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L’Oreal Q4 sales continue to grow, but results fall short of expectations

By Simon Pitman , 11-Feb-2011
Last updated on 11-Feb-2011 at 12:40 GMT

L’Oreal has continued to make significant gains during its fourth quarter, but the sales growth falls short of market analysts’ expectations.

The company said that group sales grew on a like-for-like basis at 4.1 per cent to reach €4.97bn, which represented a reported growth rate of 11.4 per cent.

Financial analysts, including Sanford C Bernstein, had expected Q4 sales growth in excess of 5 per cent, which led share prices to dip by around 5 per cent in early morning trading on the Paris Bourse.

During the quarter like-for-like sales at the Body Shop slipped by 3 per cent, while the Africa and Middle East market also saw like-for-like sales fall by, 2.4 per cent and the Western Europe market saw a small gain of 1.6 per cent on challenging trading conditions.

Strong gains in professional products

However, in all other regions and divisions like-for-like sales gains were healthy, underlined by a like-for-like increase of 5.9 per cent in active cosmetics and a 3 per cent gain in professional products, that actually represented growth of 15.3 per cent on a reported basis.

ON a regional basis the biggest gains were seen in the Latin America market, where like-for-like sales grew by 13.0 per cent to €4.02.6m, which represented a reported increase of 25.3 per cent.

“These performances confirm the relevance of the strategic thrusts adopted at the end of 2008, accessible innovation, new product categories, accelerated globalization of our brands, and strengthening of our R&D and advertising & promotional investments,” said CEO Jean-Paul Agon.

Management efforts to mend business are 'working'

For the full year 2010, net income rose by a healthy 25 percent to €2.24bn, on the back of strong gains in earlier quarters, while full year sales rose by 5.6 per cent on a like-for-like basis to €19.49bn.

“Despite sustained weak markets in Western Europe and very aggressive competition from P&G, we believe that that management’s efforts to mend the business, including 4 consecutive semesters of A&P increases as percentage of sales, are bearing fruit,” said Andrew Wood, senior research analyst, at Sanford C. Bernstein.

The analyst believes that the company is likely to continue to return average like-for-like sales growth of 5.7 per cent throughout the course of 2011.

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