Sales increase 1.0% to KRW 1.5689 trillion; operating profit decrease 35.2% to KRW 110.4 billion
Amorepacific Group recorded KRW 1.5689 trillion in sales and KRW 110.4 billion in operating profit in the second quarter of 2019. Year-on-Year sales increased by 1.0% while operating profit went down by 35.2%.
In the second quarter, Amorepacific Group pushed ahead with the development of innovative products, expansion of physical spaces for customer experience and diversification of retail channels in Korea and abroad. Despite difficulties in the business environment, it continued to invest in brands and retail channels to build a solid base for its future growth.
Hera, Mamonde and Innisfree introduced the innovative Black Foundation, Red Energy Recovery Serum, and Personal One Cream respectively to target millennial beauty enthusiasts. The new ‘Ice Beauty’ category developed from years of research was introduced in the beauty market. The change and evolution of steady selling products, such as Sulwhasoo First Care Activating Serum EX Limited Edition and renewal of Laneige Water Bank Essence, were also notable.
Key marketing activities, such as the Sulwhasoo First Care Activating Serum EX Pop-up Store, Iope Skin Week, and Invitation to Mamonde Garden aimed to enhance the customer experience. Cross-company campaigns including ‘Beautiful April’ and ‘Beauty Point Boom (May)’ aimed to better engage existing customers and attract new customers.
In addition, Amorepacific Group rolled out additional Aritaum Live Stores, and actively entered multi-brand shop channels as part of efforts to overcome the limits of the conventional road shop channel. It also signed an MOU with Lazada Group, the e-commerce corporation in Southeast Asia, to boost its competitiveness in international retail channels.
The company is set to build its ‘fandom’ through the release of new innovative products and a differentiated brand experience in the latter half of the year. It will launch new brands, particularly in the key global markets, including Asia and North America, to strengthen its presence as a global beauty company.
Plans include Mamonde’s recent new store opening in Indonesia, as well as Primera making its debut in the Chinese market via e-commerce channel. Innisfree will open its first store in Canada and Etude House is planning expansion into Vietnam.
Amorepacific Group Performance in 2Q and 1H 2019 (K-IFRS consolidated) Unit: KRW 100 Million
| Category | Q2 2018 | Q2 2019 | 1H 2018 | 1H 2019 | ||
|---|---|---|---|---|---|---|
| Amount | Amount | Difference | Amount | Amount | Difference | |
| Sales | 15,537 | 15,689 | 1.0% | 32,179 | 32,113 | -0.2% |
| OP | 1,703 | 1,104 | -35.2% | 4,484 | 3,153 | -29.7% |
Sales and Profit of Major Beauty Affiliates in 2Q 2019 unit: KRW 100 Million
| Affiliate | Amorepacific | Growth* | Innisfree | Growth | Etude House | Growth |
|---|---|---|---|---|---|---|
| Sales | 13,931 | 4% | 1,476 | -8% | 456 | -20% |
| OP | 878 | -40% | 192 | -29% | -32 | Deficit Reduced |
| Affiliate | Espoir | Growth | Aestura | Growth | Amos Professional | Growth |
| Sales | 123 | 15% | 369 | 25% | 214 | -1% |
| OP | 5 | Turned Positive | 48 | 103% | 40 | -6% |
Business Performance of Major Beauty Affiliates in 2Q 2019
Amorepacific : Sales increased to KRW 1.3931 trillion (+4%) and operating profit decreased to KRW 87.8 billion (-40%)
The main affiliate Amorepacific recorded KRW 1.3931 trillion in sales, 4% up from 2Q 2018 with Korean business turning into positive and sales increasing in the overseas market. However, the operating profit went down by 40% to KRW 87.8 billion due to increased investment in domestic marketing and the enlargement of its overseas business activities.
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Domestic business: Sales KRW 891.9 billion (+2%) and operating profit KRW 73.6 billion (-21%)
Growth for Luxury brands (including Sulwhasoo, Hera, Primera, Vitalbeautie, etc.) was led by increased sales in the travel retail channel. With the renewal of Sulwhasoo Timetreasure Invigorating Eye Cream and Serum, and the launch of Hera Black Foundation, Au Jour Le Jour Collection, Sensual Aqua Lipstick and Vital Beautie Easy Sleep, each brand enhanced their presence in the key beauty categories. Brands’ key marketing campaigns, including the Sulwhasoo First Care Activating Serum EX Pop-up Store, Amorepacific Vintage Essence Pop-up Store and Primera Love the Earth Campaign, attracted consumers to experience star products and brand story.
Premium brands (including Iope, Laneige, Mamonde, etc.) recorded increased online sales, driven by the launch of new innovative products targeting millennial customers, including the Mamonde Red Energy Recovery Serum, Hanyul Artemisia Miracle Relief Essence and Ice Beauty Skincare. In addition, Laneige Water Bank Avenue, Invitation to Mamonde Garden, Iope Skin Week and other spaces specially designed for brand experience heightened their appeal. However, Aritaum saw a decrease in sales due to store renewal and reorganization.
For Daily Beauty brands (including Ryo, Mise-en-scène and Happy Bath), enhanced digital marketing in the core categories resulted in increased online sales. Haircare brand Ryo particularly saw solid growth with the increased sales of its star product Jayangyunmo. Many on-offline events, including the 10th anniversary of Ryo Jayangyunmo, Mise-en-scène Give Back Event celebrating the sales of over 50 million Perfect Serum, and Bath Culture Experience with Happy Bath, increased brands’ engagement with customers.
Osulloc saw increased sales of fermented tea and premium tea bag products. With enhanced digital marketing, online sales also increased. It also hosted the Green Tea Festival and Thank You event, and will continue marketing campaigns closely linked to the brand heritage.
Global business: Sales KRW 512.1 billion (+7%) and operating profit KRW 20.1 billion (-56%)
Sales in 2Q 2019 increased mostly in the Asian and North American markets, but operating profit decreased due to increased investment in brands and retail channels for global growth.
In Asia, the sales reached KRW 485.5 billion, up nearly 6% from 2Q 2018 as a result of its efforts to strengthen the competitiveness of its five global champion brands and diversification of retail channels. Sulwhasoo delivered an improved customer experience and expanded its customer base through the opening of its Bloomstay Vitalizing Pop-up Store and First Care Activating Serum EX Pop-up Store. With enhanced digital marketing in China and ASEAN, the brand saw solid growth in sales. Laneige opened the global pop-up store Water Bank Avenue with the renewal of its star product Water Bank Essence and invited customers for trials. It also expanded customer touchpoints across the emerging digital and multi-brand shop channels for further growth. Mamonde released its new main product Red Energy Recovery Serum and promoted global marketing campaigns. It is now reorganizing its online and offline retail channels to gather momentum to drive qualitative growth. Innisfree strengthened its competitiveness with the launch of advanced The Green Tea Seed Serum. Various online and offline marketing campaigns were carried out in collaboration with Chinese models to enhance its presence. Etude House is paving the way for qualitative growth through the efficient operation of retail channels. In the Middle East, the brand successfully held its first-anniversary event and improved communication with local customers.
In North America, Amorepacific achieved nearly 54% sales growth compared to 2Q 2018 with sales of KRW 21.7 billion through the enhanced retail portfolio. Laneige achieved solid sales growth, mostly through its star skincare products, Water Bank and Cream Skin. Furthermore, the brand entered additional US Sephora stores, while Innisfree opened new stores in the West Coast region to strengthen their presence as a global brand.
In Europe, year-on-year sales went down by 23% to KRW 4.8 billion due to the renewal of Goutal Paris last year and a slow French market. Laneige is maintaining a good showing through active marketing campaigns in nearly 800 Sephora stores across Europe.
Innisfree : Sales KRW 147.6 billion in sales (-8%) and operating profit KRW 19.2 billion (-29%)
With declines in the road shop channel, Innisfree saw a decrease in both sales and operating profit. It did, however, renewed its Gangnam flagship to enhance the in-store experience and shopping convenience. It also released Green Barley Peeling Toner made with natural ingredients from Jeju Island and customizable Personal One Cream to enhance its appeal.
Etude House : Sales KRW 45.6% (-20%), deficit reduced
Etude House remained in deficit due to declines in the road shop channel and reduced sales in travel retail. However it was able to reduce the size of deficit by the launched live online commerce platform titled Good Deal TV to interact better with customers online. It also released various collaboration products, including Disney Sun Collaboration and bpb Collaboration Kit to improve the competitiveness of its products.
Espoir : Sales KRW 12.3 billion (+15%), turned positive
Through entering into multi-brand shop channels, eSpoir posted sales growth. Increased sales and closing of directly managed stores also contributed to its turnaround. The brand also worked to lead makeup trends with the launch of new products including Taping Cover Cushion.
Aestura : KRW 36.9 billion (+25%) and operating profit KRW 4.8 billion (+103%)
Aestura was able to achieve sizable growth in sales through expansion in the multi-brand shop channel and diversification of touchpoints. Operating profit grew by over 100%. It also enhanced digital communication, including the production of digital content in collaboration with influencers and an online test panels.
Amos Professional : KRW 21.4 billion (-1%) and operating profit KRW 4 billion (-6%)
With the launch of an advanced version of its start product, Feel the Green Tea, Amos Professional raised its competitiveness. It also enhanced communication with millennial customers through marketing campaigns in social media platforms including YouTube and Instagram.