Profits plunge: Amorepacific looks to improve digital efforts as COVID-19 bites at Q1 financials

By Amanda Lim

- Last updated on GMT

Amorepacific looks to improve digital efforts as COVID-19 bites at Q1 financials

Related tags Amorepacific financial results

K-beauty giant Amorepacific plans to reinforce digital strategy to improve 2020 earnings amid the novel coronavirus (COVID-19) crisis after sales and operating profit decreased by 22% and 67% in Q1.

Its home market, South Korea was badly affected by the COVID-19 outbreak, recording over 10,000 positive cases.

This severely impacted its domestic performance and sales fell by 19% year-on-year while operating profit decreased 33% year-on-year.

Amorepacific attributed the double-digit drop in its home market to the decreased footfall at brick-and-mortar stores such as department stores and duty-free outlets.

Its daily beauty brands arm, which consist of brands reported an increase in sales thanks to high demand for Mise en Scene hair dye, Happy Bath body wash and Illiyoon skin care.

Similarly, sales dipped overseas by 28% year-on-year and operating profit turned to deficit.

Asia and Europe recorded sales decrease of 31% and 7% respectively due to impact from COVID-19.

Online shows potential

Sales in North America, however, increased by 26%, driven by the growth of Laneige and Innisfree in the online and multi-brand shops.

In particular, the company’s partnership with Sephora US, which has a strong e-commerce platform, helped to expand its customer base.

Overall, Amorepacific observed an increase in online sales, with domestic online sales increasing by more than 80%.

It noted that its online efforts have helped to minimise the impact to its premium brands.

In China, sales of luxury brands grew by over 50% due to multiple online shopping festivals such as Women’s Day and Tmall’s Super Brand Day.

As such, the firm said it would be looking into strengthening its e-commerce business to prepare for a “new leap forward”.

“Despite the impact of COVID-19, Amorepacific has laid the foundation for securing and growing competitiveness in digital channels.”

The company highlighted that it plans to strengthen the online channel for beauty brand, Innisfree.

Innisfree saw sales and operating profit decline 31% and 76% respectively in the first quarter due to a fall in brick-and-mortar and duty-free sales.

To combat the effects of COVID-19, the firm said it will be strengthening its strategic alliances with online platforms.

Additionally, Amorepacific noted that it sees opportunities for personalised beauty to help spur growth of the company further on.

Earlier this year, it received a CES 2020 Innovation Award for the IOPE 3D-printed customisable mask.

The mask is made-to-measure by a 3D printing system is driven by a smartphone app that instantly measure users' facial dimensions to print a personalised hydrogel mask that is tailored to individual facial features and skin conditions.

This product was set to launch in late April and Amorpacific is confident it will “emerge as the leader in the era of customised cosmetics”

“The company plans to diversify its channel portfolio in overseas markets, develop customized cosmetics technology, and improve it digital structure at home and abroad to provide a bridgehead for 2020 earnings improvement.”

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