L’Oréal insists sales slowdown is temporary after just missing expectations


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L’Oréal insists sales slowdown is temporary after just missing expectations
The French cosmetics maker missed its third quarter sales expectations with the Luxe division facing difficulties in Asia and Travel Retail, but company CEO Jean-Paul Agon insists the slowdown is just ‘temporary.’

The beauty behemoth reported sales rose 3.7% like-for-like in the third quarter to €5.938 billion, which was just short of the market expectations of 4.3%.

The most noticeable slowdown for L’Oréal came in its Luxe division as the market slowed in the third quarter in Asia and in Travel Retail.

Sales growth at the group's travel retail outlets dropped to 1% in the third quarter, while sales trends also turned negative for luxury products in Asia.

"It was very precisely Chinese consumers outside China and it was generally Hong Kong and travel retail, that suffered the most,”​ says Agon in a conference call on the sales.

"We have good reason to believe it was a temporary slowdown,"​ he adds, saying that demand at shops in mainland China was holding up as well as in Western Europe and the US.

Solid performance

Despite the ‘temporary slowdown’, the Paris-based company says that L’Oréal Luxe is strengthening its worldwide position with significant gains in Western Europe, in Asia, Pacific, in the Middle East and in Latin America.

In its other divisions, Professional Products posted growth of 3.2% like-for-like, Consumer Products saw an increase of 2.3% like-for-like, while Active Cosmetics was the stand-out performer as it further improved its performance with strong growth of 7.3%, with the La Roche-Posay and Vichy brands seeing particular success.

“In the third quarter, the Consumer Products Division is confirming the gradual strengthening of its growth, notably through strong momentum in make-up with its three brands: Maybelline, L'Oréal Paris and NYX,” ​comments Agon.

“The Active Cosmetics Division continues to forge ahead and the Professional Products Division keeps outperforming a lacklustre market.”

Looking at the regional sales breakdown, Western Europe has maintained its growth rate while North America has been able to push on, which are two positives from established markets given that there has been instability in Asia and Brazil.

“North America’s growth is gradually increasing and Western Europe confirms its positive trend. In the third quarter, the New Markets have been hampered by the difficult Brazilian market, market turbulence in Asia and the taking over of agents’ contracts in the Middle East. In China, sales growth is in line with earlier quarters,” ​says Agon.

“Despite a global context that is still volatile, we are confident for the year end.”

Digital gains

There was also good news for L’Oréal in digital, especially gven the investment and focus that has turned this way recently.

The Group says that there has been a strong increase in sales achieved on its brands’ own websites as well as estimated sales achieved by its brands corresponding to sales through its retailers’ websites.

“The acceleration of our digital transformation is making us stronger, in particular with the rapid increase (+40%) of our e-commerce sales which should significantly exceed one billion euros this year,” ​adds Agon.

“We are confirming our ambition to outperform once again the beauty market in 2015 and to achieve significant growth in both sales and profits.”

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