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L’Occitane Profit Increases 22% on China, Japan

L’Occitane International SA (973), the first French company to list in Hong Kong, said full-year profit grew 22 percent as it opened new stores and sales growth at outlets open more than a year accelerated.

Net income for the 12 months ended March 31 rose to 99.5 million euros, or 0.068 euros a share, from 81.6 million euros ($116 million), or 0.064 euros, in the previous year, the maker of skin-care products, soap and perfume said in a stock-exchange filing today. Sales grew 26 percent to 772 million euros.

L’Occitane, which makes all its products in France, is opening stores to tap rising demand for cosmetics in emerging markets such as China, while continuing to expand in developed countries. It had the fastest store expansion in mainland China, with 24 additional locations, while sales in Japan its biggest market, increased 29 percent to 190 million euros.

“Risks exist but the growth story will win the day for now,” Erwan Rambourg, a Hong Kong-based analyst at HSBC Holdings Plc, who raised the company’s rating to “overweight” a week ago, said before the earnings announcement. “Although Japan may surprise by its resilience, we expect Asian countries to impress.”

L’Occitane’s total number of retail locations expanded to 1,828 from 1,541 in the previous year. The company’s own retail outlets grew 17 percent to 895. Same-store sales growth, which strips out the effect of outlets open less than a year, accelerated to 5.3 percent, compared with 1 percent in the previous period, according to L’Occitane’s statement.

Japan Sales Growth

L’Occitane slid 0.9 percent to HK$18.62 at the 4 p.m. close of trading in Hong Kong today, before the results were announced. The stock has lost 13 percent this year, compared with a 4.3 percent drop for the benchmark Hang Seng Index.

The company’s sales in Japan were affected in the first two weeks after the March 11 earthquake, the strongest on record to hit the country, Chief Financial Officer Thomas Levilion said at a briefing in Hong Kong today. L’Occitane, which is incorporated in Luxembourg, had 11 additional stores in Japan, where it made 24.6 percent of revenue for the period.

“The earthquake and tsunami are slowing down our growth in Japan in the short term but we remain confident for the long- term potential,” the company said in its statement.

Sales in mainland China, its ninth-largest market, grew 60 percent to 32.8 million euros or 4.2 percent of the total, according to the filing. Mainland China doesn’t include Hong Kong, Macau or Taiwan. Sales in Hong Kong, where many mainland Chinese prefer to shop, expanded 43 percent to 71.2 million euros, making it the fourth-largest market for L’Occitane.

Photographer: Jerome Favre/Bloomberg

A woman browses through L'Occitane International SA cosmetics at one of the company's stores in Hong Kong, China. Close

A woman browses through L'Occitane International SA cosmetics at one of the company's... Read More

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Photographer: Jerome Favre/Bloomberg

A woman browses through L'Occitane International SA cosmetics at one of the company's stores in Hong Kong, China.

In local currency terms, sales in mainland China grew about 46 percent from a year earlier, Levilion said.

The company plans to open 30 stores in China this fiscal year, said André Hoffmann, managing director for the Asia- Pacific region.

L’Occitane said it will pay a dividend of 0.0135 euro per share.

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net

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