L'Oreal Sales Surge on Haircare Demand and Lipstick Effect, Beating Forecasts
Strong Quarterly Performance Driven by Haircare and Cosmetics
By Dominique Patton
PARIS, July 29 (Reuters) - The world's largest cosmetics company L'Oreal reported better-than-expected quarterly sales on Wednesday, boosted by strong demand for new hair products and mascaras.
Quarterly Sales Exceed Analyst Expectations
The Paris-based maker of CeraVe skincare, Maybelline make-up and Valentino perfume said sales for the three months to end-June came to €11.6 billion ($13.21 billion), up 6.3% on a like-for-like basis after adjustment for the phasing in of its new IT system.
That was slightly above expectations of 5.7% growth in a consensus of analysts provided by Visible Alpha.
Market Position and Product Portfolio
The company typically outpaces the global beauty market, with a portfolio ranging from mass-market L'Oreal Paris brand makeup and creams to high-end designer perfume and shampoos used in hair salons.
Business Unit and Regional Growth
While growth slowed from 6.7% in the first quarter based on tougher comparisons, sales in the company's largest business unit, comprising mass-market products, increased more than expected, helped in Europe by growth in hair products and "a remarkable outperformance online".
The "Lipstick Effect" and Consumer Behavior
CEO Nicolas Hieronimus in April referred to the "lipstick effect", or buying cosmetics to feel better in stressful times.
That helped l'Oreal's sales in Europe, its largest region, where the cost-of-living crisis is biting, to rise 6.7% on an adjusted like-for-like basis, while sales in North America, its second-largest region, rose 5.9%.
Industry Comparison and Segment Performance
Beauty peer Unilever on Tuesday reported underlying sales growth of 8% in its beauty and wellbeing unit for the quarter.
Luxe Division and Challenges in China
In L'Oreal's Luxe division, representing a third of its sales, growth lagged forecasts at 4.7%, despite posting double-digit growth in China.
Problems in China's travel retail sector continue to curtail growth, it added.
Stock Performance
Shares in L'Oreal are up 4% year to date.
(Reporting by Dominique Patton; editing by Barbara Lewis)
