Double trouble: China lockdowns and e-commerce curbs create a perfect storm for beauty sales in China – LG H&H

The History of Whoo, CNP, Ohui and belif owner has stated that the operating environment in China, including travel retail, continues to be unfavourable.

It reported a Q3 sales slump of 23.1% yoy to KRW789bn (US$550m) for its beauty division, while operating profit plunged 68.6% yoy to KRW68bn (US$48m)

The firm noted that the quarter is ‘usually a slow season for cosmetics’, but added: “Consumption in China continued to shrink due to lockdowns. Offline stores struggled with lockdown measures and online sales faced tightening government regulations on e-commerce influencers.”​

On the plus side, it added that momentum grew for the Ohui and CNP ‘to become the next leading luxury brands’, with sales increasing 22% and 2% yoy respectively.

It also said it was making progress in premium colour cosmetics.

“Pearl makeup brand ‘Glint’ went viral soon after its online release and became the number one highlighter. With its successful launch, ‘Glint’ quickly became available in the largest H&B store in Korea and is gaining popularity among consumers. ​

"In North America, The Crème Shop is expanding its potential customer base (over 460,000 followers on Instagram) by introducing new products and expanding to various channels,”​ it added.

Daily delivers

The firm’s household and daily beauty division (HDB) fared much better, with quarterly sales increasing 8.8% yoy to KRW587bn (US$410m), although operating profit decreased 11.8% yoy to KRW56bn (US$39m)

Robust sales growth was primarily driven by solid performance across oral care, hair care and body care categories.

Operating profits were higher raw materials costs combined with a negative currency impact.

“Despite headwinds, HDB enhanced its leading position in domestic market by focusing on premium daily beauty. Dr. Groot released ‘Microbiome Beer Yeast Shampoo’ and ‘Addict Kiss Edition’ with a masterpiece of Gustav Klimt. ​

“Physiogel introduced refrigerated cosmetics ‘Cold Therapy’ and sebum care line ‘Soothing Cica Balance’ to diversify its premium product portfolio,”​ added the firm.

Overall sales for the conglomerate decreased 7.0% yoy to KRW1.9tn (US$1.3bn) and operating profit decreased 44.5% yoy to KRW190bn (US$130m)

It told investors: “Business environment for 3Q was challenging. In China, consumer sentiment and economic activity declined due to prolonged lockdowns since the beginning of this year. In addition, higher raw material costs, as a consequence of Ukraine crisis, was exacerbated by negative currency impact, resulting in even more pressure on overall operating costs. ​

“Beauty reported decreased sales and operating profit, due primarily to weak consumption in China. Anticipating an eventual market rebound as Covid-19 abates, Beauty remains committed to strengthening luxury cosmetics, while actively expanding business in North America and Japan by launching products that capitalize on the growing interest in K-Beauty and on local market trends.”​