Suspended pending the release of inside information about a takeover or merger, L'Occitane stands at a crossroads. On April 10, L'Occitane was still suspended, and the news of the acquisition was still spreading. From a single brand to a beauty group that has formed a lineup of nine major brands, L'Occitane has stood at the top of the personal care industry. At that time, L'Occitane probably would not have imagined that there would be such a day - should he sell himself?
On April 10, L'Occitane was still in the midst of a trading halt, and behind the suspension, news that private equity firm Blackstone Group is nearing completion of an agreement to acquire L'Occitane and that the announcement of the deal is expected to be announced in the coming days continues to be talked about in the industry.
The news of the acquisition is not unfounded. On April 9, L'Occitane issued an announcement on the Hong Kong Stock Exchange, saying: "Trading will be temporarily suspended from 9 a.m., pending the issuance of an announcement under the Code on Takeovers and Mergers and Acquisitions constituting inside information." "Previously, during February, there was news that Blackstone was considering acquiring L'Occitane. As the negotiations move forward, this news seems to be becoming a reality. However, some people familiar with the matter revealed that although the negotiations have entered an advanced stage, they may still be postponed or even broken down.
Headquartered in New York, Blackstone is one of the world's largest independent alternative asset managers and the largest listed investment management company in the United States.
Regarding the reason for the suspension and the news of the acquisition, a reporter from Beijing Business Daily interviewed L'Occitane, but did not receive a reply as of press time.
In the view of Wu Daiqi, CEO of Shenzhen Siqisheng Company, the acquisition can be achieved usually because of the strong intention of both parties. "If the news of the acquisition is true, it may be a good choice for L'Occitane to bring financial support and resource integration to help L'Occitane achieve better development. However, acquisitions may also bring with them some uncertainties and risks, such as management changes, business integration and other issues, which require careful consideration by L'Occitane. Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, added.
Entering 2024, L'Occitane does have some "turmoil" internally.
At the beginning of 2024, L'Occitane will move management. According to information disclosed by L'Occitane, at the beginning of 2024, André J. Hoffmann, CEO and Vice Chairman of L'Occitane, announced his resignation from his relevant positions, and Laurent Marteau became CEO of L'Occitane. At the same time, L'Occitane also announced in early April that it had sold its sub-brand, which it had acquired less than two years ago.
In addition, at the performance level, L'Occitane is also not optimistic. According to the financial report data, in the first half of the 2024 fiscal year, L'Occitane's revenue was 1.072 billion euros, a year-on-year increase of 19.05%, and its net profit was 34.03 million euros, a year-on-year decrease of 44.96%. In fiscal 2023, its revenue was 2.135 billion euros, a year-on-year increase of 19.83%, and its net profit was 115.1 million euros, a year-on-year decrease of 52.44%.
Mr. Zhan said L'Occitane was currently facing a decline in performance, which led to its share price at a low level, providing a relatively good opportunity for Blackstone to acquire. Through the acquisition, Blackstone will gain control of L'Occitane, which will allow it to consolidate its resources, create synergies and improve overall performance.
In the past, L'Occitane has been making great progress with its "buy, buy, buy" strategy.
The L'Occitane brand was founded in 1976 in Provence, France, as a single-brand company. In 1997, the L'Occitane Group was founded, and under the leadership of Reinold Geiger, the internationalization strategy began.
According to incomplete statistics, L'Occitane has successively acquired and completed the expansion of multiple brands in the following ten years. For example, in 2008, L'Occitane acquired the French skincare brand Melvita, in 2012 it acquired the Korean herbal skincare brand Erborian, in 2018 it acquired the American personalized beauty brand LimeLife, the group's Brazilian branch brand L'OCCITANE au Brésil, in 2019 it acquired the British high-end skincare and wellness brand Elemis, and in 2021 it acquired the North American high-end body care brand Sol de Janeiro, the Australian skincare brand Grown Alchemist in 2022, and the Italian luxury home fragrance brand Dr. Vranjes Firenze......
The continuous acquisition strategy has propelled L'Occitane to one peak after another. In 2005, L'Occitane entered the Chinese market, and in 2010, L'Occitane was listed on the Hong Kong Stock Exchange. Before 2019, L'Occitane's gross profit margin did not fall by 80% in ten years, far exceeding that of beauty giants such as L'Oreal and Estee Lauder. In the Chinese market, L'Occitane is even more popular with its lady-level hand cream. According to the 2022 annual report, L'Occitane China's net sales were 328 million euros, a year-on-year increase of 24.4%, contributing 18% to the group's net sales, making it L'Occitane's largest market. In terms of stores, in fiscal year 2022, the number of L'Occitane stores in Chinese mainland reached 208, which is already the largest number of stores in the world.
L'Occitane did not maintain sustained growth. Judging from the FY2023 report, the Chinese market has fallen to L'Occitane's second largest market, accounting for 14% of total net sales. In the 2024 annual report call, L'Occitane's management analyzed the operation of the Chinese market: "Organic net sales in Asia Pacific decreased by 3% due to the slower-than-expected recovery of the overall high-end beauty market in the Chinese market. "In addition, L'Occitane, whose gross profit margin has not fallen below 80%, will decline to 78.3% in the middle of fiscal 2024, and the investment in marketing expenses has become one of the influencing factors. At the same time, the brands acquired by L'Occitane were not as successful as expected. Grown Alchemist's net loss before tax and after tax for fiscal years 2022 to fiscal 2023 was €276,000 and €4,344,000, respectively.
Zhan Junhao believes that with the continuous development of the domestic skin care market, more and more domestic and foreign brands are pouring into the market, and L'Occitane is facing competitive pressure from its peers. In addition, as consumers' needs for skincare products become increasingly diverse and personalized, L'Occitane's product line may not be able to keep up with market trends in a timely manner, resulting in consumer churn.
Perhaps L'Occitane is also aware of its own problems. In the conference call after the release of the 2024 interim results, Andre Hoffman, then CEO of L'Occitane, said that he would continue to lay out the sinking market. The Group will open 10-15 new stores in third- and fourth-tier cities in China. Andre Hoffmann said. At the same time, L'Occitane said in its financial report that we have seen positive signs in China as we enter the new fiscal year and plan to significantly increase marketing investment.
Beijing Business Daily reporter | Guo Xiujuan Zhang Junhua
Edited by Topol