L'Oreal fights back from racism charge

By Louise Prance

- Last updated on GMT

Related tags: Salon hair care, L'oréal, Cosmetics

Leading cosmetic giant L'Oreal is coming up trumps despite the
recent racism case brought against the company, with a rise in
quarterly sales and the acquisition of US stores.

The company reported a 10.4 per cent increase in quarterly sales last week, whilst maintaining a positive outlook for the rest of 2007 - despite the negative impact that may occur from the backlash caused by the alleged racism in its French operations. Second quarter sales rose to €4.246bn from €3.85bn in 2006, with organic sales rising 7.4 per cent on a like-for-like basis, with the cosmetics division up 5.9 per cent to €3.984bn. A relatively subdued 3.2 per cent growth was posted in the Western European and North American markets was offset by a 35.1 per cent growth in Eastern Europe - attributed to rapid development of its divisions, in particular Russia. "This strong momentum reflects both very rapid growth in new markets, as L'Oreal captures strategic positions, and sustained growth in Western Europe and North America,"​ chief executive Jean-Paul Agon said in a statement. The company predict a like-for-like sales growth of between 6 to 8 per cent for 2007, with more news expected to be posted in the first half results, published in August. The positive financial news follows turmoil for the company, with it recently losing a court battle that accused L'Oreal, and two other companies involved, of reportedly excluding women of colour from promoting its products, according to press reports. The Garnier subsidiary of the leading cosmetics giant was ordered by a French civil appeals court to pay a fine of €30,000 after it was found guilty of being racially biased when employing staff in 2000, as reported by Reuters. L'Oreal were allegedly up in arms about the verdict stating that Garnier will appeal the case, with the stigma attached to being involved in the case thought to dent the company's reputation in the cosmetics industry. The case is the first time in French history that a major company has been involved in a legal battle involving racial bias in staff hiring. However, L'Oreal is fighting back, with the announcement of its encouraging financial results, and the recent acquisition of Maly's West, the third largest beauty salon distributor in the US. L'Oreal USA said that the company would be integrated into its Professional Products division, adding to the addition of Beauty Alliance, another professional beauty hair care provider, which the division bought up last April. Maly's West supplies 30,000 hair salons in the western region of the United States, with business operations that include 340 representatives and more than 100 points of sale, helping it to achieve a turnover of $187m in 2006. The acquisition of the business is expected to positively impact the company's financial results in the course of the 2008 financial year, providing all regulatory and legal matters are finalized. L'Oreal added that the acquisition of the two salon hair care businesses complemented its business plan to increase its footstep in the US salon hair care market, stating that the combined capabilities of the company with the specific capabilities of salon brands was a strong addition to the business.

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