PARIS — Buoyed by strong first-half results, L’Oréal is emerging from the economic crisis, according to chief executive officer Jean-Paul Agon.
“We have returned to organic growth and are conquering global markets at a faster pace,” he said, speaking to financial analysts and journalists Thursday morning at company headquarters in the Paris suburb of Clichy, France.
“The results for the first half have been extremely positive from every point of view. Once again, the world cosmetics market is growing,” continued Agon, who estimated it’s developing by about 4 percent and will continue to do so at about the same rate for the rest of this year.
In North America, Agon said it is estimated there is 2 percent growth, “even though there’s not really been any evidence of genuine economic upturn there for the moment.
“The mass market is flat,” he explained. “The luxury market is a bit more positive; things are picking up a bit in the big stores. And the hair-salon market is very quiet, too.
“Our focus is winning market share,” Agon said. “We want to win market share in [the consumer segment]. We’re [having] significant market share wins in makeup and are doing very well with Wal-Mart; [we have] very good cooperation with them, a very strong position there.
“In luxury, we’re confident, too, because all the big initiatives that produce the success of that division in Western Europe are now going to be rolled out in North America,” he continued. “And [for professional products] we’re confident because Inoa will be driving growth and Matrix [is also] doing well. I can’t give you a forecast about the U.S. economy, but we think we can probably outperform the market.”
Later in the meeting, Agon addressed the Bettencourt controversy and L’Oréal’s employment of François-Marie Banier, the photographer to whom Lilliane Bettencourt has given assets worth about 1 billion euros, or $1.27 billion at current exchange. Banier reportedly receives 710,000 euros, or $901,903, annually through his company, Héricy, thanks to a 10-year agreement with L’Oréal.
Agon said Banier provides a “real service” to L’Oréal but wouldn’t elaborate further, explaining he reserves his response for the legal inquiry.
He fielded questions about the legal battle between Liliane Bettencourt and her daughter, Françoise Bettencourt Meyers. Liliane Bettencourt is the daughter of L’Oréal’s founder and its largest single shareholder with 31 percent of the company.
“The Bettencourt affair, while very regrettable, does not have any impact on the company’s bottom line. If there is any doubt about it, the numbers corroborate this,” Agon said.
As reported, L’Oréal’s first-half net profits rose 21.2 percent to 1.32 billion euros, or $1.75 billion at average exchange, for the period ended June 30.
Operating profits grew 21.4 percent to 1.67 billion euros, or $2.21 billion, representing 17.3 percent of sales, which L’Oréal executives called “a record half-year figure.” Meanwhile, the firm’s gross profits increased 11.9 percent to 6.89 billion euros, or $9.14 billion. That corresponded to 71.3 percent of revenues, versus 70.2 percent in the same prior-year period.
Sales at L’Oréal gained 10.2 percent to 9.67 billion euros, or $12.82 billion. On a comparable basis, revenues rose 6.3 percent.
Agon said the return to organic growth — achieved in all divisions — was due to major strategic choices made over the past couple of years. These include concentrating on high value-added worldwide innovations at accessible prices, such as Inoa, Youth Code, Génifique, Hypnôse Precious Cells and Parisienne; breakthroughs in new product categories, such as men’s care and deodorants; accelerating international expansion in countries like China and Brazil, plus increasing investments in research and development and in advertising and promotion.
L’Oréal’s R&D expenses increased 7.6 percent versus the first half of 2009. Advertising and promotion expenses were 2.95 billion euros, or $3.91 billion, accounting for 30.5 percent of sales, compared with 30 percent in the same prior-year period. The company said it is continuing its policy of significant investments for A&P.
Agon said the big news was the strong revival of cosmetics business growth in new markets. They accounted for 53 percent of the world’s cosmetics business and 87 percent of its organic growth, according to L’Oréal estimates.
“In the near future, [new markets] are set to become the group’s largest business zone,” continued Agon, adding it has already happened once — this month, for the first time in the company’s history.
“We approach the second half with confidence even though we have to be aware the economic environment is still very uncertain,” he said.
The question about Nestlé’s participation in L’Oréal — which stands at about 30 percent — bubbled up again.
On Thursday in Geneva at a World Economic Forum event, Nestlé chairman Peter Brabeck-Letmathe told journalists, “If the [Bettencourt] family decides to sell, which would be Madame Liliane Bettencourt, we would have to look into that….There is nothing there…. Therefore, there is nothing that has to be decided for now.”
Meanwhile, Swiss newspaper Handelszeitung on Wednesday featured an interview with Brabeck-Letmathe. Regarding Nestlé’s intentions vis-à-vis L’Oréal, he was quoted as saying, “We haven’t yet decided what we want. The supervisory board asked me to consider what the long-term development could look like.” He added that whatever the decision, “the stake in L’Oréal is positive for shareholders of both companies.”
“For us, this is a nonevent,” said Agon. “I haven’t seen anything new or groundbreaking.”
The principal terms of the shareholder pact between Nestlé and the Bettencourt family are that neither party can increase its stake in L’Oréal during the lifetime of Liliane Bettencourt and six months after her death. Each of the parties is free to sell its shares and has conceded the other a first right of refusal until April 29, 2014. After that date, the parties can offer the shares to any third party.
To a question concerning L’Oréal’s participation in Sanofi, Agon said his company is a “loyal” investor and that it has no plans in the short term for its nearly 9 percent stake.
L’Oréal stock closed up 3.9 percent on the Paris Bourse Thursday to 78.69 euros, or $99.99.
@kering_official is spinning off its stake in puma in an effort to focus on its luxury brands, the brand operator announced yesterday. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth,” said François-Henri Pinault, Kering’s chief executive officer and chairman. Artémis will become a “long-term strategic shareholder” of Puma with a 29 percent stake. #wwdnews #wwdfashion (📷: @jilliansollazzo)
The fashion world mourns for celebrated street style photographer, Nabile Quenum, who died at age 32 in Paris.
Quenum, creator of the fashion blog “J’ai Perdu Ma Veste,” was a fashion week fixture, and regularly shot for New York magazine’s The Cut, among other outlets, and brands such as Louis Vuitton, Moncler and Adidas. He was also actively involved in the #NoFreePhotos initiative, which kicked off in the fall. Read more about Quenum in @kbsmoke's story on WWD.com. #wwdnews
@verwanggang and @maisonladuree have teamed up on a dessert collab called Vera Wang Pour Ladurée. The collection, which launched this week, features a specialty macaroon, as well as a wedding cake inspired by one of the designer’s gowns. “I could not imagine a more delicate or sophisticated creation to grace any couple’s celebration,” said Wang. #wwdfashion
“I’m Russian and I love to use all these little tricks that I got from my grandma or my mom. We didn’t have a lot of money for creams or anything like that so we would use a garden as a beauty treatment regime. We’d put cucumber in the fridge and do a cucumber mask,” says model @irinashayk on one of her beauty hacks. WWD asked celebs what their go-to self-care rituals are. See what Naomie Harris, Freida Pinto and more said on WWD.com. #wwdeye #wwdbeauty (📷: @zefashioninsider)
Exclusive: @viktorandrolf are teaming up with @Zalando on a collection made from leftover clothing. The lineup, which lands at the retailer February 1, includes 17 pieces adorned with sliced up and repurposed overstock from the retailer’s private label collection. Pictured here is a look from the collection –– see more on WWD.com. #wwdfashion #wwdnews
@duewestnyc is the newest bar joining the collection of intimate neighborhood-focused spaces in the West Village. The cocktail menu, which includes bitters and syrups made in-house, offers a “Build Your Own Old-Fashioned” – like the one pictured here – where guests can choose from a list of spirits and unexpected sugars and bitters. #wwdeye
Spotted at last night’s National Board of Review gala in NYC: Angelina Jolie. Jolie – along with Meryl Streep, @lupitanyongo and more – continued the all-black dress code from Sunday’s Golden Globes. #wwdeye (📷: @lexieblacklock)