The Beauty Company Gains Strength from Europe and Luxe Division in Second Quarter
L’Oréal has shared its sales data for the second quarter, reporting solid growth for the beauty conglomerate. This information was made available to the public on Tuesday, following the closure of the Paris Bourse.
The owner of brands including Lancôme, Kiehl’s, and Garnier recorded sales of 10.88 billion euros for the three months ending June 30, reflecting a 6.7 percent rise in reported terms and a 5.3 percent increase on an organic basis. VisibleAlpha had predicted an organic sales elevation of 5.6 percent in the second quarter.
J.P. Morgan’s Head Consumer Staples Research Europe, Céline Pannuti, noted in a report, “Key delta versus expectations were: Better Europe offset by worse LatAm and resilient Luxe was offset by soft Derma.”
L’Oréal’s Dermatological Beauty division did not meet expectations, with organic sales seeing a 10.8 percent growth compared to the anticipated 17.4 percent. However, L’Oréal’s Luxe and Professional Products division surpassed consensus, while the Consumer Products division performed as expected.
Overall, L’Oréal’s performance has been received positively. “Given the news flow leading into L’Oréal’s H1 results, we are relieved by the results,” shared Bruno Monteyne, a senior analyst at Bernstein. For instance, it was found that L’Oréal’s business in Mainland China, which registered single-digit sales growth, was significantly better than other reported market numbers.
Recent signs of recovery were observed in L’Oréal’s travel retail in North Asia. Europe, with a growth of 9.7 percent, surpassed expectations of 8.2 percent, according to Molly Wylenzek, an equity analyst at Jefferies. L’Oréal’s North American venture maintained its strength with a 3.4 percent rise in organic sales. However, sales in Latin America, which grew by 12.3 percent, were slower than consensus.
“L’Oréal remains able to activate new drivers even if the old ones (China and derma) are clearly decelerating,” stated Pierre Tegner, head of food, spirits, and HPC at Oddo BHF.
For the first half of the year, L’Oréal yielded net profits of 3.65 billion euros, reflecting an 8.8 percent growth. The company’s sales stood at 22.12 billion euros, an uptick of 7.5 percent in reported terms and 7.3 percent in like-for-like terms.
L’Oréal’s CEO, Nicolas Hieronimus, acknowledged that the company’s development balanced value and volume well. He said, “The consistent increase of our A&P spend to support these innovations and our 37 international brands allowed us to, once again, outpace the global beauty market.” He described the market as “dynamic”. He stated, “In an environment that continues to be marked by economic and geopolitical tensions, we remain optimistic about the outlook for the beauty market and confident that our innovation power and the robustness of our multipolar model will allow us to keep outperforming it and to achieve another year of growth in sales and profit.”
On June 27, during a conference conversation with investors, Hieronimus predicted that the worldwide beauty market’s sales would grow by between 4.5 percent and 5 percent this year, lower than the previously anticipated 5 percent growth.
Commenting on global beauty market growth expectations, especially concerning consensus expectations of a 7.5% LFL growth and 50 bps margin expansion in H2, Jefferies’ Wylenzek said, “Following the recent downgrade, comments on global beauty market growth expectations will be widely watched.”
Hieronimus will discuss the company’s recent earning with financial analysts and journalists on Wednesday. “We think the shares may find relief in this set of numbers,” speculated Bernstein’s Monteyne, adding, “What else is delivering like this in staples?”