L’Occitane shrugs off Covid impact as Asian sales surge

A L’Occitane store in Italy.

L’Occitane Group overcame the tumult of Covid-19 to narrow its sales decline in the second quarter to just 4.5 per cent, compared with the 22.2-per-cent decline in the preceding three months. 

Citing the company’s adaptability to moving sales online when shops were closed or footfall was down due to social distancing, and a strong performance in Asia, the company maintained an operating profit and its margin decreased only slightly by 0.4 points to 5.3 per cent of net sales. Net profit was US$20.7 million. 

Combined first-half sales of $737 million represented a year-on-year decline of 13.1 per cent at constant currency rates but gross profit margin rose by nearly 1 per cent to 82.1 per cent, thanks to a favourable channel mix and online accounting for a great share of turnover. 

L’Occitane, listed in Hong Kong, said its new free cash flow improved by $34 million to $129 million and it reduced net debt by $247 million to $836 million. 

Across Asian markets, L’Occitane experienced mixed results for the full half year. In Japan, sales declined 17.4 per cent, but narrowed from a 27.6-per-cent decline in the first quarter when stores were closed due to Covid-19, to a 6.9-per-cent fall in the second quarter as stores reopened and online sales rose.

In Hong Kong, sales were down 43.2 per cent for the half year due to the impact of borders being closed during the pandemic, but in China they rose 30.5 per cent with “fantastic growth in all channels, thanks to a successful hair care launch and Chinese Valentine’s Day campaign,” the company said in its results filing.

Tmall achieved mid double-digit sales growth, sales on JD doubled, foot traffic increased in physical stores and website visits were up. The launch of spin-off brand Elemis in China through 125 Sephora stores also gave the top line a boost. 

And in Taiwan, sales were up by 15.3 per cent, with same-store sales growth of 17.1 per cent due to successful promotional campaigns for Immortelle Reset and Immortelle Divine, and hand-care items in the second quarter.

There was some recovery in the travel-retail channel in China, mainly due to the travel boom in the Hainan province. Sales to Korea duty free operators also improved in the second quarter thanks to online collaborations.

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