Apr 18, 2017
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Luxury cosmetic sales give L'Oréal a lift in mixed start to year

Apr 18, 2017

A jump in luxury cosmetic sales at L'Oréal offset a weak first quarter for several of the French company's other divisions, with overall like-for-like revenues 4.2 percent higher, slightly above forecasts.

Luxury brands like Lancôme boosted L'Oréal in its latest quarter

L'Oréal, which produces mass-market brands Maybelline and Garnier, among others, said that demand for its mass-market consumer products was slow to pick up in the first three months of the year. Sales in this unit rose 1.4 percent from a year earlier on a like-for-like basis, which strips out swings in currency exchange rates and acquisitions or disposals. They had grown 4.2 percent on an annual basis in the fourth quarter.

Chief Executive Jean-Paul Agon told a conference call on Tuesday that this trend would likely be reversed in the rest of 2017, however, as the consumer division returned to healthier growth rates after a "strange" start to the year.

Demand for L'Oréal's luxury cosmetics was especially strong in Asia, with sales up 12.2 percent on a like-for-like basis.

"This part of the world is a fantastic opportunity for our luxury division," Agon said, adding that cosmetic brands like Lancôme, Armani and Yves Saint Laurent were "on fire" in China and attracting young consumers.

That contrasted with shrinking sales in the company's professional unit, which makes products for salons.

L'Oréal also said sales were particularly weak in its home market, which accounts for just under 8 percent of its revenues, although other parts of Europe such as Britain and Germany held up better and the United States performed well.

Reported sales across the group were up 7.5 percent at €7.04 billion ($7.5 billion), slightly above analyst expectations. Analysts had forecast like-for-like sales across the group to rise 3.9 percent, according a compilation for Reuters by Inquiry Financial.

L'Oréal said that it would decide on a possible sale of retailer The Body Shop, an ethical beauty pioneer that has struggled with rising competition, in the coming months.

Its shares closed down 0.52 percent at €180.1 per share before the company released its earnings.

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