'K-Beauty Top Two' Diverge Overseas.. Amore 'Revives', LG Household & Health 'First Deficit in 21 Years'

[Financial News] The 'top two of K-Beauty', AmorePacific and LG Household & Health, are seeing mixed fortunes in overseas markets. AmorePacific is clearly reviving as it succeeds in restructuring its Chinese business, which was the main cause of its poor performance, and diversifying its sales in North America. On the other hand, LG Household & Health is struggling with its distribution structure centered on China and duty-free, recording a quarterly deficit in its cosmetics business for the first time in 21 years, indicating an urgent need for business structure reform. 

According to the beauty industry on the 3rd, AmorePacific's operating profit for the second quarter was recorded at 80.1 billion won, growing 6.6 times compared to the same period last year. Sales increased by 8.9% year-on-year to 1.05 trillion won. It is analyzed that the restructuring of the Chinese business and the growth in Western markets have begun to be reflected in the performance. 
AmorePacific achieved outstanding results in overseas markets in the second quarter. Sales in EMEA (Europe, Middle East, Africa) increased by 18% thanks to the strong performance of Laneige and Innisfree, and the Americas market also grew by 10% due to the expansion of new brands. Sales in Greater China also increased by 23% year-on-year due to restructuring effects, maintaining a profit trend. In Korea, sales of key brands such as Sulwhasoo, Primera, and IOPE increased evenly, supporting growth. An industry insider analyzed, "AmorePacific's success in reorganizing its global brand portfolio and transforming its distribution structure was crucial to its performance improvement." 
On the other hand, LG Household & Health's cosmetics business sales in the second quarter decreased by 19.4% year-on-year to 604.6 billion won. In particular, the operating loss was 16.3 billion won, turning into a quarterly deficit for the first time since the fourth quarter of 2004. It is analyzed that the intensifying competition in traditional channels such as duty-free shops and door-to-door sales, and the increase in marketing costs have expanded the cost burden.

The industry is focusing on the fundamental differences in strategic structures rather than simple performance figures. AmorePacific is evaluated to have succeeded in securing new demand in Western markets by having a diverse lineup of brands at various price points and moving away from a China-centered structure. The sales proportion of mid-low price brands such as Laneige, Hanyul, and Innisfree has expanded to about 50% of the total, leading external growth. 
In particular, it is analyzed that the response strategy in the Chinese market has led to the contrasting performance of the two companies. AmorePacific maintained a premium line centered on Sulwhasoo while boldly reorganizing inefficient stores and maximizing efficiency through a profitability-focused restructuring strategy. An industry insider said, "This monetization effort has resolved the sluggish sales in China and had a positive impact on the global strategy."
LG Household & Health still has a high dependence on traditional channels such as duty-free shops and the Chinese market, and has not escaped from a premium brand-centered structure with The History of Whoo at its core. The sales proportion of mid-low price brands such as Belif and CNP remains at about 25% of the total, which, considering the characteristics of K-Beauty competing on price competitiveness in overseas markets, indicates a limitation in growth potential.
Lee Haeni, a researcher at Eugene Investment & Securities, said, "AmorePacific's rapid brand reorganization in Western markets such as North America and Europe was key to this performance improvement," and predicted, "The performance improvement trend will become more pronounced as we move into the second half of this year." He added, "LG Household & Health has not escaped from a China-centered structure, and it seems that it will take some time for the results of the ongoing brand reorganization to become visible."


clean@fnnews.com Lee Jeong-hwa Reporter