L’Oréal said fourth-quarter sales rose 2.5 per cent like-for-like to €11.08 billion, missing analyst expectations of a 3.9 per cent increase, per the Visible Alpha consensus. This marks a slowdown in sales growth following a third-quarter organic revenue increase of 3.4 per cent. For the full year, organic group sales were up 5.1 per cent to €43.49 billion.
Dermatological beauty (including Cerave and La Roche-Posay) led company growth with sales up 5 per cent in the quarter. Professional products (Kerastase, Redken) were up 3.8 per cent, consumer products (L’Oréal Paris, Maybelline) were up 2.7 per cent, while L’Oréal Luxe (Kiehl’s, Yves Saint Laurent) was up 1 per cent. From a geographic standpoint, soft sales in North America (up 1.4 per cent, well below expectations of 5 per cent), did not offset the 3.6 per cent decrease in North Asia. Europe was up 5.2 per cent.
“The long-term outlook should not be called into question, but the most likely assumption is 3 per cent growth in the first half of 2025,” says Pierre Tegnér, consumer staples equity analyst at Oddo BHF.
“Excluding North Asia, where the Chinese ecosystem remained challenging, sales advanced in the high single digits,” L’Oréal CEO Nicolas Hieronimus said in a statement. The executive is “optimistic” about the global beauty market in 2025, and is “confident in [L’Oréal’s] ability to keep outperforming it and to achieve another year of growth in sales and profit”. “We expect growth to accelerate progressively, supported by our beauty stimulus plan, which will be driven by an exciting pipeline of launches and continued strong brand support.”
Sluggish sales in China and travel retail’s slow rebound have cast a shadow over big beauty. Estée Lauder Companies sales fell 6 per cent to $4 billion in its second quarter, which sent stocks down 16 per cent. The company also announced layoffs of up to 7,000 employees. LVMH’s perfumes and cosmetics division reported 2 per cent organic sales growth to €2.27 billion in the fourth quarter. Coty will publish its earnings on 10 February.
“After mixed read-across from peers so far this earnings season, sentiment had been nervous heading into results, and these fears have proven well-founded, as we have a weak set of numbers, illustrating that the wind has been well and truly knocked out of the industry darlings’ [L’Oréal and Estée Lauder’s] sails,” wrote Bernstein analysts, including Callum Elliott, in a note. “It is also the lowest quarterly performance since the height of the pandemic, and outside of the pandemic, you need to go back more than 10 years to the third quarter of 2014 for weaker growth.”
L’Oréal also announced some governance changes, starting with the fact that L’Oréal heiress Françoise Bettencourt Meyers has informed the board of directors that she would not request the renewal of her tenure as director. She has proposed that the family-owned holding company Téthys join the board of directors alongside her two sons, Jean-Victor and Nicolas Meyers. If the annual general meeting approves the appointment of Téthys as a director, Téthys would designate deputy CEO Alexandre Benais as its representative.
L’Oréal’s annual earnings conference held at its HQ on Friday provided more colour on the growth drivers for 2025 including the US and possible acquisitions. To start with, the conglomerate expects the global beauty market to grow between 4 to 4.5 per cent in 2025. “We are determined to outperform the market again,” Hieronimus said.
The executive is “pretty bullish” on the US market. “The consumption of particularly premium goods in the US will be dynamic. Of course, there are many unknowns on the situation of the US market, the tariff strategies may evolve and then whether it will have an impact on local inflation is hard to predict. But today, we see the US as a land of opportunity.”
Meanwhile, “it’s not a huge rainbow in China but the market seems to have been stabilizing at least for the first couple of weeks of 2025,” Hieronimus added, noting that China was flattish in January and February.
He’s also “not super positive still for travel retail” with Hainan still not growing in terms of sellout. “We don t see travel retail being a powerful growth engine, particularly at the beginning of the year.”
It’s not only organic growth. Acquisitions are on the table. “We are in a conquest mode. There are plenty of acquisitions that are today being worked on and looked at,” L’Oréal CFO Christophe Babule said. Asked about the rationale behind taking a minority stake in Oman-based fragrance brand Amouage, Hieronimus replied: “There are many moments where founders are eager to continue to run their business and at the same time, they re excited to benefit from L Oreal s support. Amouage is one of the most sophisticated fragrance houses in the Middle East. We ll see what the future holds… We don t know which one of these brands is going to be passing the test of time and having a finger in different pots of jam allows us to make sure we ll have probably at some point one that becomes a star. That’s part of this market. The beauty market has become extremely creative, in a number of brands. We can t buy them all, we can buy some of them, but we can also learn and discover and probably seduce a certain number in a later stage.”
But that’s not the plan with Jacquemus, which L’Oréal just took a minority stake in and signed a beauty license deal with. “We do not intend to go higher in the capital of Jacquemus,” Hieronimus said.
This article was updated on 7/2/2024 to include comments from L’Oréal CEO Nicolas Hieronimus after the company s earnings conference.
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