Beiersdorf Falls Short of Profit Expectations, Citing Slowdown in China Impacting Luxury Brand Sales – Reuters

By Eva Orsolya Papp and Marleen Kaesebier

Beiersdorf, the company behind the Nivea brand, reported disappointing half-year operating profits, attributing part of the decline to a slowdown in the luxury market in China that has adversely affected its La Prairie brand.

As a result, the company’s shares dropped as much as 5.9%, hitting 123.65 euros in morning trading, their lowest point since November, before recovering slightly to a 1.7% decrease by mid-morning.

The luxury beauty market in China has faced challenges as economic uncertainty dampens consumer confidence, making middle-class shoppers more cautious about spending on high-end products. Organic sales for Beiersdorf’s main brands, Nivea and Derma, increased by 11.1% and 8.3% respectively in the first half of 2024, while La Prairie experienced a 7% decline, primarily due to the tough market conditions in China.

Analysts from Stifel noted that the struggles of La Prairie were a significant factor behind the second-quarter sales shortfall for Beiersdorf’s consumer segment, overshadowing another strong performance from Nivea. The Hamburg-based company reported a 6.1% growth in organic sales for its consumer business for the second quarter, which fell short of the 7.4% growth anticipated by analysts.

Overall, Beiersdorf’s group sales in the first half of the year grew organically by 7.1%, reaching 5.2 billion euros, just below the 7.2% growth forecast by analysts. French competitor L’Oreal has also indicated that it faced challenges due to the lack of recovery in the Chinese market and expects a continued downturn in the latter half of the year.

In terms of operating profit, Beiersdorf reported a decline to 838 million euros for the first half, falling short of the analysts’ average prediction of 890 million euros. This decline was primarily attributed to increased investments in marketing, research and development, and digital initiatives.

Despite these challenges, Beiersdorf maintained its annual forecast for organic sales growth of 6-8%. CEO Vincent Warnery expressed disappointment if sales only met the lower end of this range. Meanwhile, CFO Astrid Hermann indicated that the company’s growth prospects for 2024 would largely depend on La Prairie’s performance in the second half of the year.