The performance of COSRX, a derma (a portmanteau of Dermatology and Cosmetic) skincare brand that Amorepacific acquired by investing more than 900 billion won in total, is on a downward trajectory. As K-beauty competition has intensified in key export markets, the brand's freshness has relatively faded, and lowering product prices to respond has hurt sales and profitability. COSRX plans to target hair care as a new business area and work to improve results.
COSRX is a brand founded in Korea in 2013. It has grown rapidly, expanding into about 150 countries with hit products such as "Original Clear Pad," "Acne Patch," and "Good Morning Gel Cleanser." Based on its long track record, it is cited as the K-beauty brand with the most online and offline touchpoints in the United States.
According to the securities industry on 25th, COSRX posted sales of 96.7 billion won and operating profit of 24.2 billion won in the second quarter of this year. Compared with the same period a year earlier, sales fell 0.3% and operating profit declined 17%. In the first quarter, COSRX recorded sales of 101.6 billion won and operating profit of 26.4 billion won, down 35% and 56%, respectively, from a year earlier.
COSRX, acquired by Amorepacific in 2023, drew attention as the largest brand the company has bought to date. Amorepacific invested 180 billion won in 2021 to secure 38.4% equity in COSRX and also received a call option to purchase the remaining equity. Then in Oct. 2023, it invested an additional 755.1 billion won to acquire the remaining 288,000 shares, raising its equity stake to 93.2%.
However, COSRX has posted weak results since the second half of last year. Sales fell from 150.6 billion won in the third quarter of last year to 137.9 billion won in the fourth quarter, and came to 101.6 billion won and 96.7 billion won in the first and second quarters of this year, respectively. Operating profit also continued to decline, from 46.7 billion won in the third quarter and 30.3 billion won in the fourth quarter last year to 26.4 billion won in the first quarter and 24.2 billion won in the second quarter this year.
This is seen as the result of intensifying competition among K-beauty brands in key export markets. In recent years, domestic indie brands with strengths in skincare have actively entered overseas markets including the United States, causing established brands' freshness to relatively diminish.
COSRX is responding by cutting prices on online malls and other channels to adjust inventory, but this is negatively affecting sales and profitability. Cho So-jung, an analyst at Kiwoom Securities, said, "COSRX is currently continuing price stabilization efforts in key growth markets such as North America and Southeast Asia," and added, "In Europe, weakness is likely to continue for the time being due to a reduction in business-to-business (B2B) accounts."
COSRX aims to improve results by delivering outcomes in the hair care business it has chosen as a new line. To that end, it made a full-fledged entry into the market in Jul. by launching the new product "Peptide-132 Ultra Perfect Hair Bonding," based on a proprietary, patent-pending ingredient it developed.
According to COSRX, the peptide ingredient in this product penetrates deep into damaged hair to restore internal bonding structures and strengthens the cuticle to recover shine and elasticity. Among COSRX's hair care lineup, the treatment product ranked No. 1 among new products in the "deep conditioner" category on Amazon in the United States right after its launch.
Kim Hye-mi, an analyst at Sangsangin Investment & Securities, said, "COSRX's sales are expected to gradually recover, helped by the effect of new product launches," and added, "Profitability is also expected to benefit as the share of low-priced products shrinks and the lineup expands with a focus on high-functionality."
Meanwhile, Amorepacific's recent business conditions are not good. Amorepacific had long held the top spot in market capitalization in the domestic beauty industry but fell to No. 2 on 6th last month, overtaken by APR. LG H&H, which had held the No. 2 spot, fell to No. 3 on Jun. 23, also overtaken by APR. As of the previous day's (23rd) closing price, Amorepacific's market cap was 7.335 trillion won, about 800 billion won less than APR's 8.1412 trillion won. LG H&H stood at 4.3689 trillion won.