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Stocks

French skincare brand L'Occitane sees robust growth in China, Japan

Asia popularity covers for marginal growth in home market

HONG KONG -- The Hong Kong-listed shares of French natural cosmetics brand L'Occitane jumped 3.73% on Wednesday morning trading after the company reported steady revenue growth for the three months ended in June. However, profit-taking saw the shares close slightly lower.

After the market closed on Tuesday, the company said that its revenue grew in the quarter by 4.1% to 279.5 million euros ($324.8 million) from a year ago. Its core market of Japan -- which accounted for 19% of the total sales -- grew at 3.4%, supported by robust online sales which were helped by promotional campaigns on the nation's popular messaging app Line.

The revenue growth accelerated from the 3.2% rise seen in the previous quarter ended March. When the market opened on Wednesday morning, L'Occitane shares surged as high as 18.32 Hong Kong dollars ($2.34).

Besides the Japan market, sales in developing markets also saw strong growth, with China and Brazil increasing by 24% and 28% respectively during the quarter. "Sales growth in China will lead the company's performance going forward," said Mark To, head of research at Wing Fung Financial Group.

Sales in L'Occitane's home market of France saw only marginal growth of 1% during the same period, while revenue contracted in the U.S. and U.K.

Nomura International analysts, headed by Emily Lee, expect the company's growth to pick up in the second half of 2017, noting "we expect sales growth to reach 8% in the fiscal year 2018."

A stronger euro could weigh on on the company's earnings as earnings in Asia are eroded by unfavorable currency conversions. However, To of Wing Fung said "strength in the euro is also a sign of recovery in the Eurozone economy, which is not necessarily bad news for a company that runs a substantial business in Europe."

L'Occitane shares gradually declined throughout the day on profit-taking and closed at HK$ 17.50, down 0.9% from the previous day.

Nikkei staff writer Mariko Tai in Hong Kong contributed to this report.

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