Abstract: KOSÉ recorded sales of $980 million in the first half of 2022, up 4.4% year-on-year. Its revenue in Asia Pacific reached $270million, down 4.3% year-on-year.
On August 10, KOSÉ announced its interim financial data for 2022. In the first half of the year, KOSÉ recorded sales of 130.6 billion yen (approximately 6.608 billion yen), up 4.4% year-on-year, and an operating profit of 7.2 billion yen (approximately 364 million yen), up 81.5% year-on-year.
In the first half of the year, KOSÉ’s results were significantly impacted by the lockdown of China due to COVID-19 cases and control policy, as well as higher crude oil and other ingredient prices. However, KOSÉ believes that normal economic activity has now resumed in China and expects demand for cosmetics to recover. Especially as the travel retail market is expected to accelerate with the recovery of results in Hainan, along with increased competition.
In Asia Pacific, where China is located, revenue for the reporting period was $270 million, down 4.3% year-on-year. In terms of sales channels, e-commerce, travel retail and offline all declined overall in China.
Specifically, KOSÉ mentioned in its financial report that e-commerce sales in Japan rose 23.8% to $38 million, driven by the growth of the DECORTÉ in particular. However, e-commerce sales in China were $63 million, down 5.5% year-on-year with growth slowing in this year’s Chinese 618 Shopping Festival.
For the travel retail segment, KOSÉ’s overall revenue was $165 million, down 7.6% year-on-year. The travel retail sales of duty-free stores in Korea resumed growth, but the Korea travel retail business still fell 1.9% to $68 million, while the China travel retail business fell 11.8% to $93 million due to the lockdown in China.
For the revenue decline in the China region, KOSÉ said in its financial report, due to China’s 0-COVID 19 policy resulting in strict closure control will continue as well as the decline of top KOL live streaming, the group’s revenue may not be able to recover in the short term.
Specifically, in the cosmetics division, sales for the period were $791 million, up 6.5% year-on-year, while operating profit was $74 million, up 51.1% year-on-year. High-end brand DECORTE overall sales reached $316 million. The momentum of development in Japan is strong but China’s sales are not very satisfactory. In addition, brands such as ALBION, Tarte, Carte HD, and CLEAR TURN all contributed to revenue growth. Sales of Sekkisei were also not good with sales of only $39 million, down 14.75% year-on-year.
In its earnings report, KOSÉ also presented its plans for the second half of 2022 for its premium brand DECORTE. KOSÉ will open a flagship store in October 2022 on Hainan Island. The store will sell a broad range of high-end DECORTÉ products, including LIPOSOME and AQ line products. The store will boast the first treatment room in a duty-free store in Hainan. KOSÉ also analyzed that due to the dry climate in multiple regions in China, the demand for skincare cream is strong. LIPOSOME ADVANCED REPAIR CREAM will be launched as a major DECORTÉ product in addition to beauty serum products. The product will be available on September 1, 2022, outside Japan and will be sold on September 16 in Japan.
In terms of future development, KOSÉ expects to further expand its sales in the young Japanese market by developing high-end products such as DECORTÉ and to expand its market share for sensitive skin with a focus on Sekkisei. In addition, KOSÉ is also hoping for the recovery of the travel retail market in China and Korea to recover the decline in sales.
Recently, the Japanese beauty KOSÉ, Shiseido, Kao, and POLA are four leading companies, three have released first-half financial results. With a look at the three financial reports, the China region due to the epidemic has declined to various degrees. Shiseido 2022 first half sales reached about $3.7 billion, down about 0.4% year-on-year. The China region declined about 19.7% year on year. Kao Group’s total net sales for the first half of the year were $5.504 billion, up 8.7% year-on-year, with the cosmetics business in China down 5% year-on-year.
Although beauty companies were hit to varying degrees in the first half of the year, they all mentioned in their earnings reports that they will still push for the China market. And it is believed that the Chinese market will rebound substantially after the epidemic sealing is over.
PS: The amount is calculated at the exchange rate of August 12, 2022(China Standard Time)
