The double-digit decline in China is holding back the group’s performance in the APAC region
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 leading regional market, rose slightly by 1.2% at constant exchange rates to 171.9 MEUR (173.9 MUSD)
According to the company, most of its APAC markets posted double-digit growth, led by Hong Kong, Australia and Malaysia.
In particular, the troubled Hong Kong market saw double-digit growth, driven by retail growth under a successful partnership with e-commerce partners, the company said.
However, the growth was offset by unrest in China. Offline and online sales were severely impacted by the COVID-19 outbreaks in April and May 2022. In addition to store closures, the company’s warehouse in Shanghai was also closed, disrupting restocking stores across the country.
According to the company, this resulted in a decrease in the “teens”. Over the past two years, China has consistently been a top performing market for the company. In 2021, China overtook other regions to become the company’s largest market.
On the positive side, sales in China rebounded strongly to reach double-digit growth in June 2022 as soon as conditions in the country eased.
New brand positivity
The company has also been boosted by its new brands, including Sol de Janeiro, which it acquired in November 2021.
Company reports indicate that the brand ended the quarter with 40.8 million euros ($41.3 million) in sales, an increase of approximately 60% compared to the same quarter last year. , before the acquisition.
L’Occitane attributed the growth to the successful global launches of the new Beija Flor range and the brand’s premium fragrance mists, as well as its expansion outside of the US market.
André Hoffmann, vice-president and CEO of L’Occitane, underlined his confidence in the company’s new acquisitions, including Sol de Janeiro and the Australian brand Grown Alchemist, “play an important role in driving the profitable growth of the group”.
Overall, the group described the first quarter as a “positive start”. Sales reached 416 million euros ($420 million), up 15.8% at constant exchange rates.
Excluding the recently acquired brands Sol de Janeiro and Grown Alchemist, as well as the group’s recent divestment of its Russian operations and the deconsolidation of the US subsidiary, sales growth was 5.1%, compared to a high base of 27 .7% growth in the first quarter of fiscal 2022.
The group’s sales in the Americas increased by 55.5% thanks to the post-pandemic reopening and the addition of Sol de Janeiro. Sales in EMEA also rebounded and increased by 10.3%, thanks to the solid performance of travel retail and the recovery of retail sales in France and Germany.
“We are aware of the increasingly volatile macroeconomic environment, including the impacts of inflation and the ongoing pandemic. However, I am confident that our ongoing mitigation strategies and the proven resilience of our brands and our teams will enable us to meet these challenges”,said Hoffman.