HONG KONG — French beauty group L’Occitane International SA on Monday posted a 16.6 percent increase in net profit to 132.4 million euros, or $148.4 million, the highest since its listing on the Hong Kong Stock Exchange.
The company had net profits of 113.6 million euros, or $124.9 million at average exchange. Sales for the year ended March 31 increased 3.2 percent to 1.32 billion euros, or $1.48 billion, compared with 1.28 billion euros, or $1.41 billion, the previous year. This was attributed to a more efficient supply chain management, better price and product mix and favorable foreign exchange effects. The gross profit margin also reached a historic high, up 0.5 points to 83.3 percent.
L’Occitane was listed on Hong Kong’s bourse in May 2010, the first French company to do so.
“The situation remained challenging in Asia as a whole and some key U.S. cities which remain affected by terrorism threats,” said Thomas Levilion, chief financial officer, speaking at the press briefing via teleconference.
The strongest growth markets were Brazil and Japan with sales increasing 30 percent in Brazil and 15.5 percent in Japan — thanks to the stronger Brazilian real and Japanese yen. Levilion said sales in Japan benefited from a successful TV advertising campaign as well as improving sales in the group’s e-commerce business.
China was also a strong market, with sales growing 11 percent compared to the previous year. André Hoffmann, vice chairman and managing director for Asia, said this turnaround was due to increased consumer confidence in China as well as a new brand ambassador on the Mainland, Asian heartthrob and pop idol Luhan. Accelerated growth in bricks-and-mortar stores — 15 new stores — as well as online ones were also key.
“For the new fiscal year we are budgeting growth of approximately 20 percent in China with the growth being led by our online business with Tmall,” said Hoffmann.
But across the border in Hong Kong the story was less rosy. “Hong Kong remains challenging with reduced mainland Chinese tourist traffic and heavy discounts by competitors and a strong Hong Kong dollar,” said Levilion.
Hoffmann said sales in Hong Kong had been poor since the pro-democracy campaign Occupy Central that began in September 2014. After a very difficult two years, he said he noticed the first signs of improvement beginning this financial year.
“We do see a slight improvement in the Chinese arrivals and purchasing, but we are not out of the woods yet. One of the biggest marketing campaigns we’ve ever done in Hong Kong will take place this fall and we have strong products in the pipeline so I am optimistic,” said Hoffman.
L’Occitane has been ploughing money and resources into its self-owned e-commerce web sites, mobile sites, third-party marketplaces and social media platforms and the investment is paying off — e-commerce grew by almost 12 percent and reached 11 percent of retail sales.
L’Occitane recently invested $128 million in a 40 percent stake in Limelight by Alcone, a U.S.-based natural skin care and personalized makeup company that sells through “social commerce.” When the deal was revealed last month, the group said it planned to use the investment to develop its business model worldwide and speed its expansion into the color cosmetics sector.
“Limelight is a very new acquisition. Initially we think that outside the U.S., Brazil, the U.K. and possibly Japan would be the first international markets that we would go into — we’re still working on the business plan,” said Hoffman.
Commenting on the record gross profit margin, Levilion said there was still room for improvement in terms of productivity and production capacity which were key to this year’s result, but he was keenly aware of the fierce competition in the market.
“We are working systematically with new resources that we have put in place in marketing and in terms of pricing. We also hope to see the continued positive effects of e-commerce and a higher share of skin care and fragrances,” he said.