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L'Occitane on track to reach store expansion target

PUBLISHED : Wednesday, 28 November, 2012, 12:00am
UPDATED : Wednesday, 28 November, 2012, 2:34am

L'Occitane International, a French cosmetics maker and retailer, is on track to reach its store expansion target this year despite slower global economic growth, as it reports a better-than-expected first-half profit growth.

The company posted a 16.3 per cent year-on-year rise in net profit to €33.7 million (HK$338.1 million) for the six months to September. Sales grew 21.9 per cent to €449.2 million.

Citi analyst Catherine Lim said she expected flat interim profit growth in a recent research report, citing higher tax expense.

Sales are typically skewed towards the second half, with the Christmas-shopping-heavy October-December quarter accounting for 40 per cent of annual sales and 22 per cent of operating profit. The firm will release the quarter's sales figures in January.

Investors relations director Winnie Chin said the firm expected to reach the high end of its target to open 130 to 150 stores for this financial year. It opened 57 stores in the first half and added 10 from the purchase of a distributor in Ireland, raising the number of self-run stores by 6 per cent to 1,120. Those operated by distributors rose 7 per cent to 2,218.

Sales in stores that have existed for at least two years grew 2.6 per cent, slowing from 6.1 per cent in the year-earlier period, a reflection of the weaker global economy. Sales from recently added stores nearly doubled.

Gross profit margin was steady at 82 per cent, while operating margin was largely flat at 9 per cent.

Japan, its largest market, accounting for 23 per cent of total sales, saw same-store sales fall 6.5 per cent because of weak consumer sentiment. This was offset by new store openings, which resulted in a 2.4 per cent rise in overall sales.

Same-store sales in Hong Kong rose 7 per cent and that in the United States gained 12 per cent. Each accounted for about 11 per cent of total sales.

Chairman Reinold Geiger said the firm's high-growth period was far from over as its L'Occitane brand still had plenty of room for store expansion. It aimed to add two to four brands which he hoped would take up half of total sales in 10 years.

Geiger also said the firm faced foreign exchange risk, particularly from the yen and euro, which he considered overvalued.

L'Occitane's share price yesterday rose 5.6 per cent to HK$25.60 ahead of the results.

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