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L’Oréal said Tuesday that third-quarter sales rose 2.8 per cent to €10.29 billion, despite expected struggles in China. Sales for the first nine months of the year were up 6 per cent.
“As anticipated, global beauty market growth has been normalising throughout the year. In the developed markets, this has been driven by a gradual easing in pricing after two years of strong inflation; despite that, underlying market trends remain robust in Europe and in North America — as well as in emerging markets,” CEO Nicolas Hieronimus said in a statement. “The situation in the Chinese ecosystem has become even more challenging, but we believe in the future of this market and hope that the governmental stimulus will help improve consumer confidence.”
Sales in North Asia, which includes Mainland China, were down 4.4 per cent for the quarter, a continued deceleration compared to second-quarter sales, when the region was down 2.4 per cent like-for-like. Sales in Europe rose 5.2 per cent; while North America was up 4.3 per cent. SAPMENA and SSA (South Asia Pacific, Middle East, North Africa and Sub-Saharan Africa) grew 7.9 per cent.
L’Oréal Group’s sales have slowed since the previous quarter, in line with the broader luxury downturn. Its competitor, Estée Lauder, had faced similar struggles in its last quarter earnings, noting a net sales decline of 2 per cent, alongside Puig, which continues to be dragged down by China. However, despite the luxury slowdown, categories like fragrance and its decision to onboard professional and dermatological brands onto e-tailer Amazon has proven successful, opening up sales opportunities for the conglomerate.
A deceleration in drugstore beauty
After a significant growth spree, drugstore skincare has slowed. L’Oréal’s dermatological beauty category, which includes brand Cerave and La Roche-Posay, fell 1.6 per cent for the quarter. Hieronimus attributed this decrease to a combination of factors including inventory management, and balancing sold-out shelves with excess product in wholesale doors. He added that La Roche-Posay remains a bright spot, leading growth for the category.
On the call, Hieronimus said suncare showed unexpected turbulence for the conglomerate, thanks to inconsistent summer weather influencing sales.
Fragrance remains strong
L’Oréal Luxe, which houses the company’s premium fragrance business, was a strong point: sales rose 8 per cent for the quarter. Hieronimus told investors he’s confident the category will remain a strong driver as it pushes into Q4 and the holiday season.
“It’s only good news, we don’t see it slowing down,” he says. Across Luxe’s fragrance and cosmetics, Yves Saint Laurent posted single-digit growth in all regions and Valentino gained momentum in the US, on the launch of its newest lipstick, Spike Valentino. Other strong fragrance performers include Valentino Roma, Prada Paradoxe and Yves Saint Laurent Libre, while its premium collections like Maison Margiela Replica and Armani Privé continue to advance strongly.
The fragrance sector remains a resilient category during the luxury slowdown. Hieronimus said the category appeals to the affordable luxury consumer sentiment that repeatedly takes place during an economic slowdown. Looking forward to 2025, Hieronimus noted the Miu Miu fragrance launch coming up in January — following the exclusive licensing agreement agreed in February — and he expects the launch and customer reception to do well thanks to the brand’s buzz.
Within the professional products division, haircare growth was fuelled by Kérastase and the launch of Premiere and Elixir Ultime as well as L’Oréal Professional and the continued strength of its Absolute Repair Molecule.
Hieronimus said that the company plans to launch more new makeup products in the first half of the year going forward after a lack of newness dragged on sales this year. He says that the makeup category takes longer to make a stir in today’s climate and needs more time in the market.
The Amazon effect
Hieronimus said that L’Oréal Group is “very happy” with Amazon as an emerging distribution channel for the company since onboarding to the platform in February — calling it a “win-win”, despite being one of the later players to launch on the online channel. He said the partnership has worked to recruit customers who were otherwise shopping third-party sellers, and it has allowed the group to push more categories and brands such as skincare and Kiehl’s, which were being underserved in selective retail. To the potential cannibalisation of its retail partners including Ulta Beauty and Macy’s, Hieronimus said relationships remain strong, and all in all, integrating its brands onto Amazon was a “very positive move.”
In summary, “the beauty category continues to grow, including in units, demonstrating once again its resilience and long-term potential. L’Oréal continues to outperform thanks to our innovation power, the agility of our teams and our capacity to reallocate our resources towards new growth engines.”
In an industry “that continues to be marked by economic and geopolitical uncertainties, we remain confident to achieve another year of growth in sales and operating profit and are preparing our own beauty stimulus plan for 2025”, concluded Hieronimus.
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