AmorePacific Q2 profit and sales fall sharply
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South Korean cosmetics company AmorePacific has reported a -58% fall in operating profit and a -16.5% drop in sales in Q2 2017, compared to the same period in 2016. Net profit plummeted by -59.8% year-on-year.
Operating profit was KW101.6 billion (US$91.13 million) compared to KW240.6 billion in Q2 2016 and sales amounted to KW1,205 billion (US$1.1 billion).
The company said revenue and profitability decreased for its South Korean business, including duty free stores, due to a decline in the number of foreign tourists.
Chinese visitor numbers have fallen dramatically since mid-March because of the well documented THAAD anti-missile dispute between South Korea and China.
On 15 March China imposed a ban on group tours to South Korea, leading to a -40% year-on-year fall in Chinese arrivals in March, a -66.6% decline in April, and a -64.1% decrease in May.
“Revenue decreased for key luxury brands [such as Sulwhasoo and Hera] from a slowdown in the duty free channel,” said AmorePacific in a statement.
“Revenue for premium brands [Laneige, Mamonde etc] decreased due to a decline in number of tourists affecting key commercial areas and the duty free channel.”
The company said the slowdown in sales growth in Asia was a result of “geopolitical uncertainties”, while revenue and profit in North America declined as a result of increased investment in brands and channel portfolio restructuring.
In Europe, sales and profit fell due to the termination of the Lolita Lempicka licence, said AmorePacific.
Questions & Answers
Q.Which specific business areas were most affected by the decline in foreign tourists?
Which specific business areas were most affected by the decline in foreign tourists?
Revenue and profitability decreased for the South Korean business, including duty-free stores. Key luxury brands like Sulwhasoo and Hera, and premium brands such as Laneige and Mamonde, were also impacted in the duty-free channel and key commercial areas.
Q.What caused the significant drop in Chinese tourist numbers to South Korea?
What caused the significant drop in Chinese tourist numbers to South Korea?
Chinese visitor numbers fell dramatically due to the THAAD anti-missile dispute between South Korea and China. China imposed a ban on group tours to South Korea on 15 March, leading to sharp declines in arrivals.
Q.What factors contributed to the decline in sales and profit in AmorePacific's other markets?
What factors contributed to the decline in sales and profit in AmorePacific's other markets?
Sales growth slowed in Asia due to "geopolitical uncertainties." In North America, revenue and profit declined because of increased investment and channel portfolio restructuring. European sales and profit fell after the termination of the Lolita Lempicka licence.
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