L'Oreal Quarterly Sales up 6.7% on Growth in Us, Emerging Markets

L'Oreal's quarterly sales up 6.7% on growth in US, emerging markets

Strong Performance Driven by Premium Products and Global Markets

By Dominique Patton

Quarterly Sales Overview

PARIS, April 22 (Reuters) - L'Oreal's first-quarter sales rose 6.7%, it said on Wednesday, as strong demand for premium hair products and perfume, particularly in North America and emerging markets, more than offset weakness in the Middle East.

The Paris-based maker of Kerastase shampoo and YSL Libre perfume said total sales for the three months to end-March came to 12.2 billion euros ($14.32 billion), up 6.7% on a like-for-like basis after adjusting for overstocking in both last year's first quarter and this year's due to an ongoing overhaul of the group's IT system.

Analyst Reactions

"L’Oreal has returned to form," said analysts at RBC, pointing to solid underlying growth and an acceleration from the fourth quarter. 

The world's largest cosmetics firm typically outperforms the global beauty market, leveraging its wide-ranging portfolio from mass-market L'Oreal Paris brand makeup to high-end perfumes and creams prescribed by dermatologists to benefit from shifts in consumer spending. 

Regional Sales Performance

North America and Emerging Markets

While L'Oreal said demand in the Middle East has been impacted by the U.S.-Israeli conflict with Iran, particularly in the UAE, it recorded double-digit growth in other emerging markets and reported a 7.6% rise in sales in North America, its second-largest region behind Europe.

CEO Outlook

"Despite current geopolitical and macroeconomic uncertainties, we are optimistic about the outlook for the global beauty market," said CEO Nicolas Hieronimus in a statement.

Impact of Geopolitical Events

The outlook follows more cautious earnings reports from companies concerned about the impact of the conflict in the Middle East. Luxury groups LVMH, Hermes and Kering all blamed the war for slower-than-expected growth in the first quarter while companies in a range of other sectors have warned that the war is driving up costs, disrupting supply chains and hurting consumer confidence, clouding financial outlooks.

Analyst Insights

"L’Oreal screens as a relative winner thanks to its strong exposure to mass beauty, where products remain affordable and consumers can trade down within the portfolio," said Barclays analysts in an April 17 note.

They estimated the Middle East accounted for just 2%-3% of total L'Oreal sales, including travel retail.

Sales by Region

L'Oreal said sales in the region which includes south Asia as well as the Middle East and Africa, accounting for 9% of group sales last year, grew by 15%, while sales in Europe were up 5.5%.

China grew by mid to high single digits, it said, helped by its luxury products.    

Additional Information

($1 = 0.8519 euros)

(Reporting by Dominique Patton;Editing by Elaine Hardcastle)