L’Oreal’s Q3 Sales Surge Driven by Europe and US Growth, China Lags

Highlights

• L’Oreal reports strong Q3 sales, driven by robust growth in Europe and the United States.
• Sales in North Asia, particularly China, fell short of expectations, down 4.8% due to tighter government control over resellers.
• L’Oreal CEO assures that the travel retail impact is temporary, with a manageable effect on margins.
• Despite a muted recovery in China’s beauty market, L’Oreal’s sales grew by 7.7% over the first nine months.
• L’Oreal remains ambitious for China, with plans to expand premium labels into lower-tier cities.
• In Europe and North America, L’Oreal exceeded expectations, with growth rates of 16.2% and 11.8% respectively.
• L’Oreal’s luxury division experienced a slowdown in growth, up by 3.2%, indicating consumer caution in high-end purchases.
• Q3 sales reached 10 billion euros, an 11.1% increase on a like-for-like basis, slightly below consensus estimates.
• Currency fluctuations had a significant impact, accounting for a 9% decrease over the quarter.

In the latest quarterly report, cosmetics giant L’Oreal unveiled robust sales figures, with notable surges in Europe and the United States. However, the anticipated rebound in China fell short of expectations. Sales in North Asia experienced a 4.8% dip, contrary to projections of a 14.4% rise. The company attributed this to tighter Chinese government control over resellers, impacting travel retail, particularly in Hainan and South Korea.

L’Oreal‘s CEO, Nicolas Hieronimus, assured that the travel retail setback is transient and will have a limited effect on margins. He predicted inventory adjustments to persist until year-end. Despite a subdued recovery in China’s beauty market, sales in the region grew by 7.7% over the first nine months, with L’Oreal continuing to gain market share.

Acknowledging China’s importance, Hieronimus expressed the company’s strong ambitions for the country, including plans to expand premium labels like Lancome into lower-tier cities. L’Oreal‘s dominance in China’s beauty and personal care market, accounting for a significant share, underscores its strategic focus.

In Europe and North America, L’Oreal outperformed expectations, with growth rates of 16.2% and 11.8% respectively, signaling an upswing in North American markets. Despite inflation affecting household spending in Europe, there’s been no noticeable shift towards lower-priced products or reduced purchasing.

However, globally, L’Oreal‘s luxury division, its largest segment, experienced a slowdown in growth, up by 3.2%. This provides further evidence of consumers tightening their budgets for high-end purchases, aligning with trends reported by luxury leader LVMH last week.

L’Oreal‘s Q3 sales reached 10 billion euros, marking an 11.1% increase on a like-for-like basis. While slightly below the consensus estimate of an 11.5% rise, it reflects a strong performance. Currency fluctuations had a notable impact, accounting for a 9% decrease over the quarter.