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L’Oréal Chief Imparts Beauty Business Overview

Jean-Paul Agon discussed how the market and company fared in 2018, and shared thoughts on 2019.

PARIS — Despite the turbulent economic and political environment of 2018, last year was marked by an acceleration of the worldwide beauty market — and for L’Oréal as well, the company’s chairman and chief executive officer Jean-Paul Agon said Friday.

Agon was addressing a room full of financial analysts and journalists gathered at group headquarters in the Paris suburb of Clichy, after the company’s results were released the prior evening, following the French bourse’s close.

As reported, L’Oréal’s fourth-quarter 2018 sales gained 8.6 percent to 7.07 billion euros. For the full year, its net profit grew 8.8 percent to 3.9 billion euros, while sales rose 3.5 percent to 26.94 billion euros.

L’Oréal’s shares ended Friday up 1.3 percent, to 218.80 euros.

During the conference, Agon said of the beauty industry: “The market has been particularly buoyant; we believe it grew around plus-5.5 percent, which makes 2018 the best year in 20 years.”

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Numerous key boosters fueled the gains, including Asia, particularly China, which registered a double-digit sales rise. “I can confirm…that we saw no slowdown in China in Q4 or in January of this year,” said Agon.

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Luxury products were another engine, led by Asia and travel retail. There was also the healthy growth rate of e-commerce, travel retail and dermo-cosmetics. Agon called 2018 “the year of skin care,” with the category tapping into market trends, such as well-being, authenticity and natural ingredients.

Underlying trends buoyed the market, too, like people’s strong desire for beauty, and the shift toward premiumization. “At its core, beauty is an aspiration. It’s not a commodity,” he said. “As a result, consumers are ready to pay more and trade up to new and innovative products.”

Digitalization and the increased penetration of beauty worldwide contributed to the market’s growth in 2018, as well.

Agon said beauty still has many white spaces in terms of categories and countries, as well as consumer targets stemming from demographic shifts.

“So we are very confident, and we have every reason to believe that the market will continue to grow at a good pace in 2019, despite an economic context that probably will be still volatile and unpredictable,” the executive said.

L’Oréal’s 7.1 percent organic sales growth marked the strongest annual revenue gains in more than a decade for the group, which also set a company record for operating margin, which came in at 18.3 percent.

“We significantly outperformed the market, generating strong share gains in the most promising and strategic areas for the future,” continued Agon, citing such examples as the luxury and dermo-cosmetics sectors, and the Asia-Pacific region.

That zone, which overtook North America last year sales-wise to become the group’s number-two region for the first time, is expected to become L’Oréal’s biggest, ahead of Western Europe, “probably very soon,” according to Agon.

In Asia, L’Oréal commands an 8.7 percent market share and is the continent’s beauty leader. “We are just at the beginning of our growth in this key region,” said Agon.

Last year, L’Oréal outperformed the skin-care market and strengthened its leadership in e-commerce, which posted sales up 40.6 percent and accounts for 11 percent of group revenues.

“If it were a country, it would be now our second worldwide,” said Agon.

He said L’Oréal increased its leadership in digital, which is boosting its brands’ power. “In the world of algorithms, bigger is truly better,” explained Agon.

L’Oréal has more than one billion people visiting its web sites, and generates one-third of the global beauty traffic on YouTube and one-fourth of the beauty engagement on Facebook. Forty-three percent of the group’s media investment is digital, and, of that, 75 percent is spent on precision advertising.

“Digital is now totally embedded in our teams — every brand, every division, every function, every country,” said Agon. “Beyond digital, new technologies around data and artificial intelligence are opening new horizons.”

In another first, L’Oréal’s travel-retail business crossed the 2 billion euro threshold, after 27.1 percent year-over-year growth.

Agon said L’Oréal is “very confident in our ability to outperform the beauty market in 2019, and achieve another year of, I hope, significant growth in sales and a further increase in profit.”

He fielded wide-ranging questions during the meeting. When asked whether L’Oréal is bidding for — and likely to win — Prada’s fragrance and beauty license, Agon said: “No comment.”

Ditto for the query regarding if Nestlé, L’Oréal’s second-largest individual shareholder, with a 23.3 percent stake in the group, might soon sell down its holding.

“Our relations with Nestlé are excellent, and there is absolutely no change,” added Agon.

He also said L’Oréal’s business has not at all been impacted by the months-long yellow-vest demonstrations in France.