K-Beauty companies evaluate, mull adjustments to strategies

[Graphics by Song Ji-yoon and Han Yubin]

South Korean cosmetic companies are facing the challenge of reducing their reliance on China, where global fashion and cosmetic firms have seen sluggish sales.

Market analysts are focusing on Amorepacific Corp. in particular, as the company increased efforts to expand its businesses in the United States and Europe. Known for its relatively heavy reliance on China, LG H&H Co. is expected to become more vulnerable to stock fluctuations based on its performance in the Chinese market.

As of the close of trading on Monday, Amorepacific shares gained 6.4 percent over the past month while in contrast, LG H&H saw an almost 13 percent decline during the same month.

China is where the two Korean companies generate the largest share of their sales generated outside Korea. But NH Investment & Securities Co. maintained a Buy rating on Amorepacific and raised its price target from 240,000 won to 240,000 won ($173) per share, citing the company‘s growth prospects in the United States and Europe.

[Photo by Yonhap]

“Amorepacific’s U.S. market sales will surpass those in China, supported by the expansion of brands including Cosrx and Laneige in the United States,” NH Investment & Securities analyst Jung Ji-yoon said.

According to its most recent earnings report, Amorepacific‘s sales in Western markets such as the United States and Europe increased from 22 percent in the first quarter of 2023 to 31 percent in the first quarter of 2024. Sales in China accounted for 44 percent and was down from 53 percent.

In comparison, LG H&H saw its share of sales in China increase from 39 percent to 42 percent, while its North American sales fell from 27 percent to 24 percent.