Oct 27, 2022 – In 3Q 2022, LG H&H (The Company), Ltd. reported 1.9tr won in sales (-7.0% yoy), 190bn won in operating profit (-44.5% yoy).

Business environment for 3Q was challenging. In China, consumer sentiment and economic activity declined due to prolonged lockdowns since the beginning of this year. In addition, higher raw material costs, as a consequence of Ukraine crisis, was exacerbated by negative currency impact, resulting in even more pressure on overall operating costs.

Beauty reported decreased sales and operating profit, due primarily to weak consumption in China. Anticipating an eventual market rebound as Covid-19 abates, Beauty remains committed to strengthening luxury cosmetics, while actively expanding business in North America and Japan by launching products that capitalize on the growing interest in K-Beauty and on local market trends.

HDB reported solid growth in sales from high demand across major categories, but operating profit declined due to increased raw material costs.

Refreshment reported steady growth in both sales and operating profit, making three consecutive quarters of growth this year.

[3Q 2022 Results by Business]

▲Beauty business sales decreased 23.1% yoy to 789bn won, and operating profit decreased 68.6% yoy to 68bn won.

For China onshore, including travel retail, the operating environment was unfavorable. 3Q is usually a slow season for cosmetics, plus consumption in China continued to shrink due to lockdowns. Offline stores struggled with lockdown measures and online sales faced tightening government regulations on e-commerce influencers.

Momentum grew for ‘Ohui’ and ‘CNP’ to become the next leading luxury brands, as 3Q sales increased 22% yoy and 2% yoy, respectively. Meanwhile, Beauty is making progress in premium color cosmetics. Pearl makeup brand ‘Glint’ went viral soon after its online release and became the NO.1 highlighter. With its successful launch, ‘Glint’ quickly became available in the largest H&B store in Korea and is gaining popularity among MZ consumers. In North America, The Crème Shop is expanding its potential customer base(over 460,000 followers on Instagram) by introducing new products and expanding to various channels.

▲HDB business sales increased 8.8% yoy to 587bn won, and operating profit decreased 11.8% yoy to 56bn won.

Robust sales growth was primarily driven by solid performance across oral care, hair care and body care categories. Operating profit was more than offset by higher raw materials costs combined with negative currency impact. Despite headwinds, HDB enhanced its leading position in domestic market by focusing on premium daily beauty.

‘Dr. Groot’ released ‘Microbiome Beer Yeast Shampoo’ and ‘Addict Kiss Edition’ with a masterpiece of Gustav Klimt, ‘The Kiss’, printed on the package, enriching both sentimental appeal and functional value of the brand. ‘Physiogel’ introduced refrigerated cosmetics ‘Cold Therapy’ and sebum care line ‘Soothing Cica Balance’ to diversify its premium product portfolio.

▲Refreshment business sales increased 11.3% yoy to 494bn won, and operating profit increased 4.9% yoy to 66bn won.

Major brands, ‘Coca-Cola’, ‘Sprite’ and ‘Monster Energy’, delivered sustained sales growth, while operating profit improved despite adverse cost conditions due to efficient operating cost management.

Amidst the ongoing ‘Healthy Pleasure’ trend, ‘Coca-Cola Zero’ reinforced brand ‘newness’ by making adjustments to its product formulas and launching limited-edition flavors. In addition, new products, including ‘Monster Energy Zero Sugar’ and ‘Dr. Pepper Zero’, were introduced to provide consumers with more extensive sugar-free options.

Demand for nutrient-fortified beverages, such as ‘Powerade Protein’ and ‘Toreta! THE Lacto’, continued to be strong since their release in the first half of the year, accounting for a larger share of top-line growth.