L’Occitane, the European beauty products retailer, experienced a notable surge in its shares following the announcement of robust sales for the nine months ending in December. Analysts have expressed optimism, suggesting that the company is already returning to pre-pandemic levels.
On Wednesday, shares of L’Occitane rose by 6.7% to reach 24.65 Hong Kong dollars (US$3.15), marking the largest percentage gain since November.
L’Occitane reported an expected growth in nine-month sales from 1.61 billion euros to 1.915 billion euros (US$2.08 billion). The success can be attributed to the continued strong performance of the Sol de Janeiro brand, as well as the recovery of its Elemis line.
According to analysts at Citi, Sol de Janeiro experienced impressive sales growth driven by record-breaking holiday sales, a successful product launch, and increased online sales. Additionally, the expansion of online sales played a significant role in this growth.
The retail sales of L’Occitane remained steadily increasing at a rate of 4.0%, largely influenced by its business in China. Online sales were fueled by the recent introduction of L’Occitane en Provence products on Douyin, the Chinese equivalent of TikTok.
In a research note, Citi analysts highlighted that the revenue growth in the fiscal third quarter ending in December exceeded expectations. They predict that L’Occitane’s business will return to normalcy by FY 2024 and FY 2025 after grappling with the effects of the pandemic in recent years.
The company has revised its full-year sales growth guidance to more than 20%, up from the previous estimate of 17%. This positive update is primarily driven by Sol de Janeiro’s impressive performance. However, analysts at Citi express some caution concerning the company’s main brand, L’Occitane en Provence, due to increased marketing investments and weakness in the travel retail sector.
The Elemis brand is expected to experience significant sales growth in FY 2024, thanks to an extensive marketing campaign, according to the analysts.
Citi maintains its buy rating for L’Occitane’s stock and has raised its target price from HK$25.50 to HK$29.50.