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Jean-Paul Agon Talks Beauty Business

L’Oréal’s chairman and chief executive officer discussed the highly contrasted and atypical market of this year.

PARIS — Despite an atypical beauty market so far this year, L’Oréal chairman and chief executive officer Jean-Paul Agon remains confident about the business at large.

Addressing financial analysts and journalists during a call on Friday — one day after the French beauty giant published its second-quarter and first-half results — Agon said “our estimates at the end of June show that once again the beauty market has held up well, with the pace of growth at around 4 percent — very similar to last year. The difference this year is that the growth is very contrasted by sector.

“Luxury is still championing the growth of the market, especially in Asia-Pacific and travel retail, while the makeup category is very dynamic [and] dermocosmetics continue to deliver a healthy growth. But the mass market has slowed down in most regions, notably in the U.S., as we mentioned earlier this year already. And professional is lagging behind,” Agon continued. “Across the board, e-commerce continues to increase very significantly. By region, volatility and consumption turbulences now occur within each zone. The French market remains difficult, but in the rest of Western Europe all sectors are strengthening — from mass to luxury. So overall, the zone continues to improve.”

The executive said North America, which generates almost one-fourth of global beauty sales, is less dynamic in 2017 than last year due to a much softer mass market. At the same time, “new markets,” including the Asia-Pacific region, Latin America, Eastern Europe, Africa and the Middle East, continued to drive growth around the globe but remained rather unpredictable and differed from country to country.

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Agon noted a recovery of the skin-care market. “We see a comeback of skin care, obviously because of the strength of [growth in China], but not only [that] — we see skin care coming back in many countries,” he explained.

The executive said L’Oréal views the rest of the year with “confidence” due to various factors, including that the beauty market is expected to grow at around 4 percent once again.

When asked what the company plans to do with the proceeds of its sale of The Body Shop to Natura, whose offer values the activity at 1 billion euros, he said it will be used to increase and strengthen L’Oréal’s profitability.

“Because, as you know, The Body Shop has been a drag on the profitability of the company — the whole company — for the past 10 years,” Agon said. “We will also use a part of the proceeds to strengthen our business drivers for some brands, where we believe we have some great opportunities. We have a great opportunity to accelerate our market-share gains that will consequently drive an acceleration of our top line.”

The cash injection will be used to pay down L’Oréal’s current debt of around 1.5 billion euros, to make targeted acquisitions and to nourish dividends, as well.

In fielding wide-ranging questions from analysts, Agon was asked about how L’Oreál would respond if Amazon were to move into the high-end beauty space by aligning with a prestige beauty e-tailer (a reference to Violet Grey which, WWD reported Friday, is close to a deal with the web giant).

“We will see,” said Agon, adding: “You know, it’s too early to tell.”