Amorepacific Group 2019 Annual Results

International sales exceeded KRW 2 trillion for the first time
Q4 2019 Sales of KRW 1.5025 trillion and an Operating Profit of KRW 62.5 billion

Amorepacific Group recorded KRW 6.2843 trillion (+3.4%) in sales and KRW 498.2 billion (-9.3%) in operating profit in 2019. Despite difficult business conditions, Amorepacific Group continued to make investment for its growth in the global market and as a result, its international sales surpassed KRW 2 trillion (KRW 2.784 trillion) for the first time since its foundation.

Sales in 2019 increased by 3.4% driven by domestic growing channels (including online and multi-brand shops) and international sales but operating profit went down by 9.3% due to increased overseas investment.

During Q4 2019, sales increased to KRW 1.5025 trillion, up 7.5% year-on-year while operating profit went up by 281% to KRW 62.5 billion.

During 2019, Amorepacific Group developed innovative products, expanded customer experience spaces and diversified retail channels both in Korea and abroad.

Amorepacific Group also energized the market by launching new innovations through its leading brands. It fascinated millennial “beauty junkies” (defined as those who love and know all about cosmetics) with new innovations including the renewal of Sulwhasoo Timetreasure Invigorating line, Iope Stem III Ampoule, Iope The Vitamin C23, Mamonde Red Energy Recovery Serum and Hanyul Artemisia Miracle Relief Essence and demonstrated its compelling technological prowess in the skincare field.

It also launched new brands targeting millennials. The new stylish makeup brand ‘BLANK’ and the male makeup brand for Generation Z males, ‘Be Ready’, presented a lineup of never-seen-before products. The beauty market also saw the company inaugurating the new Ice Beauty category, which was developed through long years of research.

With Hera Black Foundation and Laneige Layering Lip Bar, Amorepacific Group also set the makeup trend. The company also rolled out Aritaum Live Stores to significantly increase experience-type contents and actively entered (other company’s) multi-brand shop channels to overcome the limits of the conventional roadside shop channel. The opening of Amore Seongsu for a new beauty experience drew great attention from customers.

The company also signed an MOU with Lazada Group, the ASEAN e-commerce giant and established a foothold in the European skincare market with the launch of Laneige in multi-brand shops as part of efforts to boost its competitiveness in Korean and international retail channels.

Amorepacific Group will diversify its channel portfolio, particularly in the global market to better its performance in 2020. Through diversified retail channels in Asian countries, it will strengthen the market share of its existing brands. Furthermore, it considers entering new channels in the North American market to grow sales of its leading brands. The company is also actively leveraging multi-brand shops in the European market to rebuild itself into a novel skincare powerhouse. Currently, it is actively collaborating with a wide variety of global business partners.

Business Performance of Major Beauty Affiliate

Amorepacific : Sales increased to KRW 5.5801 trillion (+6%) and Operating Profit decreased to KRW 427.8 billion (-11%)

The main affiliate Amorepacific recorded KRW 5.5801 trillion in sales (+6%) and KRW 427.8 billion in operating profit (-11%). New investment in international operations, channel expansion, and increased marketing expenses resulted in decreased operating profit. However, domestic sales increased to KRW 3.5181 trillion, up 5% from the same quarter in 2018 and international sales went up by 6% to KRW 2.784 trillion.

Domestic business : KRW 3.5181 in sales (+5%) and KRW 319.5 billion in operating profit (+13%)

Increased sales of luxury brands, fortification of key categories per brands, improved touchpoints in new channels including online and multi-brand shops and growth of daily beauty brands in the hair care category led to a growth in sales. Sulwhasoo Bloomstay Vitalizing Digital Pop-up Store and Hera Red Vibe Campaign were used as part of online and offline marketing for interaction with customers. Laneige similarly opened a global pop-up store Water Bank Avenue for visitors to experience the advanced version of its star product, Water Bank Essence.

In addition, the growth of online channel based on intensive investment in new brands including Be Ready, Rarekind and Bro & Tips, increased sales of major brands particularly in growing channels and efficient expense management contributed to the growth of operating profit.
Global business : KRW 2.784 in sales (+6%) and KRW 104 billion in operating profit (-49.7%)

In Asia, sales reached KRW 1.9635 trillion, up 5% from the same quarter in 2018. Various innovative products were introduced, mostly by five global brands – Sulwhasoo, Laneige, Mamonde, Innisfree and Etude House - and the channel portfolio was expanded through collaboration with global business partners.

In North America, sales increased by 38% to KRW 93 billion, which greatly contributed to the growth of global sales. Along with the continued sales growth of Laneige, the launch of Innisfree and Primera in Sephora U.S. and the debut of Innisfree in Canada laid the foundation for further growth.

In Europe, the sales went down by 24% to KRW 21.9 billion due to the weak demand in the French market. However, Laneige established a foothold for growth in the skincare market through its launch in European multi-brand shops.

Innisfree : KRW 551.9 billion in sales (-8%) and KRW 62.6 billion in operating profit (-22%)

Innisfree recorded KRW 551.9 billion in sales (-8%) and an operating profit of KRW 62.6 billion (-22%) in 2019. Sales in roadside shops located around popular tourism districts and TR channel decreased. Despite the difficult conditions, the brand renewed its Gangnam Flagship Store and Jeju House to enhance the customer experience of Jeju heritage contents. It also released various new products targeting young millennials to strengthen the competitiveness of its products.

Etude : KRW 180 billion in sales (-18%) with deficit reduced

Etude managed to reduce the size of its last-year deficit in operating profit with sales of KRW 180 billion (-18%) in 2019. It also had poor sales in roadside shops located around key tourism districts and TR channel but it improved its product competitiveness through the release of collaboration editions and as a result, the brand was able to grow in the digital channel and narrow the deficit.

Espoir : KRW 46.7 billion in sales (+11%) with operating profit turned positive

Espoir turned operating profit to positive with sales of KRW 46.7 billion (+11%) in 2019. It entered multi-brand shops to improve touchpoints and as a result, increased the sales. Efficient expense management with the closing of directly managed stores contributed to its turnaround. It introduced differentiated makeup looks, for example “Colorful Nude” and “Mute Rose”, developed products through social media platform #CrewSays and enhanced its competitiveness as a professional makeup brand.

Aestura : KRW 111.1 billion in sales (+11%) and KRW 6.8 billion in operating profit (+655%)

Aestura recorded KRW 111.1 billion in sales (+11%) and KRW 6.8 billion in operating profit (+655%). Sales and operating profit increased greatly through expansion in the multi-brand shop channel and increased product categories with the release of the new product line (365). It also raised its profile through continued digital marketing campaigns including collaboration with influencers and the selection of a new brand spokesmodel.

Amos professional : KRW 83.4 billion in sales (-1%) and KRW 16.8 billion (-2%)

Amos professional reported sales of KRW 83.4 billion (-1%) and an operating profit of KRW 16.8 billion (-2%). Due to increased competition in the haircare market throughout 2019, both sales and operating profit declined slightly. The brand renewed its star product line, Feel the Green Tea and opened the haircare video content platform, Amos TV for enhanced digital communication.