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L’Oréal sales climbed 9 per cent like-for-like to €11.24 billion in the first quarter, the company said on Thursday, beating consensus expectations of 6.6 per cent.
“L’Oréal is able to move advertising and promotion around the world, across categories and demographics, thereby not only optimizing its global growth, but also making that organic growth a lot more resilient,” writes Bruno Monteyne, senior analyst, personal care at Bernstein.
The group’s dermatologic beauty category, including brands like Cerave and La Roche Posay, led the growth (up 21.9 per cent), followed by consumer products, including L’Oréal Paris and Maybelline (11.1 per cent) and professional products, including Kerastase (10.7 per cent) and Luxe (1.8 per cent).
Skincare notably dragged down the Luxe division, which includes luxury skincare, cosmetics and fragrance brands such as YSL, Lancôme and Kiehl’s. “Super premium skin care like Helena Rubinstein is overall doing good. But what impacts us most is the fact that skincare is the category that’s most overweight in China and in travel retail. So the challenge we face on skincare is related to both the destocking and the lack of rebound in China and in travel retail,” L’Oréal CEO Nicolas Hieronimus said.
Fragrances on the other hand are seeing “strong momentum”, according to the executive. Hieronimus declined to comment on press reports around L’Oréal purchasing a stake in Omani luxury fragrance company Amouage.
“But what is true is that the premium part of the fragrance market is the most dynamic one right now. It’s growing significantly faster than the average of the market. So it’s clearly an area of focus, not just of M&A, but including in our own brands,” he said, naming Maison Margiela, Atelier Cologne, YSL, Valentino and Armani/Privé. “So clearly, premium fragrance is a nice cherry on the cake of fragrance, which is already delivering great performance.” As reported, Valentino Beauty just appointed a new president.
Sales in North Asia, which includes China, showed signs of improvement with sales in the region down 1.1 per cent compared to last quarter’s 6.2 per cent decline. L’Oréal, as well as competitor Estée Lauder, have faced a consistently weak sales environment in Asia, thanks in part to diminished travel retail sales. In other regions, L’Oréal’s Q1 sales in Europe were up 12.6 per cent, North America 12.3 per cent, Sapmena (SSouth Asia Pacific, Middle East and North Africa) 16.4 per cent and Latin America 16.2 per cent.
“Continued double-digit growth in Europe, coupled with ongoing strength in emerging markets more than offset the only gradual recovery in North Asia. The outstanding performances of dermatology and mass compensated the short-term challenges in luxury,” Hieronimus said in a statement.
During a call with analysts on Thursday, Hieronimus said: “In Mainland China, market growth was subdued at less than plus 1 per cent. Travel retail was impacted by tough year-on-year comparisons and sell-out trends in Hainan as we have yet to anniversary the daigou clamp down there.”
LVMH’s Perfumes & Cosmetics division reported 7 per cent organic sales growth to €2.18 billion in the first quarter, while Estée Lauder Companies is to report its third-quarter earnings on 1 May.
“We expect the global beauty market to remain dynamic and continue to forecast a 5 per cent growth approximately for the full year with strong support from a dynamic first quarter. Our ambition is to outperform our market and gain share again,” Hieronimus said.
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