Consumers have become more rational, and "Hermes in the hand cream industry" has increased income without increasing profits, and then it has new developments in the capital market.

On September 13, the beauty giant l'Occitane, which has been listed on the Hong Kong stock market for 14 years, $L'OCCITANE (00973.HK)$ officially ceased trading of shares until they withdraw from the listing. As of the last trading day before delisting, l'Occitane had a total market value of approximately HKD 49.7 billion (approximately RMB 45 billion).

This news has been circulating for a long time, with some signs as early as last year, and it officially had a result in April this year.

At that time, after L'Occitane was suspended from trading for several days, it resumed trading on April 30th. At the same time of resuming trading, Reinold Geiger, the chairman of L'Occitane, announced that they would acquire the L'Occitane shares not yet held at a price of HK$34 per share, with financial support from Blackstone and Goldman Sachs. This price was 61% higher than the average price of the previous 60 days. On that day, L'Occitane's stock price rose nearly 13% to a record high of HK$33.5 per share during trading and finally closed at HK$33 per share.

In the face of the decision to privatize, L'Occitane stated that in the increasingly fierce competition in the global skincare and cosmetics industry, the current management team hopes to be more flexible in promoting the company's long-term strategy, free from the constraints of short-term interests in the public market, so as to better achieve the brand's global expansion and market deepening.

Affected by the privatization news, L'Occitane's stock price has remained relatively strong for the past 5 months, reaching a high of nearly HKD 34 per share, close to the planned acquisition price.

Before delisting and privatization, L'Occitane released its final financial report.

The financial report for the fiscal year ending March 31, 2024 shows that L'Occitane achieved a net sales revenue of 2.541 billion euros, a 19.1% increase compared to the same period last year. Calculated at a fixed exchange rate, it achieved a 24.1% growth.

Despite the increase in sales, the net income of L'Occitane was 93.893 million euros, a 18.4% decrease compared to the previous year, due to the impact of high marketing expenses and other expenditures.

After nearly 20 years of development in the Chinese market, L'Occitane has also experienced a decline in recent years.

Currently, China is its second largest market, while around 2022, China was once its largest market. In the 2022 fiscal year, the Chinese market accounted for 18.4% of the group's total sales. In the following two years, it gradually declined, reaching 14% in the 2023 fiscal year, and in the latest reported fiscal year, it was only 12.9%.

As the "Hermes of hand creams," L'Occitane is not inexpensive. In the past few years, it has targeted those who want to buy luxury brands but find it difficult to afford them, playing a role similar to that of "luxury lipstick." At its peak, hand creams from L'Occitane could be found in the hands of every young lady.

Originating from the lavender homeland of Provence, France, L'Occitane has a history of nearly 50 years. Combining natural plant extracts and other stories, it has opened stores in major cities and has enjoyed successful sales in the era of sales upgrading.

However, the price of hand cream at nearly 100 yuan/30ml is still too expensive in today's Chinese market where the average price of hand cream is around 34 yuan, and relying solely on a hand cream product is also difficult to support the entire brand.

Although L'Occitane's shower gel, face cream, and other products have appeared on Li Jiaqi's live broadcast, the best-selling product is still the hand cream. Moreover, L'Occitane has not been very innovative in its products, and it's just those few products that are seen repeatedly in daily life, which many first and second-tier consumers have already grown tired of.

Furthermore, L'Occitane actively targets the sinking market, providing emotional value to the wealthy women in the county.

Consumers in third and fourth-tier cities have more time, are willing to experience offline stores, and trust recommendations from friends. L'Occitane is not particularly expensive, but it carries a certain brand premium, which perfectly fits the needs of the market's consumers. Furthermore, L'Occitane's gift boxes have become a new choice for many mothers and older people when giving gifts.

Last year, then L'Occitane CEO Andre Hoffman stated that the group would continuously expand into China's sinking market and open 10-15 new stores in third and fourth-tier cities.

Currently, L'Occitane has opened multiple stores in third and fourth-tier cities with relatively high consumer potential, with at least one store in most mainstream prefecture-level cities. Seizing the sinking market also means there are more opportunities.

For the past few years, L'Occitane's problem has always been its relatively single product structure. With the privatization this time, the brand also wants to deepen its market independently without being affected by stock prices.

After privatization, whether L'Occitane can create another classic best-selling product like the hand cream depends on the specific product performance in the future.

Meanwhile, the global cosmetic and personal care market competition is becoming increasingly fierce, and L'Occitane also needs more competitive strategies to maintain its position.

Editor/new