Key Takeaways from L’Oreal’s Q1 Results

LRLCY: L'Oreal logo

L’Oreal reported its first quarter results on April 16, with total sales increasing by 11.4% to €7.55 billion over the prior year quarter. Ignoring the impact of consolidation and currency fluctuations, the growth in total sales was 7.7%, which is higher than the first quarter of 2018 where the comparable sales growth was 6.8%. Among the four product lines, L’Oreal Luxe and Active Cosmetics remain the strongest growing segments and together contribute around 40% of total sales.

Geographically, New Markets continue with the strong growth trajectory by reporting a 20% increase in sales over prior year quarter. This supports the company’s mission to acquire a billion new customers, double the existing figures, where a major portion is expected from the Asia-Pacific region. The company’s e-commerce business posted a jump in sales of 43.7% over the prior year quarter and contributes around 11% of total sales.

The Trefis price estimate for L’Oreal stands at $54 per share, which is in line with the current market price. You can view our interactive dashboard on How Has L’Oreal Fared In Recent Quarters? to observe the quarterly revenue trends and modify yearly earnings to gauge the impact on the stock price, and see more of our Consumer Discretionary Sector data here.

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Product Line Performance

The group operates a portfolio of 36 brands that are split into divisions as per consumption universe and distribution channels.

Professional Products: This division targets professional hair salons and contributes around 12% of total sales. The division’s sales have grown by 4.8% to €835 million over the prior year quarter, but has been witnessing a decline in recent years. This is in line with the overall industry trend, as the growth in professional care has been limited.

Consumer Products: This division targets the mass market with makeup, skincare, and hair care products. It contributes around 44% of total sales and reported €3.28 billion of sales, growing by 7% over the prior year quarter. On an annual basis, this division has been reporting subdued performance in the past few years.

L’Oreal Luxe: This is the fastest-growing division, with quarterly sales of €2.68 billion, 19% over the prior year quarter. The division leverages selective distribution and has the biggest brand portfolio of generalist brands, aspirational brands, and specialized brands. This division has been observing strong growth in the past two years, growing consistently at ~10% levels.

Active Cosmetics: This division includes brands that sell derma-cosmetic products exclusively through specialty drugstores, pharmacies, and dermatologists. The segment reported quarterly sales of €751 million, 14% over the prior year quarter. Together with L’Oreal Luxe, this division has been consistently reporting 10% annual growth for the past two years.

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