L’Oreal 2Q Sales Rise, But Depressed China Market Weighs – Reuters

L’Oreal Reports Slower Sales Growth Amid Market Challenges

By Dominique Patton

PARIS – French cosmetics giant L’Oreal announced a 5.3% increase in second-quarter sales, a figure that fell short of expectations and heightened concerns among investors about the sluggish recovery in the crucial Chinese market.

The Paris-based company, known for brands such as Maybelline and Lancome, reported sales of 10.88 billion euros ($11.75 billion) for the quarter. This growth was below the anticipated 5.9%, as compiled by market consensus. It marks the slowest quarterly growth since at least early 2022 and highlights a shift in the global beauty market towards a more restrained sales pace, following a surge in demand post-pandemic.

LVMH, another key player in the luxury sector, reported a 4% growth in its perfumes and cosmetics sales for the same period, a decline from the 7% growth seen in the first quarter of the year.

Following L’Oreal’s sales announcement, shares in U.S. competitor Estee Lauder dropped by 2.7%, while beauty firm Coty saw a 3% decline.

L’Oreal’s CEO, Nicolas Hieronimus, indicated last month that the global beauty market was underperforming relative to earlier expectations, estimating growth at approximately 4.5%-5%, largely due to the weak rebound in China.

In China, once one of the fastest-growing beauty markets, consumers are tightening their spending in light of job insecurity and ongoing issues in the real estate sector. The country’s economic growth fell short of expectations in the second quarter, leading to lower purchases of cosmetic products.

L’Oreal, which caters to both mass-market and luxury segments, anticipated outpacing competitors but experienced a 2.4% decline in like-for-like sales in North Asia, primarily from mainland China, following a 1.1% drop in the previous quarter. The company noted that the beauty market in mainland China was negative in the second quarter, referencing a challenging comparison base and persistent low consumer confidence.

Sales growth also decelerated in North America, coming in at 3.4% for the quarter, although Europe experienced a robust 9.7% increase. Analysts at Jefferies remarked that "Europe continues to defy gravity."

L’Oreal’s luxury division, which includes products like YSL Libre perfume and Prada makeup, grew by 2.8%, surpassing expectations for a 1.6% rise, supported by strong growth in Europe and double-digit increases in North America and emerging markets.

In the consumer products segment, which encompasses L’Oreal Paris mascaras and Garnier skincare and accounts for over a third of the company’s revenue, sales rose by 6.7%. The dermatological beauty division, which features brands like La Roche-Posay and CeraVe, saw growth of 10.8%, although this represented a slowdown compared to previous quarters due to reduced demand in the U.S.

L’Oreal, ranked as Europe’s sixth most valuable publicly traded company with a market capitalization of around 211 billion euros, has experienced a 12% decline in shares this year, contrasted with a 31% drop for its U.S. rival Estee Lauder.