L’Oreal sees luxury boost as mass market dips

By Andrew McDougall

- Last updated on GMT

Related tags Europe United states

L’Oreal sees luxury boost as mass market dips
The French cosmetics giant has released its third quarter figures with revenue rising thanks to strong luxury sales, masking over a drop in demand from the mass market.

Third quarter revenue rose 4.8 per cent compared to last year, to €4.94bn, a figure that was expected by many.

More of the same for the rest of the year

In a conference call, company CEO Jean-Paul Agon said the figures and demand currently seen were likely to be maintained for the rest of the year and reiterated L’Oreal’s full-year goal to outperform the market and increase sales and profitability.

"The fourth quarter should be more or less in the same vein as the third,"​ he said. "We are cautious for the fourth quarter. You know the world right now is quite unpredictable so we prefer to be cautious."

The Paris-based firm may be right to remain cautious too as it saw growth in consumer products, which accounts for mass market brands such as Garnier and Maybelline, slow to 3.4 per cent in the third quarter compared to 5.2 per cent in the first half of the year.

However the luxury consumer came to the rescue, much like it did for Estée Lauder as reported on CosmeticsDesign-Europe.com last week​.

Luxury to the rescue

L’Oreal saw strong performances from high end brands such as Lancome and Yves Saint Laurent as the luxury segment posted 8.8 per cent growth contributing to a quarter of company sales.

Geographically L’Oreal claimed the luxury demand was mainly coming from the US, China, South Korea and Hong Kong with Europe lacking on all fronts.

Revenue rose 1.1 per cent in Western Europe, L’Oreal’s largest market, trumped by 4.6 per cent sales growth in North America and 8.8 per cent growth in new markets, led by the Asia Pacific region.

Difficult European market

Eastern Europe saw a sales decline of 1.5 per cent, with the company commenting that “in the dismal economic context, which has left no country unscathed, consumer confidence is weak and markets are proving difficult.”

Agon did, however, comment that the situation in Eastern Europe and Russia was gradually improving and that L'Oreal should be able to grow again there in 2012.

"This year, we are not growing share in Europe so far ... I believe that we are going to gain share again in Western Europe next year,"​ he added.

Last week, premium-end rivals Estée Lauder raised its targets for the year as strong demand from the luxury consumer saw revenues for premium products pick up rather than expected.

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