L’Occitane Q1: Double-digit decline in China hinders group’s APAC performance

L’Occitane International is the manufacturer of beauty and wellness products and owns brands such as L’OCCITANE en Provence, ELEMIS, Melvita and Erborian.

APAC, which remains the group’s largest regional market, grew slightly by 1.2% at constant rates to EUR171.9m (USD173.9m)

According to the firm, most of its APAC markets posted double-digit growths, led by Hong Kong, Australia, and Malaysia.

In particular, the troubled Hong Kong market posted double-digit growth, driven by travel retail growth as a successful partnership with e-commerce partners, said the firm.

However, the growth was offset by the troubles in China. Both offline and online sales were severely impacted by COVID-19 outbreaks in April and May 2022. In addition to store closures, the firm’s warehouse in Shanghai was also closed, causing disruption to store replenishments nationwide.

According to the firm, this resulted in a decrease in the “high-teens”. ​In the past couple of years, China has constantly been a top-performing market for the company. In 2021, China surpassed​ other regions to become the firm’s largest market.

On the bright side, sales in China rebounded strongly to double-digit growth in June 2022 as soon as conditions in the country eased.

New brand positivity

The company was also boosted by its newer brands, including Sol de Janeiro, which it acquired in November 2021.

The firm’s reports stated that the brand ended the quarter with EUR40.8m (USD41.3m) in sales, an increase of approximately 60% as compared to the same quarter last year, prior to the acquisition.

L’Occitane attributed to the growth to successful global launches of the brand's new Beija Flor range and premium perfume mists, as well as its expansion outside the US market.

André Hoffmann, vice-Chairman and CEO of L’Occitane, highlighted his confidence that the firm’s new acquisitions, including Sol de Janeiro and Aussie brand Grown Alchemist, will “play an important role in driving the group’s profitable growth”.​

Overall, the group described the first quarter as a “positive start”. Sales reached EUR416m (USD420m), growing 15.8% at constant rates.  

Excluding the recently acquired brands Sol de Janeiro and Grown Alchemist, as well as the group’s recent divestiture of its Russian business, and the deconsolidation of the US subsidiary, sales growth was 5.1%, against a high base of 27.7% growth in FY2022 Q1.

The group’s sales in the Americas grew 55.5% thanks to the post-pandemic reopening and the addition of Sol de Janeiro. Sales in EMEA also rebounded and grew 10.3%, attributed to the solid performance of travel retail and recovery in retail sales in France and Germany.

“We are mindful of the increasingly volatile macroeconomic environment, including the impacts of inflation and the ongoing pandemic. However, I have full faith that our ongoing mitigation strategies and the proven resilience of our brands and teams will see us through these challenges,”​ said Hoffmann.