Is Skin Care The Sole Driver Of L’Oreal’s Revenue?

+1.26%
Upside
93.59
Market
94.76
Trefis
LRLCY: L'Oreal logo
LRLCY
L'Oreal

L’Oreal’s (OTCMKTS: LRLCY) total revenue has grown from $27.58 billion in 2016 to $30.95 billion in 2018, on the back of strong demand growth in emerging markets, and higher pricing of their products. This growth was largely driven by a $2 billion increase in skin care revenue, which is L’Oreal’s largest segment, bringing in $9.83 billion in 2018. We expect L’Oreal’s total revenue to grow to $34.86 billion by 2020, on the back of new product launches and consistent demand growth.

Takeaway

  • L’Oreal’s skin care division, which offers daily care and anti-aging products, is expected to contribute $11.06 billion to total revenue in 2019, making up 34% of L’Oreal’s $32.76 billion revenue estimate.
  • The make up and hair care divisions, which equal 27% and 26% of total revenue, respectively, are expected to bring in a combined $17.39 billion in 2019.
  • However, the skin care segment alone is expected to add $4.6 billion between 2016 and 2020, which is 63% of the additional $7.28 billion that the company is expected to bring in over this period.
  • This strong revenue growth has been key to L’Oreal’s 50% price appreciation since December 2016, further helped by growing margins.
  • In our interactive dashboard L’Oreal Revenue: How Does L’Oreal Make Money?, we discuss L’Oreal’s business model, followed by sections that review past performance and 2020 expectations for L’Oreal’s revenue, and include comparisons with Estee Lauder, a close competitor.

A look at L’Oreal’s segments and their contribution to total revenue

Relevant Articles
  1. Is There More Room For Growth In L’Oreal Stock?
  2. After Underperforming The Markets, Can L’Oreal Stock Rally?
  3. L’Oreal Stock Poised For Bounce Back After Rough Month?
  4. After Dismal Performance Last Month, L’Oreal Stock Looks Set To Rebound
  5. L’Oreal Stock Looks Set For A Rally On The Back Of Strong Earnings Growth
  6. Forecast Of The Day: L’Oreal Makeup Revenues

(A) Skin care revenue to grow by $2.61 billion over the next 2 years, with its share of total revenue to be about 36% by 2020

  • L’Oreal’s product portfolio ranges from popular luxury brands like Lancome, Giorgio Armani, YSL, Biotherm, and Kiehl’s to popular mass brands like L’Oreal Paris, Maybelline, and Garnier.
  • L’Oreal’s skin care revenue has grown from $7.85 billion in 2016 to $9.83 billion in 2018, on the back of strong demand growth in emerging markets for both, the luxury as well as mass brands.
  • We further expect skin care revenue to grow to $12.45 billion by 2020.

(B) Make up revenue to grow by $870 million over the next 2 years, with its share of total revenue to be about 27% by 2020

  • L’Oreal’s makeup segment has grown from $7.28 billion in 2016 to $8.48 billion in 2018, on the back of an increase in demand for L’Oreal’s make up products.
  • New product launches also helped drive up revenue from this segment.
  • We further expect make up revenue to grow to $9.35 billion by 2020.

(C) The hair care segment is expected to add $250 million over the next 2 years, taking its share of total revenue to 25%

  • The hair care segment has seen revenue drop from $8.63 billion in 2016 to $8.4 billion in 2018, largely due to a lack of product innovation.
  • We expect things to improve slightly by 2020, taking revenue from this segment to $8.65 billion.

(D) Fragrance revenue to grow by around $170 million over the next 2 years, to make up about 12% of the total revenue estimate for 2020

  • Revenue from the fragrance segment has grown from $3.82 billion in 2016 to $4.24 billion in 2018, driven by L’Oreal’s strong fragrance line.
  • We expect this steady growth to continue, driving total revenue to $4.41 billion by 2020.

 

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.