L’Occitane profit rose after Restructuring
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Hong Kong-listed beauty-products retailer L’Occitane is reaping the benefits of a restructure with profit up 21.8 percent last financial year to €117.6 million.
And chairman Reinold Geiger says even better results are in the pipeline. “The group now operates as a multi-brand entity, where unique brand identities are celebrated and common values shared — respecting nature, creating authentic and genuine experiences, promoting entrepreneurship, and bringing a human approach to beauty,” he said in a statement.
“The group encourages its brands to stay agile and autonomous, yet synergies are also being identified and capitalized. With the material improvements delivered by the core L’Occitane en Provence brand, combined with the largely accretive consolidation of Elemis, the group expects to see enhanced profitability in 2020 and beyond.”
Group net sales were €1.427 billion for the year to March 31, up 8.7 percent at constant exchange rates. Gross margin remained high at 83.2 percent and operating profit rose by 6.9 percent.
L’Occitane’s Hong Kong net sales were €137 million, an increase of 9.9 percent year on year, or 8.6 percent at constant exchange rates. However, same-store sales fell 2.6 percent.
“Macroeconomic uncertainties continued to erode consumption sentiment, reflected in a marked downturn in the Hong Kong retail market after the first quarter of {last year}, notably in the average ticket value,” the company said in its earnings review. “Meanwhile, the increase in mainland tourist traffic brought by new infrastructure did not uplift Hong Kong retail sales.”
Sales in China reached €178.1 million, an increase of 11.9 percent, or 12.1 percent on a constant-exchange-rate basis.
“Sales momentum in China was dynamic throughout the whole year,” the company said. “Sell-out sales remained strong even though trading with seven fewer stores than last year, posting a growth of 9.6 per cent at constant exchange rates, and with same-store sales growth at 6.9 percent. The marketplace channel continued to drive growth, with impressive performances recorded during key festivals such as Singles’ Day, Chinese New Year and Women’s Day. Sell-in sales also posted encouraging results, with the growth of more than 30 percent, thanks to the launch of JD and dynamic B2B sales.”
“Meanwhile, the increase in mainland tourist traffic brought by new infrastructure did not uplift Hong Kong retail sales.”
In Japan, net sales rose 1.5 percent to €222.1 million, however in the local currency, the growth was just 0.1 percent. “The flattish performance was due to a sluggish retail market. Nonetheless, retail sales of L’Occitane en Provence grew at a low single-digit rate as compared to last year, thanks to the new stores opened, the large-scale “Balloon Journey” marketing event and successful face care campaigns during the year.”
Taiwan net sales of €38.2 million represented a decline of 3.2 percent at reported rates, or 2.7 percent at constant exchange rates.
“The Taiwan retail market remained competitive,” the company said. “The decrease in sell-out was largely explained by the negative 2.7 percent same-store sales growth, together with the typhoon hits and poor weather during the summer season. Web sell-out channel, however, recorded double-digit growth, thanks to the revamped own e-commerce platform as well as the development of the marketplace.”
Most other markets remained static for L’Occitane, with the exception of Brazil, where sales fell by 4 per cent, and the US, where they soared 35 per cent.
Questions & Answers
Q.What is the company's strategy following the restructure?
What is the company's strategy following the restructure?
The group now operates as a multi-brand entity, celebrating unique brand identities while sharing common values. It encourages brands to stay agile and autonomous, but also identifies and capitalises on synergies to enhance profitability.
Q.How did L’Occitane perform in Hong Kong compared to mainland China?
How did L’Occitane perform in Hong Kong compared to mainland China?
Hong Kong net sales increased by 9.9 percent to €137 million, but same-store sales fell 2.6 percent due to macroeconomic uncertainties. In contrast, mainland China sales rose 11.9 percent to €178.1 million, with strong sell-out sales despite fewer stores.
Q.Which market saw the most significant growth for the company?
Which market saw the most significant growth for the company?
The US market experienced the most significant growth, with sales soaring by 35 percent. This strong performance contrasts with other markets, such as Brazil, which saw a four percent decline in sales.
Q.What was the reason for the flat sales performance in Japan?
What was the reason for the flat sales performance in Japan?
The flat sales performance in Japan, with only 0.1 percent growth in local currency, was attributed to a sluggish retail market. Despite this, retail sales of L’Occitane en Provence grew slightly due to new stores and marketing events.