L’Oreal Sales Grow In Spite Of Mixed Results From Europe

L’Oreal (PINK:LRLCY) released its sales from the third quarter on Tuesday. Revenues grew 4.6%, on a like-for-like basis. The company’s luxury products marketed under the Lancôme and Yves Saint brands performed particularly well in the quarter. Consumer Products and Active Cosmetics segments too reported solid performance with sales growing 5% & 5.6% respectively. However, sales of professional markets were flat in spite of the company launching new products. These results are inclusive of the difficult situation prevailing in Southern European countries, performance from which was offset by good performance in several West European countries. On the back of its steady performance, the company re-affirmed its targets for the current fiscal year and aims to outperform the global cosmetics market which it expects to expand at 4% this year.

L’Oreal is the leading cosmetics and beauty care player globally and competes with Revlon (NYSE:REV), Estée Lauder (NYSE:EL) and Avon Products (NYSE:AVP).

View our detailed analysis for L’Oreal here

L’Oréal Luxe leads sales growth

L’Oréal Luxe sales grew by +9.1% like-for-like in third quarter on acquisition of Clarisonic. Thanks to new product launches and its high-end customer experience, the Luxe brand gained market share worldwide. The company has several new product launches lined up under the Yves Saint Laurent brand which will soon launch Manifesto, a new women’s fragrance. The division is also expanding its presence in skin care with Forever Youth Liberator, and in make-up with Teint Touche Eclat.

Geographically, the Western Europe market reported sluggish growth. In North America, L’Oréal Luxe gained market-share. The company outperformed the overall market in Asia and Middle East with the growth resting primarily on the Yves Saint Laurent, Lancôme and Giorgio Armani brands. In Travel Retail, the division maintained its leadership even as the market decelerated.

Accelerated growth for Active Cosmetics segment

Active Cosmetics division, which reported a sales growth of 5.5% during the quarter, gained market share in Western Europe as its North American sales growth accelerated. The division’s growth was supported by its expanding presence, particularly in the United States where it opened new sales outlets at Walgreen drug stores and Vichy brand confirming its recovery with a new advertising campaign and the successful launch of Idéalia.

European markets perform in spite of prevalent economic situation

The company’s improved performance in Eastern Europe market was on the Garnier brand under the Consumer Products division. Garnier’s skincare products performed well as Olia, the first mass market permanent hair colorant gained wider acceptance. In Western Europe, the market remained sluggish. However, the division strengthened its position through hair-care and facial skincare products in France, the United Kingdom, Germany and in Northern Europe.

Non-traditional markets continue rapid growth

In spite of a slowdown in the luxury channel in South Korea and Taiwan as well as Travel Retail, the company reported that Asia-Pacific sales grew at almost 11% during Q3. The strong performance of Lancôme, Kiehl’s and Yves Saint Laurent helped it gain market share in the market as Maybelline lead sales growth in the ASEAN countries.

The Latin America zone reported a 9.4% sales growth on strong sales momentum of L’Oréal Luxe and Active Cosmetics divisions. In EMEA region, sales grew 14.7%, driven by Consumer Products division and the success of the L’Oréal Luxe brand of fragrances. The company continued to expand its presence in the region and added a new subsidiary in Saudi Arabia, a market it deems to have strong potential.

The Body Shop maintains steady growth

The Body Shop recorded like-for-like sales growth at +5.3% in Q3. It performed strongly in the non-traditional markets of Middle East and South East Asia and had 2,787 operational stores on 30th September. Though, it felt the impact of the overall economic environment in Southern Europe, it maintained a solid performance in the rest of Europe.

It added new customers, particularly through the rapid development of its e-commerce channel which now operates 20 live websites. It continues to innovate to interest customers and launched new products such as BB Cream All-in-One, a texture and Pore Minimiser in its iconic Tea Tree range which features Community Fair Trade organic tea tree oil from Kenya. In order to keep attracting customers, it will be rolling out its innovative Pulse boutique concept globally during the coming quarters.

We are revising our Trefis price estimate of $27 for L’Oreal.

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