‘Short-term’ setback: L’Occtiane en Provence sales dip attributed to COVID-19 challenges in China, Japan

By Amanda Lim

- Last updated on GMT

’Occitane International’s flagship brand recorded a sales dip of 0.9% in the nine months ending December 2022. [L'Occitane]
’Occitane International’s flagship brand recorded a sales dip of 0.9% in the nine months ending December 2022. [L'Occitane]

Related tags L'Occitane COVID-19 financial results

Hong Kong-listed L’Occitane International’s flagship brand recorded a sales dip of 0.9% in the nine months ending December 2022 due to challenges related to COVID-19 in China and Japan.

This comes after L’Occtiane en Provence reported that sales declined by 5.5% in the third quarter (Q3) of its 2023 fiscal year.

The brand also attributed the decline partly to the divestiture of its business in Russia, as well as “cautious consumer sentiment”​ in markets such as France and the UK.

Lastly, the brand said sales suffered from the brand’s efforts to offer fewer promotions, which affected the brand’s holiday sales performance.

Excluding China and Russia the brand posted sales growth of 1.3% at constant rates for this quarter.

In the nine months ending December 2022 the Group’s net sales amounted to EUR1.60bn (USD1.73bn), representing a 16.5% growth at reported rates and a 10.6% growth at constant rates.

Ripple effects from Asia

Overall, L’Occitane International​ recorded growth of 2.7% at reported rates and a decline of 0.6% at constant rates in Asia Pacific for the nine months ending December 2022.

According to the firm, most countries in the region recorded growth, except China and Japan which were both affected by the COVID-19 situation.

The situation in China, which resulted in store closures, hampered its retail business greatly, which saw an overall decrease of 1.7%.

It highlighted that China saw a low-teens per cent decline at constant rates in Q3. Excluding China, APAC grew by 7.0% at constant rates over the nine months.

However, the company said this slump was temporary and expected its performance to improve moving forward.

“Like many brand operators with a strong retail footprint, we are feeling the effect of China’s exit from COVID-19 restrictions and more cautious sentiment in other markets around the world,” said ​André Hoffmann, vice chairman and CEO of L’Occitane.

“The strongest of the current headwinds are likely to prove short-term. As we head into FY2024, we see ample growth opportunity from launching some of our newer brands into new markets and channels. We remain optimistic about our long-term strategy as a multi-brand and geographically balanced group.”

Performance by geography

The Europe, Middle East and Africa (EMEA) region also reported a slight sales decline of 0.3% at constant rates in the nine months, mainly due to the divestiture of Russia in June 2022

Excluding Russia, EMEA posted growth of 9.2% at constant rates.

The Americas lead the company’s growth with 75.1% at reported rates or 53.7% at constant rates.

According to the firm, this was mainly driven by the accelerated growth of Sol de Janeiro and the solid performance of Elemis in the US.

Brand winners

Elemis, a luxury skin care brand​ acquired by the firm in 2019, posted growth of 11.3% growth at reported rates or 5.3% growth at constant rates in the nine months despite sales decreasing in the third quarter.

Sol de Janeiro proved to be the biggest winner, with growth of 170% in Q3, resulting in a growth of 96% for the nine months.

This was attributed to its successful holiday campaigns, anchored by its hero product, Bum Bum Cream, as well as its highly popular fragrance mists.

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