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L'Occitane's Q3 sales improve 8 percent

By Prachi Singh

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Business

Image: L'Occitane en Provence Moscow, FashionUnited

L’Occitane International S.A., in its unaudited trading update for the period ended December 31, 2022 said that in the nine months period, the group’s net sales amounted to 1,602.3 million euros, representing 16.5 percent growth at reported rates and 10.6 percent growth at constant rates.

On a like-for-like basis, the company said, excluding Russia due to the group’s divestiture in June 2022, the newly consolidated brands Sol de Janeiro and Grown Alchemist, the impact from the deconsolidation of the US subsidiary last year and at constant rates, sales growth was 2.3 percent.

As a result of challenging macroeconomic conditions in certain key markets, the company added, overall sales growth in the third quarter was 8 percent at reported rates and 4.5 percent at constant rates.

Commenting on the results, André Hoffmann, vice-chairman & chief executive officer of L’Occitane, said: “Like many brand operators with a strong retail footprint, we are feeling the effect of China’s exit from Covid-19 restrictions and more cautious sentiment in other markets around the world. However, thanks to our proven track record of resilience and our efforts to increase our brand and geographic diversity, we have managed to weather this well, maintaining decent growth overall.”

Highlights of L’Occitane’s performance across brand portfolio

The group’s core brand L’Occitane en Provence recorded a sales decline of 0.9 percent and 5.5 percent during the nine months and third quarter, respectively, due partly to the divestiture of Russia, and partly to persistent macroeconomic challenges in certain key markets such as China and Japan.

Cautious consumer sentiment in some markets such as the UK and France, coupled with the group’s efforts to offer fewer promotions, also affected the brand’s holiday sales performance. Excluding the China and Russia markets, the brand posted sales growth of 5.9 percent and 1.3 percent at constant rates in 9M and Q3, respectively.

Elemis posted 11.3 percent growth at reported rates or 5.3 percent growth at constant rates in the nine months, down from the double-digit growth in the first half of FY 2023. Third quarter saw a decrease in sales, mainly due to a strategic decrease in sales to certain web partners in the UK to prioritise an omni-channel model that is adapted to post-pandemic consumer trends and enhances brand equity. The US performed strongly with 22.9 percent growth in the nine month period, mainly driven by its strong e-commerce, cruise ship and wholesale businesses.

Sol de Janeiro accelerated its sales momentum in the third quarter with sales of 64.2 million euros and ending the nine month period with sales of 158.8 million euros. Successful holiday campaigns, anchored by its hero product Bum Bum cream and highly popular fragrance mists, contributed to the acceleration of growth to 170 percent in the third quarter and 96 percent in the nine month period.

Other brands together posted growth of 12.6 percent at reported rates or 5.5 percent at constant rates for a nine month period, in line with the sales momentum recorded in the first half of FY2023. Erborian and L’Occitane au Brésil performed particularly well with 28.3 percent and 38.1 percent growth respectively at constant rates in the nine month period.

L’Occitane’s trading update across geographies

In terms of regional performance, the Americas led the group’s growth with 75.1 percent at reported rates or 53.7 percent at constant rates in the nine month period. This was mainly driven by the accelerated growth of Sol de Janeiro and Elemis’ solid performance in the US.

APAC posted growth of 2.7 percent at reported rates and a decline of 0.6 percent at constant rates in the nine months. Most countries recorded growth, except China and Japan which were both affected by the Covid-19 situation. Sales in China saw a low teens percent decline at constant rates in the third quarter. Excluding China, APAC grew by 7 percent at constant rates in the nine months.

EMEA saw a slight sales decline of 0.3 percent at constant rates in nine months mainly due to the divestiture of Russia in June 2022. Excluding Russia, EMEA posted growth of 9.2 percent at constant rates, with key contributions from distribution and travel retail sales in the region.

Wholesale & others led in terms of channel performance in the nine month period, growing 43.7 percent at constant rates with dynamic growth in wholesale chains, international distribution and travel retail. Online channels posted growth of 8.3 percent at reported rates and 2.3 percent at constant rates in the nine month period, accounting for 31.2 percent of the group’s sales.

Retail sales saw a slight decrease of 1.7 percent, mainly affected by store closures in China due to Covid-19 outbreaks, the divestiture of Russia and the closure of the group’s own stores. Excluding the China and Russia markets, retail sales grew by 6.9 percent at constant rates. The total number of company-owned retail stores was 1,386 as at December 31, 2022, as compared to 1,515 as at December 31, 2021.

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