Lancaster sales grew over 20% in the first quarter of FY2023, a result of the brand’s performance in Hainan, even in the midst of strict COVID-19 restrictions.
“This growth was fuelled by strong momentum in Hainan, even in the midst of the periodic closures there, illustrating that with the right brand activations, story-telling and product trial, Lancaster can win with Chinese consumers,” said CEO Sue Y. Nabi.
“[Lancaster sales] multiplied by five year-on-year, which is a great demonstration of the desirability of the brand towards the most demanding Chinese customers,” Nabi added while expressing her optimism for the brand’s position in the travel retail market moving forward.
“With the consumer appetite for travel post the pandemic showing no sign of easing, we continue to be optimistic about the prospects for this channel.”
The Monegasque brand has also been performing well outside of Hainan and topped Sephora’s rankings as the number one niche skin care brand.
“Based on the learnings we have accumulated in recent months, we have the playbook for our ultra-premium Lancaster product launch and brand activations in China which remain on track for the second half of this fiscal year,” said Nabi.
Coty’s China ambitions
Nabi highlighted that skin care accounts for 70% of the Chinese beauty market and represented a “huge potential” for the firm, considering it has only started building up its skin care portfolio in China.
The success of Lancaster has given the firm a huge confidence boost as it makes its foray into China’s booming skin care market.
Overall, China has returned to growth for the company despite the COVID-19 woes. “I would describe the situation in terms of how we are, in a way, doing quite okay in China despite all these very difficult environments,” said Nabi.
She commented that the situation does not look like it will improve anytime soon. However, because China only accounts for 4% of its net revenues, it is shielded from the troubles.
“In a way, we are protected against all these lockdowns that we've been seeing since a few months as now that are continuing and that we do not see improving in the coming quarter and probably quarters, if I may,” said Nabi.
In addition to Lancaster, Coty is also seeing strong momentum in fragrance as well. It highlighted the success of brands such as Gucci, Burberry, Calvin Klein, Hugo Boss and Chloé.
“All these brands that are doing fabulously well globally are growth engines for the near future and the, I would say, far future for the company, of course, as you can imagine.”
On the other hand, make-up brands such as Gucci and Burberry make-up started out well but were impacted by the COVID-19 lockdowns in China, said Nabi. “Both brands had a fantastic start before lockdowns; and this is the category, I would say, that are most impacted by the recent series of lockdowns.”
In the midst of a complex period, first-quarter revenue increased 1% year-on-year. It recorded an adjusted operating income of USD249.6m, up 24% from USD200.5m the previous year.
Coty Asia Pacific grew 6% as reported and 12% like-for-like, the strong momentum in Asia helped to offset the downturn in China and travel retail. Crucial, China’s revenues returned to growth.