L’Oreal continues to struggle following weak Q4

By Simon Pitman

- Last updated on GMT

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L’Oreal’s financial performance continues to look unsteady for its fourth quarter, bringing an end to a disappointing year.

Fourth quarter sales totaled €4.47bn, an increase of 1.5 per cent in like-for-like terms, but down by 3.5 per cent in reported terms, a result that was hard hit by a poor performance in the company’s Western Europe market.

CEO Jean-Paul Agon said that the result represented a ‘slightly positive’ outcome, stressing the fact that inventories had been significantly cut while sell-out had been reduced.

Professional products hit by downturn

On a divisional basis, the company also reported that its professional products business was hard hit by a downturn in the hair salon business, with sales on a reported basis falling 6.7 per cent to €581.6m.

The company’s luxury products division also continued to be hard hit by the economic downturn and resulting lower consumer spend, with sales on a reported basis falling by 9.1 per cent to €1.16bn.

Indeed, all of the company’s business divisions reported falling sales on a reported basis, with the consumer products division fairing the best recording a quartlery sales fall of 0.2 per cent to €2.07bn.

Full year sales take a knock

Sales for the full year were €17.47bn, a fall of 1.1 per cent on a like-for-like basis and a fall of 0.4 per cent on a reported basis, while net profit was down by 3.2 per cent to €1.99bn.

Operating profit for the full year was €2.58bn, which was down by 5.4 per cent compared to 2008, and represented 14.8 percent of the total sales, compared to a figure of 15.5 per cent the previous year.

“Overall, L’Oreal has emerged from 2009 stronger, and has prepared itself for a return to sales and results growth in 2010,”​ Agon said.

Analys suggest 2010 will be better for L'Oreal

Financial analyst Andrew Wood, from Sanford Bernstein, suggests the fact that L’Oreal’s US December sales results were positive, combined with the forecasts for department stores sales, could help to reignite the company’s performance.

Wood believes that this, combined with the fact that comparisons for the 2009 financial year will be so low, could actually reflect favourably for the company in 2010, although results are unlikely to compare with the breakneck growth of recent years

“Despite the more positive Q4, the financial year 2009 should still go down in history as probably L’Oreal’s worst ever year with negative growth in three of its four cosmetics division and negative growth for the over all company of 0.5 per cent,”​ said Wood.

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