L’Oreal (PINK:LRLCY) is the leading cosmetics and beauty care player globally and competes with Revlon, Estee Lauder and Avon Products. The company has products in skin care, hair care, makeup and fragrances catering to consumers and professionals, specialized products in the active cosmetics segment as well as luxury products in L’Oreal Luxe.
L’Oreal released its sales numbers for the second quarter and first half of fiscal 2013 on July 16. While sales for the second quarter grew 5.2% on a like-for-like basis, the growth was 4.2% over Q2 2012, excluding currency fluctuations. However, when taken on a sequential basis, the sales numbers for the L’Oreal group were 2.11% lower than those from Q1 2013.
- Should Beauty Companies Focus More On Men’s Personal Care?
- Here’s Why L’Oreal’s Active Cosmetics Is The Highest Growing Segment For The Company And Is Also A Market Leader
- L’Oreal: The Rising Trends In The Travel Retail Business And Its Implications
- Here Are The Key Drivers For L’Oreal’s Consumer Products Segment
- This Is How L’Oreal Might Significantly Grow Its Hair Care Segment’s Business
- Here’s How L’Oreal Can Benefit From Working With Influencers
Strong Growth In Professional Products
Professional products from L’Oreal consist of various hair care products sold in salons and these contributed almost 15% of total sales. Professional product sales grew to €779.3 million compared to €752 million in Q1 2013. On a like-for-like basis, the company reported that professional product sales grew 2.7% over Q2 2012. However, the reported revenues inclusive of currency fluctuations increased by 1.5% over the same period.
Sales grew 3.55% over the previous quarter inclusive of currency fluctuations. Higher volumes sold in hair care brands like Kérastase, L’Oreal Professional, Matrix and Redken contributed to the higher sales following the launch of hair oils and colourants worldwide.
Geographically, the “new markets” continue to grow strongly for this division marking the increase in professional salons in the region. The company reports that sales from mature markets rebounded in Q2 2013, as demand from the U.S. and Europe has started to pick up.
Stronger U.S. Economy Supports Consumer Product Sales
Consumer products revenues amounted for more than 50% of the Loreal’s total sales. Compared to Q2 2012, reported revenues grew 4.7% in Q2 2013. Excluding the currency fluctuations in all the markets that L’Oreal operates in, sales grew 6.1% on like-for-like basis over Q2 2012. Sales from the consumer products segment declined from €2920.8 million in Q1 2013 to €2802.2 million in the second quarter, indicating a decrease of 4.09%.
The like-for-like sales growth was supported by an increase in volumes sold as hair care products such as Elvive from L’Oreal Paris and Olia from Garnier were introduced globally. Introduction of newer hair colourants Préférence Mousse Absolue and Préférence les Ombrés in the European markets have boosted sales even further. Categories such as skin care and makeup have shown growth in sales with the introduction of newer products in brands such as Maybelline and L’Oreal Paris.
Revenues earned by L’Oreal from consumer products decreased sequentially over Q1 2013 due to depreciating currencies in Europe, Asia Pacific and Latin America. However, volumes picked up momentum in North America, Western Europe and Latin America as L’Oreal reports an increase in the market share for this division.
Luxury Products Are Still Solid
L’Oreal sells skin care, hair care and fragrance products from many international brands through L’Oreal Luxe in select departmental stores and its own boutique stores. The segment contributed over 25% to L’Oreal’s total sales. In comparison to Q2 2012, sales grew by 5.1% for L’Oreal Luxe indicating a strong performance by the division. Removing effects of currency fluctuations, sales grew 5.5% over Q1.
Sales in the second quarter of 2013 were €1404.7 million, shedding 1.22% from €1422 million in Q1. The decline in reported revenues are attributable to volatile exchange rates in many markets on the back of uncertain economic scenarios. However, like-for-like sales growth was fueled by higher volume sales in fragrances and makeup products from major luxury brands such as Yves Saint Laurent, Lancôme, Ralph Lauren, Giorgio Armani, Urban Decay and Kiehl’s. Skin care products also registered higher sales’ numbers as the number of product offerings grew from Lancôme and Kiehl’s.
Luxury products have posted strong growth rates in the Western European region despite stagnant sales in the cosmetics market due to the introduction of new products. North American sales have been bolstered by the strong performance of the US economy resulting in an increase in discretionary income levels. In the Asian and Middle Eastern markets, the decline in sales from South Korea have been offset largely by an increase in sales from China and Russia, and strong growth from the Middle Eastern region.
Weak Currencies Dent Active Cosmetics’ Sales
The active cosmetics segment includes specialized skin care products sold through various healthcare outlets worldwide. Sales from this segment contributed 7.3% of the total in FY 2012. Like-for-like sales growth and reported sales growth for Q2 2013 were 8.6% and 7.2% over Q2 2012.
Sequentially however, the sales shrank by more than 17.5% in the second quarter of 2013 due to heavy depreciation in currencies in international markets. The company reported strong sales in brands such as Vichy and La Roche-Posay from Western Europe and SkinCeuticals in North America. Sales from Brazil and other Latin American nations has been strong as well, boosting sales over Q2 2012.
We have a $27.72 Trefis price estimate for L’Oreal, 10% below its current market price.