L’Oréal Beats High Expectations in the Second Quarter
PARIS — L’Oréal once again sped past analyst consensus estimates, with double-digit sales gains in the second quarter.
Sales at the world’s largest beauty company rose 9.5 percent in reported terms and 13.7 percent on a like-for-like basis in the three months to June 30 — far outpacing consensus forecasts of 11.9 percent organic growth.
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After the close of the Paris Bourse Thursday evening, the group reported total sales of 10.19 billion euros in the period.
“L’Oréal has delivered a strong set of results, ahead of consensus expectations though we think in line with elevated buyside expectations,” wrote Jefferies analyst Molly Wylenzek in a research note.
Business at the maker of Yves Saint Laurent, Lancôme, Kiehl’s and Garnier products was bolstered by sales gains in Europe and the demand for mass-market and dermatological products.
“It is an odd world where the mass market Consumer division and old-world Europe are leading L’Oréal’s growth,” wrote Bruno Monteyne, a Bernstein analyst in a note titled “Even in an upside-down world, they keep outperforming high expectations.”
L’Oréal’s sales gain in Europe, of 20.8 percent, beat consensus of 12.9 percent, while the Consumer Product division’s 15.4 percent sales increase compared favorably with the expected 10.9 percent. And Dermatological Beauty — with sales up 27.3 percent — registered the biggest divisional beat of 674 basis points.
Group sales rose by double digits, on both a reported and organic basis, in all regions except for North America and North Asia. L’Oréal noted that business in mainland China, which lagged in the first quarter, had experienced a “sharp recovery” in the second.
In the first half of 2023, company net profits grew 4.3 percent to 3.36 billion euros on sales of 20.57 billion euros, up 12 percent in reported terms and 13.3 percent like-for-like.
L’Oréal registered momentum across all of its branches and highlighted record growth at its Consumer Products division, which in the half posted sales of 7.69 billion euros, up 13.1 percent on a reported basis and 15 percent organically.
The company said the strong gain was driven by volume and value, and that the division increased sales in the half by around 1 billion euros, with each of its large brands generating double-digit growth.
“The division significantly outperformed the dynamic mass market; of particular note were the exceptional performance in Europe and in the high-potential emerging markets of Mexico, Brazil and India,” L’Oréal said.
Also in the period, the Luxe division’s sales reached 7.29 billion euros, advancing 6.1 percent in reported terms and 7.6 percent like-for-like, buoyed by double-digit gains in Europe, North America and emerging markets, primarily mainland China.
“Luxe saw a remarkable recovery during the second quarter with double-digit growth in sales and achieved another record market share,” said L’Oréal, adding the division outpaced the luxury fragrance market with double-digit rises across all regions.
In the first six months of 2023, the Dermatological Beauty division’s sales of 3.28 billion euros gained 29 percent on a reported basis and 29.5 percent organically. It progressed in all regions, with L’Oréal highlighting development in emerging markets and Europe. The division outperformed significantly in mainland China, where the group noted the market continued to recover gradually.
Professional Products generated sales of 2.31 billion euros, a gain of 6.9 percent in reported terms and 6.9 percent like-for-like. L’Oréal said the division outperformed the market, especially in mainland China and India, plus in the U.K. It also grew in all retail networks, including salons, the SalonCentric network, e-commerce and the selective channel.
“In a beauty market that is more dynamic than ever, L’Oréal delivered a remarkable performance and further strengthened its global leadership in the first half,” said Nicolas Hieronimus, L’Oréal chief executive officer, in a statement. “Growth was broad-based across all divisions, regions, categories and channels, once again vindicating our balanced, multipolar model.
“Growth continued to be driven by the dual cylinders of volume and value — testament to the success of our innovations and the desirability of our brands,” he continued. “In keeping with our virtuous circle, we improved our profitability, all while significantly increasing investment in our brands.”
L’Oréal’s advertising and promotion expenses were 32.5 percent of sales, representing a 100 basis-point increase.
The executive said in keeping with L’Oréal’s ambition of both economic and corporate performance, the group kept investing in the transition toward a more sustainable operating model that will guarantee longterm value creation.
“In an economic context that is still uncertain, we remain ambitious for the future, optimistic about the outlook for the beauty market and confident in our ability to keep outperforming the market and achieve in 2023 another year of growth in sales and profits,” Hieronimus said.
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