China is LG H&H’s headache amid global K-beauty boom

South Korean cosmetics giant LG H&H Co. has yet to benefit from the global K-beauty boom due to its heavy dependence on China, the world’s largest beauty products importer.

LG H&H, known for its premium brand The Whoo, said on Thursday its operating profit edged up 0.4% to 158.5 billion won ($114.4 billion) in the second quarter versus a year earlier, but with sales down 2.7% to 1.8 trillion won. In the first half, its profit rose 1.9% while revenue dipped 0.1%.

In comparison, smaller Korean cosmetics makers have been enjoying the growing K-beauty boom worldwide.

For example, VT Co., famous for its skin care product Reedle Shot, was forecast to post a 126.5% surge in operating profit and a 47% jump in sales in the second quarter, according to analysts.

Naturalist cosmetics maker Manyo Co.'s quarterly profit was estimated to have soared 84% on-year, with sales up 52% as it expanded its business in North America.

OVERRELIANT ON CHINA

LG H&H, formerly LG Household & Health Care Ltd., has focused too heavily on China, the world’s second-largest economy, industry sources in Seoul said.

The company’s cosmetics sales to China, including those to the mainland and at duty-free shops, made up 46% of its beauty products revenue, according to Hyundai Motor Securities Co.

The LG Group unit revamped The Whoo, its flagship brand in China, to revive sales in the country, but the move has yet to pay off.

Last month, The Whoo again failed to land in the top five skincare brand list by sales on Tmall, an e-commerce platform operated by China’s Alibaba Group, during the annual 618 festival, mainland China's second-largest shipping event.

ACQUISITIONS TO DIVERSIFY MARKETS

LG H&H has sought to lessen its reliance on Chinese markets through acquisitions.

Last September, the company took over Korea’s Vivawave Co. whose premium makeup brand Hince is popular in Japan.

LG H&H also kept the door open for acquisitions of other companies to expand its presence in Asia outside China and North America.

Its Korean rival Amorepacific Corp. has begun to reap benefits from a takeover.

The beauty giant known for its premium brand Sulwhasoo was estimated to have achieved a 1,111% surge in operating profit with 8.2% sales growth in the second quarter as earnings of Cosrx Inc., which Amorepacific acquired, were reflected in the company’s income on a consolidated basis, analysts said.

Cosrx, a Korean cosmetics maker known for snail mucin, generated most of its sales in overseas markets.

Write to Hyung-Joo Oh at ohj@hankyung.com
 
Jongwoo Cheon edited this article.