[Edaily Reporter Kim Kyung-eun ] On the 25th, LS SECURITIES predicted that the sale of Avon’s North American business by LG H&H(051900)would have a positive impact on the company’s stock price. The firm maintained its “Buy” rating and target price of 350,000 won.

Oh Rin-ah, an analyst at LS SECURITIES, stated in a report released that day, “We view this as a positive decision for the stock price, as it streamlines the business structure by divesting non-core assets and reallocates resources to the company’s own brands, which have high growth potential.”

LG H&H announced yesterday that its U.S. subsidiary, LG H&H USA, had signed a share purchase agreement to sell its 100% stake in The Avon Company to Stratford Worldwide. According to the disclosure, the sale price is $6 million, equivalent to approximately 8.358 billion won. The transaction is scheduled to close on the 1st of next month, and the exact sale price will be finalized upon closing.

Analyst Oh stated, “Annual consolidated revenue is projected to decrease by approximately 260 billion won,” but added, “Since Avon’s contribution to operating profit was not significant, the impact on consolidated operating profit will be limited.”

He further noted, “Given that the North American Avon business posted a net loss last year, attention should be focused on the qualitative improvement resulting from the divestiture of low-profit operations rather than on the decline in revenue.”

In connection with this transaction, LG Corp. USA will convert the $255.07 million (approximately 286.3 billion won) it lent to The Avon Company into equity. This is a procedure to settle the internal debt relationship between the two companies; no separate cash payment will be made, and the ownership stake will remain unchanged.

Analyst Oh explained, “This is not a new cash injection but a procedure to settle existing internal loan relationships,” adding, “No separate cash contribution will be made, and the ownership stake will remain at the existing 100%.”

He further explained, “The plan is to subsequently sell the entire stake in Avon once its financial structure has been reorganized,” adding, “The accounting impact, including any final impairment losses, will be determined after the transaction is finalized.”

Through this sale, LG H&H aims to restructure its North American business portfolio and focus its resources and capabilities on K-Beauty and wellness brands—such as Dr. Groot, Belif, and CNP—as well as retail and digital channels.

Analyst Oh added, “In the medium to long term, this is part of a strategy to reorganize the North American business portfolio around LG H&H’s own brands and retail and digital channels,” noting, “The company plans to concentrate its marketing budget and investment resources on K-Beauty and wellness brands such as Dr. Groot, Belif, and CNP.”