Sprite Boys & Meal 2022
LG H&H, Reports 1.9tr won in Sales, 217bn won in Operating Profit
2Q Sales and Operating Profit Decreased 7.9% YoY and 35.5% YoY
2Q Sales and Operating Profit Increased 13.2% QoQ and 23.4% QoQ
July 28, 2022 – In 2Q 2022, LG H&H (The Company), Ltd. reported 1.9tr won in sales (-7.9% yoy), 217bn won in operating profit (-35.5% yoy).
China’s growing commitment to uphold ‘Zero-Covid’ policy since March has severely affected China onshore business throughout 2Q and rising raw material prices due to prolonged Ukraine crisis made it difficult to accelerate the growth of sales and operating profit.
Compared with the difficulty in 1Q, 2Q sales increased 13.2% qoq and operating profit increased 23.4% qoq. The improvement in quarterly earnings was largely attributable to the growth of Beauty which grew 21.9% qoq in sales and 35.2% qoq in operating profit. Total Beauty, which is Beauty and Daily Beauty combined, delivered 1.2tr won in sales and 139bn won in operating profit.
HDB and Refreshment, despite rapidly increasing cost headwinds, achieved growth in both sales and operating profit.
[2Q 2022 Results by Business]
▲Beauty business sales decreased 23.6% yoy to 853bn won, and operating profit decreased 57.4% yoy to 93bn won. Compared with the 1Q, sales and operating profit increased 21.9% qoq and 35.2% qoq, respectively.
In response to the COVID-19 outbreak in China, major cities including Shanghai were under full lockdowns and partial lockdowns were imposed on other cities such as Beijing. The lock down followed by movement restrictions, shutdown of retail stores, and disrupted logistics had significant and negative consequences for 2Q China business.
Despite the low consumption sentiment due to ‘zero-covid’ policies, ‘Whoo’ ranked No.1 best-selling beauty brand on ‘Douyin’ and ‘Kuaishou’, two newly growing platforms, during 618 Shopping Festival, which is one of the largest e-commerce events in China. While maintaining our strict pricing policy, sales started to recover as sales increased 36% qoq and decline in growth yoy slowed down.
Beauty launched ‘freshian’, a new vegan makeup brand targeted towards MZ generations that emphasize value consumption. Through this launch Beauty will expand its eco-friendly product portfolio and actively take part in the premium color cosmetics market.
▲HDB business sales increased 9.5% yoy to 543bn won, and operating profit increased 1.4% yoy to 60bn won.
Even at the face of ongoing cost challenges due to hikes in materials and logistics costs, Daily Beauty premium brands delivered strong performance driving not only sales growth but also operating profit growth. ‘Dr. Groot’ and ‘Veilment’ upgraded its product portfolio through renewal of products that enhances its efficacy and differentiates its substances. ‘Physiogel’ complemented its winter-biased product portfolio by launching refrigerated cosmetics, ‘Physiogel Cold Therapy’, and sun-care products to reduce seasonality.
In the emerging market for gray hair covers, ‘Dr. Groot Black Recover’ and ‘ReEn Dyed’ has been receiving positive responses since release. Furthermore, HDB is making efforts to improve brand preference by targeting MZ generations through offering various collaborations and strengthening digital contents across brands.
▲Refreshment business sales increased 13.9% yoy to 466bn won, and operating profit increased 10.0% yoy to 64bn won.
As consumer interests in health and weight-loss grew, zero-calorie drinks, such as ‘Coca-Cola Zero’ and ‘Sprite Zero’, and low-calorie drinks, such as ‘Monster Energy Ultra’ drove sales growth. As the trend shifts toward preference for sugar-free beverages, ‘Monster Energy’ launched ‘Monster Energy Zero Sugar’, which eliminated sugar while preserving the unique ‘Monster Energy Green’ flavor, to offer consumers a wider range of selection.
Refreshment experienced sales growth from channels such as restaurants, theatres, and highway rest stops due to increased outdoor activities with the number of COVID-19 infections on decline since its peak in April. Meanwhile, online channels, which grew sharply with the outbreak of COVID-19, reported steady growth even with the increased outdoor activities indicating a change in consumer purchase patterns.