HONG KONG — Profit for the beauty group L’Occitane International S.A. suffered a 27.1 percent drop for the year ended Mar. 31, but the company is confident its investment in growing its emerging brands and markets, especially China, will rejuvenate the business.
Profit for the year was 96.51 million euros with net sales falling slightly by 0.3 percent from a year ago to 1.32 billion euros. Gross profit margin remained stable at 83.3 percent. Web sales increased its share from 12 percent of the group total to 14 percent.
Company performance was impacted by Japan, its biggest market, which accounts for 16.6 percent of the business. Sales there shrank by 8.3 percent to 219 million euros.
“It is not as strong and dynamic,” chief financial officer Thomas Levilion said of the overall Japanese environment, while acknowledging they needed to recalibrate their operations there and would utilize limited edition products to help create excitement among consumers. The firm closed two big underperforming stores in the country although on a net basis, it opened 10 in Japan for the period, seven of which were under the Melvita brand.
The U.S., the group’s second largest market, improved with sales rising by 0.6 percent year-over-year. Hong Kong, Macau and Asia travel retail sales grew collectively by 0.2 percent, and Brazil by 6.5 percent. China sales, now 12.1 percent of the business, rose 14.5 percent.
Levilion also revealed that the group’s next China ambassador is actress Liu Shishi, forming a trifecta with celebrities Bai Jingting, who was appointed in April, and Lu Han. The latter has helped the company create a tremendous marketing buzz in the country, but Liu in particular is being tapped to endorse face care products, he said, which is a strategic focus area group-wide. The company was “very happy” with their partnership with Tmall, he added.
The group’s emerging brands Melvita, L’Occitane au Bresil, and Erborian expanded by the double-digits and its color cosmetics acquisition, LimeLife, grew more than three fold in the last calendar year. However, collectively they still account for a small part of the business with the group’s core brand, L’Occitane en Provence, driving 92 percent of the business.
Capital expenditures, excluding acquisitions of subsidiaries and financial investments, nearly doubled to 92.9 million euros from a base of 49.6 million euros the year prior. Much of that was spent on stores which racked up 62.1 million euros compared to 31.7 million a year ago.
The company saw a net increase of 41 directly operated stores during the year bringing its network to 1,555 as of Mar. 31. Among those were three flagships in Paris, London, and Toronto. The Paris location, called 86Champs for its address on Avenue des Champs-Élysées is a one-of-a-kind concept store in partnership with French pastry chef, Pierre Hermé.
Levilion said that the company will continue to invest substantially in its retail presence in the coming year but said store expenditures would be slightly less than this most recent set of results “because the [costs] of Champs-Élysées store was very high.”