L’Oreal, the world’s largest cosmetics company, continued its momentum in its annual 2018 earnings with a 7.1% rise in sales to 26.93 Billion euros. The company's earnings were primarily driven by a strong performance in the Active cosmetic & L'Oreal Luxe division, L’Oreal Luxe segments, and emerging new markets, particularly Asia-Pacific which grew +20.4%. All the top brands of the Luxe segment posted more than 10.6% growth and the Active Cosmetics Division posted 9.2% growth driven by the success of its La Roche-Posay and SkinCeuticals brands, the new impetus of Vichy, and the dynamism of CeraVe. The Consumer Products Division saw an outstanding performance in China. In the New Markets, especially the Asia Pacific Zone, China's consumers' aspirations for iconic brands remained strong.
E-commerce and Travel retail remained strong in 2018. With the acquisition of the Canadian company, ModiFace, the company's digital acceleration has moved up a gear, which provided the most innovative technologies to enhance services and the beauty experience for all the brands. E-commerce sales have increased strongly and continue to rise rapidly, and now account for 11% of the total sales. Travel Retail, also was strong for EL as it broke the 2 billion euro barrier with an increase of 27.1%.
The year 2017 - 2016 also ended on a strong note for L'Oreal having been boosted by positive growth (~4%) in the global beauty market. The company outperformed the performance of the global beauty market. L'Oreal's luxury segment, L'Oreal Luxe, remained its best performer with its innovative products and iconic line of products, while the mass markets recovery continued due to the adaptation of the segment to the contemporary market demands. Though its Active Cosmetics segment slowed down a bit towards the end of last year, it was still a growth driver. With L'Oreal's recent acquisitions of three brands under this category, its strong leadership position in this segment might continue to flourish.
L'Oreal's Professional segment continued on its weak note but it is expected to show signs of improvement as the hair color market starts gaining momentum and the new product launches by the company last year starts picking up sales. Along with this, there has been management restructurings for further boosting the performance of the Professional division. L'Oreal's e-commerce sales' impressive growth continued in both its mature and New markets. The year 2016 was one where L'Oreal boosted its market dominance and growth with the help of organic and inorganic growth along with its digital initiatives. L'Oreal is the most advanced beauty company when it comes to digital progress.
However, one of the biggest highlights of its Q4 2016 earnings call was that L'Oreal has started looking for strategic alternatives for its The Body Shop brand. With over 3,000 stores across 66 countries, The Body Shop, which was once a celebrated brand, has been suffering in its performance lately. In 2016, The Body Shop witnessed a 5% decline in its top line to reach €920.8 million. The slowdown in sales in strategically important regions such as Saudi Arabia and Hong Kong were attributed to its weak performance.
L'Oreal's growth engine seems to be going ahead at full steam. After a strong 2016, the company reported a 4.5% like-for-like growth in its total sales to reach €19.5 billion for the first nine months of 2017. The star performers as usual were the Active Cosmetics and the L'Oreal Luxe segments. L'Oreal's strategic acquisitions are proving to be key drivers of its performance. One of the key brands driving its Active Cosmetics Segment's growth was its 2017 acquired brand, Cera Ve. The four most important brands for the growth in the Luxe segment had been: Lancôme, Yves Saint Laurent, Giorgio Armani, and Kiehl's, along with its 2016 acquisition, IT Cosmetics. Geographically L'Oreal's new markets are some of the best performers, particularly the Asia Pacific market in which China stole the limelight. It is noteworthy that Estee Lauder's recent performance was also boosted by China. The country is emerging as one of the most important markets for the growth in beauty sales. Western Europe was also another key market that drove L'Oreal's growth.
In January 2017, in an effort to further grow its active cosmetics segment, L'Oreal announced its intention to acquire the skincare brands, CeraVe, AcneFree, and Ambi from Valeant Pharmaceuticals for a sum of $1.3 billion.
L'Oreal's Market Share of Global Hair Care Market: Hair Care Market Share for L'Oréal declined from 24.3% in 2009, to 22% in 2012, and was around to 24%, 23%, and 20% in 2013, 2014, and 2015 respectively. In 2016, the company's market share stood at 20% and around the same in 2018. The company pulled out its Garnier brand from China in a bid to focus exclusively on prestige beauty products in the region. We currently forecast L'Oréal's share of the Hair Care market to reach 21% by the end of our forecast period. There could be a marginal downside to the Trefis price estimate if the market share remains flat at the current level.
L'Oreal's Market Share of Global Skin Care Market: L'Oréal's Skin Care Market Share expanded from 12.3% in 2009 to close to 14% in 2014 before declining to around 12% in 2016 and 2018. We currently forecast L'Oréal's share of the Skin Care market to grow to about 13% by the end of our forecast period. There could be a marginal downside to the Trefis price estimate if the market share were to remain flat at the current level.
L’Oreal is the largest manufacturer of cosmetics in the world. It manufactures and sells makeup, fragrances, skin care, and hair care products through over 30 global brands. It caters to consumers across all income levels and distribution channels spanning mass volume retailers and drugstores, to upscale perfumeries, pharmacies, department stores, company-owned stores, and e-commerce websites.
L’Oreal reports and segments its products range on the basis of price range and distribution channel into: Professional, Consumer, Luxury, and Active products.
L'Oreal also has ~ 9% stake in Sanofi Aventis, the dividend from which contributes significant value to L'Oreal's stock.
Despite L’Oreal’s global presence, about 35% of its cosmetics revenue comes from Western Europe and over 25% from North America. Asia accounts for about 23% of its cosmetics sales. Latin America and Eastern Europe currently contribute around 8% and 6%, respectively.
L'Oréal's main competitors include other major global beauty care products manufacturers such as Revlon, Estee Lauder, Avon, Shiseido, and Procter & Gamble, among others.
L'Oreal has the largest market share in the Skin Care segment, the largest and fastest growing segment within Beauty Care (on account of anti-aging skincare and skin care for men), as well as in the Fragrances and Makeup segment.
Hair care is a stable and growing market, and L'Oreal commands the second largest share in the segment, after Procter & Gamble. Hair care accounts for about 20.5% of L'Oreal's net sales.
Launching new and innovative products is crucial to growing or even maintaining share in the beauty care industry. L'Oreal spends more on R&D as a percentage of sales as compared to its competitors. This has helped L'Oreal remain a leader in the cosmetics market.
On the basis of revenue, L'Oreal (at ~$30 billion) is much larger than Revlon ($2 billion), Avon ($9 billion), and Estee Lauder ($11 billion). Therefore, L'Oreal has more money to spend on marketing, which is an extremely important factor for success in the cosmetics industry.
Anti-aging creams and anti-cellulite skin care products are in high demand among the aging populations in developed countries, notably Japan (oldest demographic), the U.S., and Western Europe. A big chunk of L'Oréal's skin-care business comes from anti-aging products. The anti-aging market comprises of those products that can treat multiple signs of skin aging at one time, and is a fast-growing segment under the anti-aging beauty products.
There is a growing demand for natural / organic products in most countries, a trend led by the developed markets in the U.S. and Western Europe. Additionally, there is an increased preference for less synthetic, eco-friendly, and more natural products and packaging.
There is a growing trend towards the so-called "Masstige," or premium brands sold at lower prices through mass distribution. In addition, beauty care products focused on men is the latest niche being targeted by most players globally. In developed markets, particularly in the U.S. and Western Europe, the introduction and extension of the men’s product lines is a major source of growth.
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%. ...More
In continuation of its strong performance over the prior few years, L’Oreal (OTCMKTS: LRLCY), the world’s biggest cosmetics company, continued its momentum in its annual 2018 earnings with a 7.1% rise in sales to 26.93 Billion euros. ...More
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L’Oreal (OTCMKTS: LRLCY) recently announced that it plans to use its newly acquired augmented reality (AR) entity 'Modiface' to partner with Facebook on virtual makeup trials. The company is just as excited by the opportunities presented by virtual and augmented reality as the new age consumers are. ...More
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In continuation of its strong performance over the prior few years, L’Oreal (OTCMKTS: LRLCY), the world’s biggest cosmetics company, continued its momentum in Q2 2018 with 6.3% rise in sales to 6.61 Billion euros. ...More
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L'Oreal's (OTCMKTS: LRLCY) growth story continued in 2017, going by the performance of its first 9 months, and it is expected to carry on for the year, as well. For the first nine months of 2017, L'Oreal reported 4.5% like-for-like growth in its total sales to reach €19.5 billion. The best performing segments were the Active Cosmetics and the L'Oreal Luxe segments. ...More
Beauty giants, L'Oreal (OTCMKTS: LRLCY) and Estee Lauder (NYSE: EL) both posted robust quarterly performances in the recent past. One of the key drivers for their growth was the demand for their products in Asia and more specifically in China. ...More
L'Oreal's (OTCMKTS: LRLCY) growth engine seems to be going ahead at full steam. After a strong 2016, the company reported a 4.5% like-for-like growth in its total sales to reach €19.5 billion for the first nine months of 2017. The star performers as usual were the Active Cosmetics and the L'Oreal Luxe segments. ...More
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The growth momentum for L'Oreal might not be showing signs of slowing down anytime soon. After ending 2016 on a strong note, L'Oreal Group (Operational Divisions Total) reported a growth of 7.3% y-o-y (4.3% like-for-like*) in the first half of the year, to end with total sales of ~€13. ...More
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