PARIS — L’Oréal’s second-quarter sales were bolstered by business in Europe and the Luxe division.
The maker of Lancôme, Kiehl’s and Garnier products released first-half results Tuesday after the close of the Paris Bourse.
The world’s largest beauty company registered sales of 10.88 billion euros in the three months ended June 30, representing a 6.7 percent rise in reported terms and a 5.3 percent gain on an organic basis.
The consensus forecast from VisibleAlpha was for a second-quarter organic sales increase of 5.6 percent.
“Key delta versus expectations were: Better Europe offset by worse LatAm and resilient Luxe was offset by soft Derma,” wrote Céline Pannuti, managing director, head consumer staples research Europe at J.P. Morgan, in a note.
The biggest miss came from L’Oréal’s Dermatological Beauty division, with organic sales up 10.8 percent. That was versus consensus of 17.4 percent.
The L’Oréal Luxe division, with sales accelerating sequentially quarter after quarter, and the Professional Products division beat consensus, while the Consumer Products division was in line.
A Garnier product.
Courtesy photo
L’Oréal’s results were mixed, but reassuring to many.
“Given the news flow leading into L’Oréal’s H1 results, we are relieved by the results,” wrote Bruno Monteyne, senior analyst, European food and home and personal care, at Bernstein in a note.
Bernstein found, for instance, that L’Oréal’s business in Mainland China, which registered single-digit sales growth, was “materially better than all the other China numbers we have heard reported recently.”
L’Oréal said that travel retail in North Asia saw the first signs of improvement, another bright spot.
“Europe once again surprised on the upside, with 9.7 percent growth versus [consensus of] 8.2 percent,” wrote Molly Wylenzek, an equity analyst at Jefferies, in a note.
L’Oréal’s North American business also remained strong, with organic sales up 3.4 percent, while sales in Latin America grew 12.3 percent. slower than consensus.
“L’Oréal remains able to activate new drivers even if the old ones (China and derma) are clearly decelerating,” wrote Pierre Tegner, head of food, spirits and HPC at Oddo BHF, in a note.
In the first half of the year, L’Oréal generated net profits of 3.65 billion euros, up 8.8 percent. The company reported sales of 22.12 billion euros in the period, an increase of 7.5 percent on a reported basis and 7.3 percent in like-for-like terms.
In a statement, Nicolas Hieronimus, chief executive officer of L’Oréal, said the group’s growth was well-balanced between value and volume.
“The consistent increase of our A&P spend to support these innovations and our 37 international brands allowed us to, once again, outpace the global beauty market,” Hieronimus said.
He characterized the market as remaining “dynamic.”
“In an environment that continues to be marked by economic and geopolitical tensions, we remain optimistic about the outlook for the beauty market and confident that our innovation power and the robustness of our multipolar model will allow us to keep outperforming it and to achieve another year of growth in sales and profit,” Hieronimus said.
As previously reported, on June 27, while speaking to investors at a conference, the executive said he foresees the worldwide beauty market’s sales increasing this year by between 4.5 percent and 5 percent, rather than by more than 5 percent, as earlier forecast.
“Following the recent downgrade, comments on global beauty market growth expectations will be widely watched, particularly in the context of consensus expectations for 7.5 percent LFL growth and 50bps margin expansion in H2,” wrote Jefferies’ Wylenzek.
Hieronimus will address financial analysts and journalists about the recent earnings during a call on Wednesday morning from company headquarters in the Paris suburb of Clichy.
“We think the shares may find relief in this set of numbers,” wrote Bernstein’s Monteyne. “What else is delivering like this in staples?”
