L’Occitane International reports profit rise 34 per cent in the fiscal half year

PUBLISHED : Tuesday, 29 November, 2016, 8:43pm
UPDATED : Tuesday, 29 November, 2016, 10:47pm

French skincare products maker L’Occitane International saw its interim net profit jump 33.9 per cent from a year earlier, as it banks on emerging economies and lucrative online marketplaces for growth amid a turbulent economic backdrop.

Earnings for the six months ended September 30 climbed to 25.99 million euros from 19.41 million euros year on year, while net sales edged marginally up by 1.3 per cent to 551.7 million euros.

Emerging economies Brazil, Russia and China were singled out as the top performing markets for the Provence-based company, as increasingly discerning consumers there turned to natural and organic beauty products.

“We are seeing accelerating store traffic in China and a tremendous growth in our sales on the Tmall market platform,”said Andre Hoffmann, president of the Asia-Pacific region for L’Occitane in a post-earnings briefing with reporters on Tuesday.

The mainland has become the company’s second largest market after the United States in terms of the number of outlets. Eight locations were launched in China in the first nine months of the year -- the largest number across L’Occitane’s nine major markets.

At constant exchange rates, total sales from the mainland gained 5.4 per cent to 50.8 million euros from a year ago, accounting for 9.2 per cent of L’Occitane’s net revenue.

The upscale cosmetics brand also extended its footprint by adding new shops in Japan, South Korea, and Brazil, where it saw a 20.5 per cent surge in sales for first half of the financial year.

However, the management conceded that its European business had been hit by escalating terror concerns, while sluggish tourist spending had taken a toll on its US and Hong Kong sales, which plunged as much as 11.2 per cent at constant currency terms from a year earlier.

Same store sales, a crucial gauge of a retailer’s profitability, fell 2.5 per cent, which the company blamed on global economic political uncertainties, including that triggered by Britain’s decision to leave the EU.

“Most recently we are seeing more positive signs, with a strong performance on Tmall, as well as in the Thanksgiving and Black Friday sales,” Thomas Levilion, chief financial officer of L’Occitane said during a conference call with media.

L’Occitane e-commerce business grew by 6.8 per cent during the first half, making up 10 per cent of global retail sales - a relatively high proportion among Western premium brands, many of which have been slow to embrace e-commerce because of concerns it could damage their brand image.

In 2014, the French cosmetics giant launched its first flagship store on Alibaba Group Holding’s Tmall, China’s main online venue for big brands. The company set its sales target on Tmall for the financial year 2017 at 100 million yuan, or about 13.67 million euros, Hoffmann added.

L’Occitane International’s Hong Kong-listed shares ended 0.52 per cent lower at HK$15.44 on Tuesday ahead of the earnings announcement. The share is up 2.93 per cent since the start of the year, compared to a 3.75 per cent gain for the Hang Seng Index.

Alibaba is the owner of the South China Morning Post.