By  on August 1, 2014

PARIS — A pickup in U.S. business and strong growth in Western Europe were among positive factors that L’Oréal executives noted while discussing the second half during a conference call with financial analysts on Friday.

The French beauty giant on Thursday night released first-half results, including a 1.5 percent increase in net profits and a 1.5 percent sales decline. On a like-for-like basis, revenues gained 3.8 percent.

In the second quarter, sales dipped 0.7 percent in reported terms and gained 4.1 percent on a like-for-like basis.

Jean-Paul Agon, L’Oréal’s chairman and chief executive officer, said the company was back in the black in North America in the April-to-June period, when revenues advanced 2.4 percent in like-for-like terms, “and we are confident that the second half will be better than the first one, mostly due to the fact that we believe [there will be] an acceleration in the mass-market business.”

With a like-for-like rise of 2.8 percent, the company achieved its strongest growth in Western Europe since 2007.

L’Oréal Luxe registered the firm’s best divisional sales performance, up 2.7 percent in reported terms and 7.5 percent on a like-for-like basis.

In the first half, the division’s drivers included the Yves Saint Laurent brand, whose revenues were up about 6 percent, and Lancôme, with sales gaining in the low single digits. Agon called the brand’s two-year-old women’s scent La vie est belle an “amazing success. It has become in record time the number-one fragrance in Western Europe. I think it’s going to be among the top three or four worldwide this year.”

The ambition is for it to rank first, Agon continued.

L’Oréal’s travel-retail revenues advanced 6.5 percent on a like-for-like basis, with the Americas and Asia’s growth in the high single digits and Europe’s increasing between 3 percent and 4 percent. The channel generated slightly more than 5 percent of overall company sales and almost 20 percent of the luxury division’s.

Travel retail slowed a bit in the first half due to the devaluation of certain currencies, causing some consumers to be more interested in buying products in their local markets.

“But this will rebalance itself, and we are pretty confident that as a channel, travel retail will probably get back to double-digit growth very soon,” said Agon.

During the conference call, he discussed the worldwide cosmetics industry overall, estimating that in the first six months of the year it grew between 3.5 percent and 4 percent — a pace similar to that in 2013.

“The cosmetic market has remained globally dynamic, [developing] at a same pace as last year. We believe that this pace will be maintained in the second half of the year,” said Agon.

L’Oréal outperformed sector peers such as Avon and Shiseido in the first half, and Agon believes the company should deliver a slightly better performance than the industry overall in 2014, with acceleration in the fourth quarter.

Céline Pannuti, an analyst at J.P. Morgan Cazenove, said in a research note the “reassuring” first-half data “puts L’Oréal ahead of the pack.”

The company said the beauty industry’s growth in Western Europe stood at 0.5 percent, with Southern European countries recovering slightly while remaining in negative territory.

“In North America, the market continued to slow down at plus 2.2 percent, especially due to the mass market that has been really sluggish since the middle of last year and even flat since the beginning of this year, which is the first time in many, many years,” said Agon. “We are seeing a strong polarization, with a luxury channel that is pretty dynamic and a hair-salon market that is getting a little better.”

Emerging countries posted a 5.9 percent sales increase. “However, that pace of growth is somehow disappointing,” said Agon, adding the deceleration was due to factors including some countries’ devaluation and local unrest in areas such as Thailand, Ukraine and Russia.

“In terms of channels, the selective-beauty market has grown nicely, by an estimated plus 4.5 percent, with a slowdown of the Chinese market and travel retail offset by an improvement in Western Europe,” said Agon. “[Meanwhile,] the United States remains pretty dynamic.”

Beauty’s mass channel, which had slowed down in the U.S. but slightly accelerated in Western Europe, grew again by between 3.5 percent and 4 percent. Agon said the hair-salon segment “remained difficult,” with estimated growth of between 1 percent and 1.5 percent, and that the door-to-door channel continues slowing down globally.

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