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L’Occitane shares rise on strong nine-month sales


L’Occitane’s shares
973,
+7.14%
rose sharply after the company reported strong sales in the nine months ended December, with analysts saying business is already normalizing post-pandemic.

Shares of the European beauty products retailer advanced 6.7% to 24.65 Hong Kong dollars (US$3.15) on Wednesday, on track for their largest percentage gain since November.

L’Occitane on Tuesday said it expected nine-month sales to have grown to 1.915 billion euros (US$2.08 billion) from EUR1.61 billion a year earlier.

It attributed the sales growth to the continued outperformance of its Sol de Janeiro brand and the recovery of its of Elemis line.

Sol de Janeiro’s sales growth was supported by record-breaking holiday sales and the successful launch of a new product, as well as the expansion of online sales, Citi analysts led by Tiffany Feng wrote in a note.

L’Occitane’s retail sales maintained a steady growth of 4.0%, mostly contributed by its China business. The growth in online sales was partly driven by the recent launch of L’Occitane en Provence products on Douyin, the Chinese version of Tiktok.

Citi analysts said in a research note that the rapid revenue growth in the fiscal third quarter ended December was better than expected.

They expect the company’s business to largely be back to normal in FY 2024 and FY 2025 after the pandemic dragged on earnings in recent years.

The company updated its full-year sales growth guidance to more than 20% from 17%, driven by Sol de Janeiro’s strong performance. They are less confident about the company’s main brand, L’Occitane en Provence, partly due to higher marketing investments and weak travel retail, Citi said.

The Elemis brand may also generate significant sales growth in FY 2024 amid a large marketing campaign, the analysts said.

Citi kept its buy rating for the stock and raised its target price to HK$29.50 from HK$25.50.



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