L’Oréal chief vows to get back on track after Q1 slowdown

By Andrew MCDOUGALL contact

- Last updated on GMT

L’Oréal chief vows to get back on track after Q1 slowdown

Related tags: Eastern europe, Western europe, Europe

L'Oréal first quarter sales dropped 2.2% as demand for mass market products and brands such as Garnier and Maybelline slows, but company CEO Jean-Paul Agon is confident that the French firm will bounce back as quickly as next quarter.

The cosmetics maker reported revenue of €5.64 billion ($7.79 billion), up 3.5% on a like-for-like basis, but this was below analyst forecasts and market expectations of over 4%.

Results for the total cosmetics division saw an increase of 7%; however The Body Shop sales decreased by 3.4%, slowing the overall figure.

Here in Europe, the French firm has confirmed the market recovery with 2.8% growth in Western Europe, while the Southern region has posted positive figures for the first time since 2007.

“In Western Europe, we see an improvement of the market which is pretty encouraging for the rest of the year,”​ says Agon in a conference call. “We are particularly encouraged by the fact for the first time in five years the market of Southern Europe are positive and we are positive too, which is very, very encouraging.”

“Eastern Europe has been pretty positive. We have some very strong numbers in some countries like Turkey where we are doing extremely fast.”

Breakdown

Active Cosmetics continued to lead growth up 8.7%, while L'Oréal Luxe grew 7.2%. As the Professional Products Division also continued to improve it highlighted that the Consumer Products Division is flagging, with the weakest growth, fuelled by the market slowing in the States.

In fact the States shows the most notable slowdown, offsetting the successes in Europe as sales have really stalled; whilst in the New Markets a considerable boost for the first three months has been reported.

Africa, Middle East climbed 14.9%, Latin America rose 8.2%, Eastern Europe increased 6.3% and Asia Pacific was up 6.8% with Japan up 9% and Asia excluding Japan, up 6.6%.

Foresight

The make-up manufacturer did warn us back in February that the first quarter revenue would slow compared to last year, particularly in the U.S, but states that full-year revenue growth should exceed its forecast.

Speaking after the sales announcement this week, Agon notes that although there are ‘uncertainties’ still in the economic situation, L'Oréal’s sales and profits will grow this year despite the initial drop in revenue which has been affected by weak currencies in key markets.

"The start of this year confirms our confidence in our ability to outperform the market once again in 2014 and to achieve another year of sales and profit growth,"​ Agon said in a statement.

"We expect growth to get back on a solid basis as early as the next quarter,"​ he added in a conference call.

Related topics: Business & Financial

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