L’Oreal Q3 2015 Earnings Preview: Healthy Growth Expected To Continue Due To Strategic Initiatives And Digital Focus

L’Oreal (OTC:LRLCY) is scheduled to release its Q3 2015 earnings on October 29th. L’Oreal has been enjoying a healthy 2015 so far, on account of its  strategic investments, expansion of global footprints, and currency tailwinds. It is important to note that L’Oreal’s Q2 2015 performance was its strongest quarterly performance in the last couple of decades. L’Oreal’s Magic Holding acquisition in China helped the company to gain a stronghold of the Chinese beauty market. Its NYX acquisition in the U.S. aided in the revival of demand in North America. Finally, L’Oreal’s digital initiatives and research and development focus is helping the company in maintaining its position as the ruling beauty behemoth. We expect L’Oreal’s healthy performance to continue in the third quarter, as well. Its Consumer division’s recovery is expected to continue while its Luxe division, as always, might emerge as the star performer.

Our $36 price estimate for L’Oreal is slightly below the current market price.

See Our Complete Analysis for L’Oreal Here

L’Oreal’s 2014 Acquisitions Are Important Contributors For Growth In Important Regions

L’Oreal’s North American market started recovering in 2015, after a disappointing performance in 2014. The Consumer division, in particular, rebounded after negative growth in 2014. L’Oreal witnessed the biggest successes with brands such as Maybelline, L’Oreal Paris, and NYX. In 2014, L’Oreal acquired NYX Cosmetics, a high-growth mass market makeup cosmetics company, which is the chief rival of Estee Lauder‘s M-A-C brand. ^{[1] [2]} L’Oreal’s aim was to recover the sluggish American market demand with the help of NYX. The company has been successful with the initiative, so far, and we expect the trend to continue in the third quarter as well. NYX displayed almost 70% growth in sales in the first half of 2015. ^[2]

However, L’Oreal’s Consumer segment is still reeling under the slowdown of Brazil’s economy. On the other hand, yet another of L’Oreal’s acquisitions in 2014, Magic Holdings in China, is helping the company grow in the region.

L’Oreal’s Digital Focus Will Fuel Growth

L’Oreal’s e-commerce sales grew by 40% in the first half of 2015 and contributed to close to 5% of the total group’s sales. L’Oreal’s e-commerce sales are expected to cross €1 billion in 2015. ^[2]

L’Oreal has always been on the forefront in the beauty industry in terms of undertaking digital initiatives. The company even created a post of Chief Digital Officer in 2014, in order to give more focus to the medium. In 2014, L’Oreal’s online sales grew by 30% and contributed to around 6% of its total revenues. ^[3]

Recently, it entered into a partnership with New York-based General Assembly, a digital training specialist company. The partnership will result in an online learning platform, called ‘The Essentials Of Digital Marketing,’ that will aid L’Oreal’s marketing team in learning about the recent trends, new strategies, and upcoming technologies in the arena of digital marketing. The company targets to train its 7,000 employees across the globe in the next 18 months. ^[4]

In September, L’Oreal started its research to offer connectivity through its makeup products via the Internet of Things. The Internet of Things is the network of objects or “things” which can collect and exchange data with the help of their embedded electronics, software, sensors, and network connectivity. In the event of its  successful implementation, the technology will allow L’Oreal to give connectivity to its makeup products, such as lipsticks or mascaras. This will aid the company in better tracking consumer behavior.  Currently, L’Oreal’s chief mode of customer communication is through the medium of mobile phones, but its future plan is to connect through its own products. ^[5]

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1. L’Oreal’s First Half 2015 Results, July 30, 2015 [↩]
2. L’Oreal’s (LRLCY) CEO Jean-Paul Agon on Q2 2015 Results – Earnings Call Transcript, Seeking Alpha, August 2, 2015 [↩] [↩] [↩]
3. L’Oreal’s (LRLCY) CEO Jean-Paul Agon on Full Year 2014 Results – Earnings Call Transcript, Seeking Alpha, February 13, 2015 [↩]
4. L’Oréal signs deal with digital training specialist General Assembly, Global Cosmetics News, October 23, 2015 [↩]
5. Connected mascara? L’Oreal explores the Internet of Things, Marketing Magazine, September 17, 2015 [↩]