Amorepacific's profit halves on weak sales in China; shares drop

South Korean cosmetics giant Amorepacific Group's stock closed at 3,400 won ($2.6) on Wednesday, down 12.1% after the group announced disappointing 2023 earnings due to sales drops in China and duty-free shops.

Its operating profit for the last year is estimated at 152 billion won on a consolidated basis, down 44.1% on-year, the main Kospi-listed group’s preliminary report said on Tuesday.

The group’s revenue declined by 10.5% to 4.02 trillion won, and net profit soared 57.3% to 234.7 billion won last year.

For the fourth quarter of 2023, the group’s operating profit dropped 62% on-year to 29.9 billion won. October-December revenue dropped 14% on-year to 1.02 trillion won, but the quarterly net profit soared by 2.5 times to 47.9 billion won.

The group is the largest beauty brand owner in Korea. It operates premium lineups of Sulwhasoo and Hera, mid-priced brands like Laneige and Iope, relatively low-priced Innisfree, Etude and Espoir and luxury teahouse O’Sulloc.

The group’s namesake affiliate Amorepacific Corp., which operates the cosmetics brands, also saw its stock drop 13% to finish at 118,000 won on Wednesday.

The affiliate’s operating profit plummeted 49.5% on-year to 108.2 billion won last year, and revenue dropped 11.1% to 3.67 trillion won. Net profit rose 34.5% to 173.9 billion won.

Its operating profit from domestic businesses dropped 34% on-year to 146.4 billion won last year; revenue from the Korean market fell 14.4% to 2.21 trillion won. The falling revenue from duty-free shops and e-commerce platforms and increased marketing costs were major causes for the worsening profits, the report said.  

The affiliate posted 43.2 billion won in operating loss from overseas business, swinging to the red from 2.5 billion won profit in 2022. Its revenue from overseas business fell 5.5% on-year to 1.39 trillion won, affected by a 25% drop in sales in the Chinese market.

The weak sales in China and duty-free shops impacted its whole earnings, despite a 30% sales rise in Japan, a 58% increase in the US and a 62% jump in Europe, the Middle East and Africa (EMEA).

The affiliate’s operating profit for the fourth quarter plunged 63.7% on-year to 20.7 billion won. Its sales for the October-December period fell 14.9% on-year to 926 billion won; quarterly net profit surged 55.5% to 38.2 billion won.

Some cosmetics subsidiaries and teahouse brand O’Sulloc saw declining profits due to increased marketing costs.

Innisfree logged 10.3 billion won profit for 2023, down 68.2% on-year. Espoir’s profit dropped 15.8% to 2.2 billion won, and O’Sulloc’s profit plunged 37.9% to 5.5 billion won.

Etude stood out with a 14.8 billion won profit for the last year, up 95.5% on-year thanks to its new stores in tourist destinations and increased sales via e-commerce platforms and offline markets.

Write to Sul-Li Jun at sljun@hankyung.com


Jihyun Kim edited this article.