PARIS — Jean-Paul Agon, chairman and chief executive officer of L’Oréal, applauded recent changes on the beauty landscape.
“We are extremely happy about the decision of P&G to give up the fight on the beauty business. We have a great respect for this company, but we are happy that they finally realized that it’s not a business for them,” said the executive during the question-and-answer section of a conference call to discuss first-half results with analysts and journalists on Friday morning here.
“We are welcoming the new competitor Coty in the game,” said Agon, adding “que le meilleur gagne” (or “may the best win”). “We don’t think that it will change many things for us.
“I hope that Coty will take good care of the professional hair-care division, because in fact we need a good competitor,” he continued. “For the last three or five years we have been the only ones to really animate this profession around the world, and it’s pretty difficult. In this case I think it would be more positive for us to have a good competitor than not. We are very confident. We always like competition, and it’s fine.”
As reported, L’Oréal said Thursday night that its first-half net profit increased 8.5 percent to 1.88 billion euros, or $2.1 billion at average exchange, while sales in the period gained 14.7 percent to 12.82 billion euros, or $14.32 billion.
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During the call, Agon highlighted the company’s growing digital transformation. In the first six month of the year, approximately 20 percent of its overall media spend went to digital platforms, and the group’s e-commerce revenues rose more than 40 percent on-year to generate more than 4 percent of total group sales.
“It is important to note that this year, e-commerce sales should represent more than 1 billion euros [or $1.11 billion at current exchange] of net sales, which is a real milestone and illustrates the impact that it will have on our future growth,” the executive said.
China — where L’Oréal believes sales growth should generally accelerate in the second half — leads the charge for the company on the digital front. The Consumer Products division is making revenue gains in the country, thanks largely to online sales that now ring up 15 percent of the branch’s business there.
Agon called the phenomenon “amazing.” “We don’t know how fast it will grow, but it could reach 20, 25 [percent],” he said.
L’Oréal estimates the beauty market at large increased by between 3.5 percent and 4 percent during the first six months of the year, which is a similar level recorded in 2014.
“In terms of regions, Western Europe market growth was still subdued overall. The good news is that Southern Europe is now also positive, as well as Northern Europe,” Agon said. “In North America, the market is growing at a slightly faster pace than last year, with improvements across all channels. Emerging markets are still driving the growth of the worldwide beauty market, even with a clear deceleration in Brazil, where the market growth has sharply dropped, hit by a severe economic crisis and changes in taxation affecting the affordability of most beauty products.”
L’Oréal remains cautious about Brazil for the rest of the year, according to Agon.
He said the luxury beauty market remains very strong, the mass market is improving slightly, the dermacosmetic market remains dynamic and the hair-salon market improves gradually.
“Across the board, e-commerce is extremely dynamic, and conversely the door-to-door channel continues to decelerate,” Agon said. “Overall, the beauty market remains dynamic, and we believe that it will probably grow again this year between 3.5 and 4 percent.”
He explained that following the company’s solid first-half results it looks to the second half with confidence in the market’s continued vitality, a strong launch plan, a renewed dynamic of L’Oréal Paris, Garnier and Maybelline in the Consumer Products division, and the impact of the company’s digital transformation.
“All in all, we are therefore very confident in our ability to accelerate our growth in the second half of the year to outperform our market and deliver a year of significant growth in sales and profit,” Agon said.
L’Oréal stock closed flat in Paris on Friday at 170.35 euros, or $188.20.