APR is replicating its Mediheal success in Europe after North America, now targeting 3 trillion KRW (about 2.17 billion USD) in sales this year.
Q2 overseas sales soared 178% year-over-year, driven by North America and Europe, setting a new quarterly record. However, skyrocketing air freight costs, overseas inventory buildup, and the end of major shareholder lock-ups could challenge sustained high growth.
North American success formula resonates in Europe, contributing 68% of revenue
Financial reports filed on Monday show APR’s Q2 consolidated revenue hit 767.53 billion KRW (about 555 million USD), up 134.2% year-over-year. Operating profit jumped 134.5% to 190.65 billion KRW (about 138 million USD), while net profit rose 113.4% to 141.53 billion KRW (about 102 million USD).
First-half revenue reached 1.36 trillion KRW (about 984 million USD), with operating profit at 342.8 billion KRW (about 248 million USD). Revenue is about 89% of last year’s total, while operating profit is roughly 94% of last year’s figure under previous reporting standards.
APR’s Q2 overseas sales surged 178% to 704.2 billion KRW (about 509 million USD), accounting for 92% of total sales. North America and Europe combined for 68% of revenue. North American sales soared 264.6% to 376.3 billion KRW (about 272 million USD).
Mediheal topped Amazon’s Prime Day beauty category in Q1 and Q2, expanding its U.S. offline presence through Target and Walmart, following Ulta Beauty.
European growth is even more dramatic. Q2 European sales skyrocketed 380.3% to 145.1 billion KRW (about 105 million USD). Expansion of Amazon official sales channels in the UK, France, Germany, Italy, and Spain, plus local distribution growth, drove success. First-half European sales hit 228.9 billion KRW (about 166 million USD), up about 363% year-over-year.
APR aims for 3 trillion KRW (about 2.17 billion USD) in annual sales, targeting 500 billion KRW (about 362 million USD) in Europe. The company raised its European target from 300 billion KRW (about 217 million USD) to over 500 billion KRW (about 362 million USD), aiming to match last year’s U.S. sales in Europe within a year.
APR boosted its annual sales guidance by 42.9% to 3 trillion KRW (about 2.17 billion USD), up from 2.1 trillion KRW (1.51 billion USD). Regional targets: over 1.3 trillion KRW (about 940 million USD) in the U.S. and over 500 billion KRW (about 362 million USD) in Europe.
During the earnings call, APR Vice President Shin Jae-ha noted that global sales growth is accelerating, especially in North America and Europe, with major online and offline channels gaining momentum. It has raised the sales guidance to 3 trillion KRW (about 2.17 billion USD).
However, 30 billion KRW (about 21.7 million USD) in air freight costs have squeezed profit margins, and 369.8 billion KRW (about 267 million USD) in inventory poses a burden.
Growth-related costs have risen. Q2 operating profit margin fell to 24.8%, down 0.8 percentage points from Q1.
Early Amazon Prime Day timing and Middle East geopolitical risks delaying European sea logistics pushed air freight costs to about 30 billion KRW (about 21.7 million USD), ten times higher year-over-year. The company expects air freight pressure through Q3, but plans to alleviate it by securing overseas safety stock from Q4.
End-of-June consolidated inventory assets jumped 123.5% to 369.8 billion KRW (about 267 million USD) year-to-date. Accounts receivable and other receivables grew 110.3% to 191.6 billion KRW (about 138 million USD). Cash and equivalents dropped 38.8% to 94.5 billion KRW (about 68.4 million USD).
Increasing overseas safety stock aims to reduce air transport reliance. However, if demand falls short, inventory valuation and cash flow challenges could arise.
Lock-Up Expiration on Aug. 27 to Put Shareholder-Friendly Management to the Test
Chief Executive Officer (CEO) Kim Byung-hoon’s 31.38% stake and Vice President (VP) Shin Jae-ha’s 1.19% stake, totaling about one-third of issued shares, will be released from lock-up.
Management states no plans for large block deals or mass sell-offs. In the conference call, VP Shin said that while the lock-up expires this month, CEO Kim isn’t interested in selling shares. It has no plans for large block deals or mass sell-offs.
New business ventures bear watching. The energy-based device (EBD) medical device, domestically certified, targets sales launch year-end or early next year. PN-based skin booster exports began in Q2, expanding to Japan and the Middle East in Q3.
An industry insider noted that managing this year’s surging inventory turnover is key for second-half profitability. APR’s 3 trillion KRW (about 2.17 billion USD) goal depends on quickly converting inventory to sales while expanding in Europe.