‘Good dynamism’: L’Oréal reports Q3 global sales rise despite inflation

By Kacey Culliney

- Last updated on GMT

L'Oréal's active cosmetics division performed especially well in skin care, with its SkinCeuticals and L'Oréal Paris brands especially strong [Getty Images]
L'Oréal's active cosmetics division performed especially well in skin care, with its SkinCeuticals and L'Oréal Paris brands especially strong [Getty Images]

Related tags L'oréal financial results COVID-19 China Fragrance Skin care

International beauty major L’Oréal has reported a worldwide surge in sales for the third quarter (Q3) of 2022, capturing growth across all divisions but especially active cosmetics, despite inflationary pressures in many countries.

Last week, L’Oréal reported worldwide sales of €9.58bn for the third quarter (Q3) of 2022, up 19.7% on the previous year, with like-for-like growth at 9.1%. Net profit was not reported.

In division terms, active cosmetics generated the lion’s share of growth in Q3, with sales up 38.8% at €1.3bn and La Roche-Posay remaining the “primary contributor to growth” ​and CeraVe representing the division’s fastest-growing brand. This was followed by growth in consumer products, up 19.1% to €3.54bn spearheaded by success in makeup; sales growth in L’Oréal Luxe, up 15.8% to €3.6bn with strong performance in fragrances; and sales growth in professional products, up 15.7% to €1.09bn underpinned by a buoyant hair care market.

Regionally, Q3 sales grew across every global region but the strongest growth came from South Asia Pacific, Middle East, North Africa and Sub-Saharan Africa [SAPMENA-SSA], up 41.5% (30% like-for-like). Latin America sales grew 36.5% (16.2% like-for-like); North America sales grew 27.7% (9.3% like-for-like); Europe sales grew 12.1% (10.5% like-for-like); and North Asia sales grew 11.3% (0.3% like-for like).

‘The global beauty market remained dynamic’

Nicolas Hieronimus, CEO of L’Oréal, said the company had achieved a “very solid quarter”​ despite “unprecedented volatility, marked by the public health restrictions in China and inflation in the Western world”.

“The global beauty market remained dynamic, and consumers’ appetite for beauty products is intact. The combination of a robust business model, agility and the commitment of its teams across the world allowed L’Oréal to, again, significantly outperform the market and strengthen its position as the world’s number-one beauty company,” ​Hieronimus said.

Speaking to analysts during the company’s earnings call, he said there were, of course, concerns around inflation – particularly in the UK where inflation was at the highest it had been in 40 years – but L’Oréal’s portfolio breadth and consumer target was helping.

Whilst the UK had seen consumer behaviour shifts, with fewer hair salon appointments and some beauty shoppers trading down, L’Oréal had captured many of these changes, he said. For example, with people going to the hair salon less, at-home hair dyes were growing as were premium shampoos, and L’Oréal had ample offerings for different price points across all categories for any trading down behaviour.

L’Oréal’s typical consumer profile also meant inflation hadn’t hit business that hard, Hieronimus said.

“Overall, shares are doing pretty good in the UK because I think the consumers we are selling our products to in most countries are not the most vulnerable to inflation (…) So, we are, of course, paying attention to what’s happening in the UK, but if I look at France, if I look at Spain, where I just came back from, we continue to see good dynamism​.

“…Globally, people are getting used to inflation and intending to spend,”​ the CEO said.

China – a market facing significant difficulties given ongoing and repeated COVID-19 lockdowns – was different, with business being weighed down by these ongoing restrictions.

Fragrances and skin care focus

As per comments made during L’Oréal’s first half (H1) results of 2022​, Hieronimus reiterated the strength of fragrances worldwide​.

He told analysts fragrance growth was “a trend that’s going to last”,​ with L’Oréal continuing to perform ahead of global market growth.

“It’s a category that, you know, men, women all over the world have really fallen for post-COVID,”​ he said. And continued engagement with fragrances was being driven by self-indulgence and continued socialising amongst consumers, he said.

On the business side, however, the CEO said L’Oréal had not been able to fulfil its true growth aspirations in the category due to a shortage of glass bottles.

“Clearly, after COVID, many of the glass manufacturers had shut down some ovens or had slowed down their activity. It takes time to reignite. And as the market has bounced back much stronger than anyone expected, and as we really overperformed the market in fragrance, we’ve been struggling to have everything we needed (…) We have to admit, we are today limited by capacity and unfortunately this is an area where you can’t create capacity very fast; it takes time. So, it’s just a question of good forecasting, good negotiation and hopefully considering our size we can get good allocations from the glass manufacturers.”

In skin care, he said active cosmetics was “really flying”, ​with SkinCeuticals, a brand that was a small European pharmacy brand 10 years ago, now registering double-digit growth. L’Oréal Paris had also performed well in skin care thanks to the launch of its pure vitamin C serum which had been a “phenomenal success”​.

Future growth and innovation

Looking ahead across the entire global business, Hieronimus said: “Despite the current uncertainties, we remain confident in the outlook for the global beauty market, which has again confirmed its resilience; confident in our power to innovate; and confident in our ability to outperform the market and achieve another year of growth in sales and profits in 2022.”

L’Oréal, he said, would continue to invest in innovation, valorisation and emerging markets to secure future growth moving forward.

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