L'Occitane China Returns to Growth, up 2.4%
- Chaileedo Press
- May 8, 2023
- 5 min read
The recovery in China during the quarter was driven by the travel retail channel in Asia Pacific and increased sales following the end of the epidemic restrictions in China.
(Credit: L'Occitane Protect & Pamper Gift Box)
On 5 May, L'Occitane Group announced its financial results for the fourth quarter of the fiscal year 2023 and its annual fiscal year 2023. According to the results, the Group's net sales for FY2023 exceeded €2 billion ($2.2 billion), which was €2.135 billion ($2.4 billion) as of March 31, up 17.9% at reported exchange rates and 13.4% at constant exchange rates.
Growth resumes in China
In terms of regional sales results, the Americas were the fastest growing region with sales of €695 million ($767.5 million), up 80.4% at reported exchange rates and 62.8% at constant exchange rates. The performance in Asia Pacific also recovered overall, leading the region with sales of €896 million ($989.5 million), up 2.4% at reported exchange rates. The business in the EMEA region was down 0.7% at constant exchange rates, mainly due to the withdrawal of operations from Russia.
In its financial results in Q3 of FY2023, L'Occitane said that sales in its China operations were down ten percent at constant exchange rates, mainly due to the impact of the epidemic. The recovery in China in the fourth quarter was mainly due to the travel retail channel in Asia Pacific and increased sales following the end of the epidemic restrictions in China.
Despite the recovery in growth in China, L'Occitane En Provence at L’Occitane Group was also affected by the outbreak in China. L'Occitane En Provence's sales growth in the fourth quarter of fiscal year 2023 was driven by the active travel-retail channel and increased sales momentum following the easing of restrictions in China, according to the results. This compares to a 0.5% decline for the full year of the fiscal year 2023, mainly due to the difficult conditions in China for most of the year and the withdrawal from Russia.
In terms of channel performance, the wholesale and other channels led the way with a constant growth rate of 50.9% in FY2023, with dynamic growth in wholesale chains, international distribution and travel retail. Retail sales declined by 2.0% due to the impact of the divestment of the Russian business and the closure of shops in China due to the previous outbreak (as of March 31, 2023, the offline shops of L’Occitane reduced 128.). Excluding the Russian and Chinese markets, retail sales grew by 7.2% at a constant rate in the fiscal year 2023.
(Credit: L'Occitane Mother's Day gift box)
Sol de Janeiro jumps to second largest brand in the Group
In terms of brand performance, the sales of L'Occitane en Provence recovered, which was €305 million ($336.8 million), with a growth of 0.8% in the fourth quarter of FY2023, thanks to an active travel retail channel and the opening of restrictions in China. But in terms of the overall financial year, sales were €1.421 billion ($1.57 billion), down at constant exchange rates of 0.5%. It was affected by its withdrawal from Russia and the management of its policy in China for most of the year.
In addition, its brand ELEMIS returned to growth of 18.1% in the fourth quarter of FY2023, with sales of €74.4 million ($82.6 million). The overall fiscal year sales of €256.0 million ($282.7 million), up 8.9% year-on-year at constant exchange rates, driven by increased sales, mainly on the back of e-commerce, the cruise business and internal brand development in Asia Pacific.
In FY2023, Sol de Janeiro maintained its strong growth, jumping 135.2% (in local currency) to reach net sales of €267 million ($294.8 million), making it the second largest brand in the L'Occitane Group. The brand's Bum Bum Firmeza skin oil, Brazilian Bum Bum cream and Rio Radiance fragrance spray performed very well.
In terms of sales channels, Sol de Janeiro was particularly strong in the online channel. According to the results, the online channel recorded a full-year growth of 4.8% at constant exchange rates in FY2023.
L'Occitane is reported to have acquired an indirect 83% stake in Brazilian beauty brand Sol de Janeiro in 2021. Regarding the addition of the brand, L'Occitane has said that it further expands its brand portfolio and helps to transform L'Occitane into a multi-brand and geographically balanced group.
In fact, Sol de Janeiro's performance has climbed year on year since the acquisition, boosting the L'Occitane Group's performance to some extent.
(Credit: Sol de Janeiro's Share in the L'Occitane Group in recent years)
Jefferies Financial Group Inc. said Sol de Janeiro's digital presence and established body care business in the US complemented L'Occitane's geographic strategy to build a balanced portfolio of brands in all major regions. L'Occitane said the transaction is in line with the Group's strategy to build a leading portfolio of premium beauty brands and that the acquisition complements the Group's balanced geographic strategy to build a strong brand portfolio, benefiting the Group's future global growth and profitability.
André Hoffmann, Vice Chairman and Chief Executive Officer of L'Occitane, said: "We saw a solid broad-based improvement in FY2023 Q4, boosting our sales to exceed the €2 billion mark in FY2023. We are well-positioned to sustain growth in the coming year as we introduce our newer brands into new markets and channels. The ongoing success of our multi-brand strategy is becoming more apparent with Sol de Janeiro now our second-largest brand, less than 18 months since its acquisition."
Sales of other brands also picked up overall, with Erborian and L'OCCITANE au Brési in particular growing by 33.4% and 41.2% respectively at constant exchange rates in FY2023.
(Credit: Sol de Janeiro body spray)
Spotlight on the personal care sector
According to CBNData, China's body care market has long exceeded 8 billion yuan ($1.2 billion). But body care products only account for around 5% of the overall skin care category, meaning that the body care market has a large potential for growth.
CHAILEEDO found that both L'Occitane en Provence and Sol de Janeiro, which grew by 135.2% this year, focus on the personal care sector, with hot-selling products including hand creams, body lotions, skin care oils and other series.
In L'Occitane's Tmall flagship shop, the highest-selling product is the L'Occitane Hand Cream Gift Set, priced at 380 yuan ($54.9)/4 pieces, with monthly sales of 1000+ units. According to data from the Meiyeyanjiuyuan, for the whole of 2022 (channels limited to Tmall \ Taobao), L'Occitane ranked third among the top 10 selling brands of body care oils in China, with 13,000+ units.
The success of the L'Occitane Group in China cannot be separated from the development of its core brand L'Occitane in the Chinese market. In terms of marketing strategy, the brand's core products have become the most popular "stars" in the hand cream sector in the eyes of consumers, and the brand continues to sit at the top of the premium body care and hand care categories.
In response to Chinese consumers' demand for niche premium brands, the L'Occitane Group has also been introducing its brands to China over the past few years. It is an effective way to optimize the brand portfolio in the market and to drive further growth with these new brands. These include Melvita, a French natural skincare brand that entered the Chinese market in 2015, Elemis, a high-end British skincare brand in the bag for 2019, as well as Grown Alchemist, an Australian pure beauty brand, and Sol de Janeiro, a Brazilian beauty brand that was recently acquired. According to Vogue, L'Occitane Group will also introduce the skincare brand Sol de Janeiro to its online channel in the first quarter of 2024.
Mr Reinold Geiger, Chairman and Chief Executive Officer of L'Occitane, said in the results: "Our sales momentum continues to accelerate as we move through the epidemic, particularly in markets such as China, which have stabilized after the crisis. In addition to the low base effect in some markets, our good performance is due to the strength and resilience of our brands and teams."
As can be seen, the body care market as a whole is improving and has strong potential for growth. China is a growth engine that the L'Occitane Group is bullish on. This earnings report shows that L'Occitane will continue to increase its presence in body care brands in the future, which also shows continued optimism in this category.
Comentarios