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Amorepacific Group Summary of 1Q 2017 Results

Company 2017-04-24
Amorepacific Group’s 1Q 2017 Sales up 5.5% YoY to KRW 1,855.4 Billion, Operating Profit down 9.7% YoY to KRW 378.5 Billion

For the first quarter of 2017, Amorepacific Group reported sales of KRW 1855.4 billion, up 5.5% year on year and operating profit of KRW 378.5 billion, down 9.7% year on year. The continued stagnation of domestic economy and reduction of inbound tourists after March 2017 attributed to slowing of sales growth and decreased operating profit. Amorepacific Group will aim to sustain growth by refurbishing brands and channels through increased investment.

[Amorepacific Group 1Q 2017] (K-IFRS Consolidated Basis)
[Amorepacific Group 1Q 2017] (K-IFRS Consolidated Basis)
KRW (bn/%) 1Q 16 1Q 17
Amount Amount YoY chg
Sales 1,759.3 1,855.4 5.5%
Operating profit 419.1 378.5 -9.7%
[Sales and Operating Profit of Major Subsidiaries] (Unit: KRW bn)
Sales and Operating Profit of Major Subsidiaries
Subsidiary Amorepacific Corp Growth* Innisfree Growth Etude Growth
Sales 1,569.0 6% 198.4 6% 81.3 0%
OP 316.8 -6% 46.3 -11% 8.8 -29%
Sales and Operating Profit of Major Subsidiaries
Subsidiary Espoir Growth Aestura Growth Amos Professional Growth
Sales 12.5 47% 27.7 14% 25.7 18%
OP 0.5 Turn into profit 1.2 140% 7.3 23%
*Year-on-Year Growth

Results of Major Subsidiaries in 1Q 2017

1) Amorepacific Corporation: Sales at KRW 1,569.0 billion (+6%), Operating profit at KRW 316.8 billion (-6%)
Amorepacific Corporation continued to deliver robust sales growth in travel retail, e-commerce and overseas markets. In Korea, Amorepacific Corp. posted sales of KRW 1,104.4 billion, up 2% year on year and operating profit of KRW 234.0 billion, down 13% year on year. Globally, Amorepacific Corp. accelerated deeper into Asian markets with its five Global Champion Brands: Sulwhasoo, Laneige, Mamonde, innisfree, and Etude. Overseas sales were up 17% at KRW 477.0 billion, while operating profit were up 11% at KRW 88.1 billion.

- Domestic business: Sales at KRW 1,104.4 billion (+2%), Operating profit at KRW 234.0 billion (-13%)

Luxury brands (Sulwhasoo, Hera, Primera, Vital Beautie, etc.) saw increased sales of skincare and inner beauty products. The key brands had a competitive year, with a series of diverse and innovative product launches including Sulwhasoo Timetreasure Renovating Eye Serum, Sulwhasoo Snowise Brightening UV Protector and Hera Rouge Holic Exceptional Valentine’s Day Edition. The brands also widened customer touchpoints through bolstered digital competitiveness.

Premium brands (Iope, Laneige, Mamonde, etc.) garnered popularity with face and lip products, including Laneige Skin Veil Base EX and Laneige Silk Intense Lipstick. In addition, the premium brands expanded channel competitiveness by investing in brand experience spaces such as opening of Mamonde Flagship store, renewal of Aritaum and mart stores.

Mass brands (Ryo, mise en scène, Happy Bath, etc.) experienced sales growth with hair and body care products ranging from Ryo Jayangyunmo to mise en scène Perfect Repair Serum. Key brands added to brand attractiveness by launching new products, while enhancing customer experience via creating differentiated online contents.

Osulloc brand is currently restrategizing its on/offline distribution channels for qualitative growth.

- Overseas business: Sales at KRW 477.0 billion (+17%), Operating profit at KRW 88.1 billion (+11%)

Amorepacific’s global business accelerated deeper into Asian markets with its five Global Champion Brands: Sulwhasoo, Laneige, Mamonde, innisfree, and Etude. In Asia, sales came in at KRW 448.8 billion, 19% higher year on year. Sulwhasoo widened customer touchpoints by opening new stores, boosting its prescence as a luxury beauty brand around the world. Laneige’s top-selling cosmetics products saw dramatically elevated sales expanding its customer base throughout Asia. innisfree expanded by targeting ASEAN member nations, including the large Indonesian market, and is focused on strengthening its leadership position in the Asian natural cosmetics market. Etude continued to introduce new and innovative products (Play 101 Stick, Any Cushion Cream Filter, etc.), which were well received and drove sales growth. In North America, Amorepacific is restrategizing its business portfolio to meet the demands of its diverse US consumer base (-16%) In Europe, sales increased by 7% after Amorepacific’s decision to invest more into the Annick Goutal brand.

2) Innisfree: Sales at KRW 198.4 billion (+6%), Operating profit at KRW 46.3 billion (-11%)
innisfree’s new product launches (Bija Cica Balm, Jeju Lava Seawater Ampoule, etc.) and consistently high sales of best-selling products (The Green Tea Seed Serum, Jeju Orchid Enriched Cream, My Cushion, etc.) resulted in overall sales growth. However, a decrease in the number of inbound tourists reduced travel retail sales.

3) Etude: Sales at KRW 81.3 billion (+0%), Operating profit at KRW 8.8 billion (-29%)
Etude boosted the attractiveness of its brand with new product launches (FIX&FIX Primer, Wonder Fun Park Collection, Glass-Tinting Lips Talk, etc.) and marketing initiatives. However, fewer tourist visits reduced travel retail sales.

4) Espoir: Sales at KRW 12.5 billion (+47%), Operating loss to profit
Espoir turned into profitability with accelerated growth in online and travel retail sales.

5) Aestura: Sales at KRW 27.7 billion (+14%), Operating profit at KRW 1.2 billion (+140%)
Aestura experienced top-line growth with its inner beauty products and medical beauty brands (Meditoxin, Atobarrier etc.), and maximized profits with effective cost management.

6) Amos Professional: Sales at KRW 25.7 billion (+18%), Operating profit at KRW 7.3 billion (+23%)
Amos Professional’s signature products (Colorgenic True Sync S, Feel the Green Tea, Curling Essence, etc.) received positive rEsponses in travel retail sales, dramatically improving total sales and operating profit.