Company Reports

L’Occitane’s second-half fiscal 2024 results disappointed, falling short of both our and consensus expectations. This underperformance stemmed from higher-than-anticipated marketing spending, which weighed on profit margins. Adding to the concerns, management lowered its medium-term guidance without providing a clear rationale. However, we do not expect the share price to react negatively due to the existing privatization offer from L’Occitane’s CEO. While shareholder approval is still pending, these lackluster results could increase the likelihood of the offer's acceptance. Consequently, we have lowered our fair value estimate to HKD 34 per share from HKD 37, aligning it with the privatization offer.

We think L’Occitane’s growth over the next five years will largely depend on the performance of Elemis and Sol De Janeiro. Elemis, a premium skincare brand acquired in March 2019, is predominantly sold in the UK and US, with few sales elsewhere. Whether Elemis can repeat its success in other markets, especially China, will make a big difference in L’Occitane’s fortunes, given the steep price L’Occitane paid for the acquisition.

We think L’Occitane’s growth over the next five years will largely depend on the performance of Elemis and Sol De Janeiro. Elemis, a premium skincare brand acquired in March 2019, is predominantly sold in the UK and US, with few sales elsewhere. Whether Elemis can repeat its success in other markets, especially China, will make a big difference in L’Occitane’s fortunes, given the steep price L’Occitane paid for the acquisition.

While Reinold Geiger's HKD 34 per share offer presents a potential exit opportunity for L'Occitane investors, we believe it falls short of reflecting the company's intrinsic value. For the proposal to be more compelling, we would prefer to see the offer priced at a premium to our fair value estimate of HKD 37 per share. We believe management's offer price overlooks L'Occitane's long-term prospects, undervaluing it by about 8%. We argue that pursuing L’Occitane’s medium-term objectives would better serve shareholder interests. These objectives include the global expansion of its Elemis, Sol de Janeiro, and Grown Alchemist brands, alongside an initiative aimed at improving profit margins. There are no competing bids for L’Occitane, and we do not foresee any regulatory obstacles that could derail these plans.

We recommend that shareholders hold their positions in L’Occitane in light of an unconfirmed Bloomberg report about buyout interest from Blackstone. Although the potential offer's terms are not disclosed, we believe any bid needs to approximate our fair value estimate of HKD 37 per share to entice shareholder acceptance. Should any such proposal fall substantially below this threshold, we think that shareholders would benefit more from L'Occitane's pursuit of its medium-term goals. These goals encompass the worldwide expansion of brands such as Elemis, Sol de Janeiro, and Grown Alchemist, in addition to efforts aimed at improving profit margins.

Narrow-moat L’Occitane Group’s fiscal third-quarter (ending December 2023) trading performance mildly exceeded consensus expectations, and management lifted full-year revenue growth guidance. We keep our assumptions unchanged as we anticipate the company will deliver better sales in fiscal 2024. Hence, we maintain our fair value estimate of HKD 37 for L'Occitane and continue to see the stock as undervalued, currently trading at approximately 15 times fiscal 2025 consensus earnings.

We maintain narrow-moat L'Occitane’s fair value estimate at HKD 37 following its broadly in-line fiscal 2024 first-half (ended September 2023) results. Management said holiday sales in China and the U.S. have been promising and maintained guidance for the full year. We view L’Occitane’s shares as undervalued, trading at more than a 50% discount to our fair value and an attractive 13 times price to fiscal 2025 PitchBook consensus earnings.

Narrow-moat L'Occitane’s fiscal secondquarter (ending September 2023) trading performance mildly exceeded expectations, but management maintains its full-year guidance. Overall, we keep our fair value estimate at HKD 37 and continue to view shares as very undervalued. We believe L'Occitane’s portfolio of brands has a strong competitive positioning and favorable growth prospects. Investors should find attractive the current market valuation of 16 times price to fiscal 2024 earnings.

While L'Occitane reported better-than-expected fiscal 2023 results (year ended March 2023), it provided disappointing fiscal 2024 operating margin guidance as it decided to spend an additional EUR 100 million on marketing. In our view, the market is overreacting as the stock is down 18% in next-day trading. In our view, incremental investment is important as it can help L'Occitane drive more awareness and rebuild pricing power over time. To us, the key question is whether such an investment will hurt longer-term profitability, and management answered it by maintaining medium-term guidance for fiscal 2026. We increased our revenue growth assumption for fiscal 2023, but lowered the margin forecast. We maintain our fair value estimate for L'Occitane at HKD 37 as our long-term assumptions remain largely unchanged. We believe the market's reaction to L'Occitane's guidance is not warranted. With shares trading at 14 times price/earnings, we continue to view L'Occitane as an attractive investment.

Narrow-moat L'Occitane’s fiscal fourth-quarter (ending March 2023) trading performance mildly exceeded expectations, and management lifted its full-year adjusted operating profit margin (excluding impairments) guidance to 15% from 14%. Overall, we slightly raised our fair value estimate to HKD 37.00 from HKD 36.60, and we continue to view shares as very undervalued. We believe L'Occitane has a strong competitive positioning and favorable growth prospects. Investors should find the current market valuation of 13 times price to fiscal 2024 earnings attractive.

We think L’Occitane’s growth over the next five years will largely depend on the performance of Elemis and the outcome of its omnichannel strategy. Elemis, a premium skincare brand acquired in March 2019, is predominantly sold in the U.K. and U.S. with few sales elsewhere. Whether Elemis can repeat its success in other markets, especially China, will make a big difference in L’Occitane’s fortunes, given the steep price L’Occitane paid for the acquisition.

We fine-tune our forecasts for L’Occitane but maintain its fair value estimate at HKD 36.60 per share, implying a fiscal 2024 P/E ratio of 21 times. But with its share price currently around HKD 20, we find L’Occitane’s valuation very attractive, trading at just 11 times fiscal 2024 earnings. We think investors should take advantage of this opportunity to buy shares of L’Occitane, which are trading at more than a 45% discount to our fair value estimate.

We maintain our fair value estimate at HKD 36.60 after narrow-moat L'Occitane reported fiscal 2023 first-half (ended Sept. 30, 2022) results broadly in line with our estimates. Management maintained medium-term guidance but set a cautious tone on near-term growth in China. We view L'Occitane's shares as undervalued, trading at a 40% discount to our fair value estimate as of the close of business on Nov. 29, and 13 times fiscal 2024 PitchBook consensus earnings.

L'Occitane's fiscal second-quarter (ending September 2022) trading performance was in line with our expectations. Constant currency sales were up 16% year over year to EUR 485 million. Management also maintained full-year guidance despite global recession risks and ongoing lockdowns in China. We maintain our forecasts and reiterate our fair value estimate for L'Occitane of HKD 36.6 per share. We believe L'Occitane has a strong competitive positioning and/or favourable growth long-term prospects and we think investors should find the current market valuation of HKD 30 billion or 15 times forward P/E attractive.

We think L’Occitane’s growth over the next five years will largely depend on the performance of Elemis and the outcome of its omnichannel strategy. Elemis, a premium skincare brand acquired in March 2019, is predominantly sold in the U.K. and U.S. with few sales elsewhere. Whether Elemis can repeat its success in other markets, especially China, will make a big difference in L’Occitane’s fortunes, given the steep price L’Occitane paid for the acquisition.

Narrow-moat L'Occitane's fiscal first-quarter's (which ended June) trading performance was in line with our expectations. Constant currency sales were up 16% year over year (off a high base of 28% growth in the same quarter last year). Despite the challenges of ongoing lockdowns in China, management maintains its full-year guidance. For fiscal 2023, we continue to expect revenue to grow at a constant currency rate of 13% and an operating margin of 16%. We maintain our fair value estimate for L'Occitane of HKD 36.60 per share. We view the firm's shares as undervalued as at the close of business on July 29, trading at about a 27% discount to our fair value.

Narrow-moat L'Occitane posted solid second-half fiscal 2022 results, with its bottom line exceeding PitchBook consensus and our estimate by about 20%. Another surprise was management's proposal to increase the dividend payout ratio to 40% from 35%, translating to about a 5% yield at the current share price. Looking into fiscal 2023, we think the company would continue to drive double-digit sales growth through expansion into new markets while maintaining an operating margin of around 16%. We maintain our fair value estimate at HKD 36.60 and view L'Occitane's shares as undervalued.

L'Occitane's lifting of fiscal 2022 guidance doesn't have an impact on our fair value estimate, but it does reinforce our favorable view of the company. After years of acquisitions, the company owns a collection of high-growth and margin-accretive emerging brands, including Elemis, Sol de Janeiro, and Erborian. We continue to view the stock as slightly undervalued with accelerated earnings growth brought by emerging brands not fully appreciated by the market.

We think L’Occitane’s growth over the next five years will largely depend on the performance of Elemis and the outcome of its omnichannel strategy. Elemis, a premium skincare brand acquired in March 2019, is predominantly sold in the U.K. and U.S. with few sales elsewhere. Whether Elemis can repeat its success in other markets, especially China, will make a big difference in L’Occitane’s fortunes, given the steep price L’Occitane paid for the acquisition.

Narrow-moat-rated L'Occitane continues its streak of posting solid net profit growth, and management lifts its fiscal 2022 guidance following upbeat interim numbers. In addition to fine-tuning our near-term forecasts, we have incorporated the firm's acquisition of margin-accretive Sol de Janeiro into our valuation model. As a result, we lift our fair value estimate to HKD 36.60 from HKD 32.60 and view shares of L'Occitane as undervalued.