics crisis’

The company said it had been hit by various adverse factors such as the spread of the COVID-19 Delta variant, global supply chain shocks, and price hikes of major raw materials “made 3Q very difficult”.​

In particular, the company said sales decline slightly due to “loss of sales opportunities from the intensified logistics crisis”​ ahead of mega shopping events in November, Singles’ Day and Black Friday.

However, the performance of luxury cosmetics and premium products saw improved profitability. Operating profit increased 4.5% year on year (YoY).

Despite the tough quarter, the firm broke its records with its full year-to-date (YTD) earnings, which recorded a sales increase of 5.5% YoY to KRW6.1tn (USD5.2bn) while operating profit increased 8.7% YoY to KRW1tn (USD853m).

Ups and downs

The beauty division, which consists of brands including History of Whoo and Su:m37, recorded KRW 1.26tn (USD1.07bn) in sales in the third quarter, a 10.2% decline from the same period of the previous year.

The division, which accounts for the largest share of its overseas business, suffered the largest loss among all divisions in terms of sales opportunity due to the global logistics complications.

However, despite the challenges, the firm continued to launch new products and engage with consumers through various activities.

Whoo launched the 12th special upgraded edition of its Bichup Jasaeng Essence while belief and VDL collaborated to launch a vegan make-up line targeting millennials and Gen Z consumers.

As a result, the division saw an improvement in profitability by 9.0% to KRW215.4bn (USD184m)

The home care and daily beauty (HDB) division, which has a portfolio of skin care, hair care, and oral care brands, saw sales increase by 6.1% to KRW540bn (USD461m).

This was attributed to high demand for hygiene products led by brands such as Physiogel as well as oral care brand Bamboo Salt.

However, profitability suffered from a sharp rise in raw material prices. This caused operating profit to decline by 4.7% to 64bn (USD55m) won.

Despite this, beauty and personal care products continue to be the main growth driver of the HDB division.

To continue the growth, the company has made efforts to diversify and differentiate its portfolio by securing new brands.

In March, the company acquired the British premium toothpaste brand, Euthymol. Following that, it acquired the US vegan hair care brand Arctic Fox, which is popular among millennial and Gen Z consumers.

Daily Beauty, the main growth driver of HDB, continued to diversify and differentiate its portfolio by securing new brands along with nurturing existing brands.

HDB continued to strengthen its premium brand lineup both domestically and internationally by acquiring ‘Arctic Fox’, a vegan fashion hair care brand that is attracting attention of the MZ generation in the US, following the acquisition of ‘Euthymol’, a British premium toothpaste brand with a strong fan base, last year