L’Occitane ‘bullish’ on China

L’Occitane International, the French cosmetics and personal-care products company, said it was optimistic on its outlook for mainland China, despite what it called a “challenging” global retail environment.

“We are still very bullish on China,” Andre Hoffmann, vice chairman and managing director, said at a press conference in Hong Kong.

“Today, China is the No. 3 market globally for the L’Occitane group,” Hoffman said. “We expect by the end of the fiscal year it could reach the No. 2 market status after Japan,” surpassing the U.S.

The comments came as the Hong Kong-listed company reported a drop in fiscal first-half net income for the period ended 30 September 2017.

Net sales in China for the first half were 60 million euros ($70.7 million), up 18.2% from a year earlier, boosted primarily by a 15.8% increase in same-store sales, the company said in a statement, adding that a marketing campaign featuring Chinese singer Lu Han “continued to draw traffic both online and offline.”

While the company maintains its own e-commerce website in China, Hoffmann noted that “it really cannot compete in terms of traffic and awareness with the major marketplaces like [Alibaba Group Holding’s] Tmall.”

“It is better that we focus our energy and investments to build up the brand through Tmall,” he said.

L’Occitane said first-half net profit fell 59.4% to 10.7 million euros compared with 26.4 million euros in the same period a year earlier.

Thomas Levilion, executive director and group deputy general manager of finance and administration, attributed the drop to unfavorable exchange rates, one-off costs and seasonal effects.

Those included expenses related to the opening of two new flagship stores in London and Paris, marketing and promotional costs in preparation for the important Christmas shopping season, and a tax credit of 6.5 million euros in the year-earlier period.