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North America, China Help Drive L’Oréal’s Q1 Sales Up 19 Percent

The beauty giant’s business was spurred by growth in its Luxe, Professional Products and Active Cosmetics Divisions.

PARIS — L’Oréal started 2022 off with a bang.

First-quarter sales at the world’s largest beauty company rose 19 percent in reported terms and 13.5 percent on a like-for-like basis, spurred by growth in its L’Oréal Luxe, Professional Products and Active Cosmetics Divisions, plus gains in North America and China.

The maker of Lancôme, Kiehl’s and Garnier products reported sales of 9.06 billion euros in the three months ended March 31.

L’Oréal’s results, which were released after the close of the Paris Bourse on Tuesday evening, were ahead of analysts’ consensus of 10.6 percent growth in like-for-like terms.

“Momentum was pleasingly broad-based by category, with skin care still strong despite the pickup across most other categories; [by] division, with Active, Professional and Luxe all in the high teens, while Consumer was hampered by U.S. supply-chain issues, and region, with all, except North Asia, in double digits,” wrote Eva Quiroga, an analyst at Bank of America, in a note.

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“Importantly, management stated that there was no evidence of consumer down-trading, with volumes up 5 percent and price outpacing mix,” she continued.

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Nicolas Hieronimus, L’Oréal’s chief executive officer, shared thoughts and answered questions about the results during a conference call with analysts and journalists. He lauded the company’s first-quarter performance, especially given the context of the ongoing lockdowns in China due to the coronavirus pandemic, inflation and the invasion of Ukraine.

A tailwind in the period was currency fluctuations, which positively impacted L’Oréal sales by 5.1 percent.

Hieronimus said the beauty market continues to demonstrate resilience and estimates it grew by 8 percent in the quarter, consistent with last year’s rhythm.

“So there has not been any negative impact of the current context on the overall growth of the market, [nor] on L’Oréal’s ability to overperform,” said Hieronimus. “This quarter, again, we can say that we are beating the market growth in every division and in every region.”

In like-for-like terms, L’Oréal Luxe’s sales increased 17.5 percent to 3.46 billion euros, with balanced growth across geographic zones, and market share gains. Brands such as Yves Saint Laurent, Giorgio Armani, Prada and Valentino grew much faster than their markets.

The Professional Products Division registered sales of 1.04 billion euros, a 17.6 percent rise, with particularly strong momentum in the U.S., Germany, India and mainland China. Hair care remained its main category growth driver.

L’Oréal’s Active Cosmetics Division posted sales up 18 percent to 1.25 billion euros and gained market share in each zone, while the Consumer Products Division’s sales increased 6.9 percent to 3.30 billion euros. L’Oréal said the division had a positive quarter in Europe and the U.S., despite supply chain issues.

The group noted a clear revival of offline sales, which increased 15.5 percent in like-for-like terms, while e-commerce continued going strong, ringing up 25.8 percent of the company’s overall sales in the quarter.

By geographic region, starting in Europe — L’Oréal’s largest market — the group’s sales were up 16.4 percent. They grew 9.4 percent in North Asia; 12.6 percent in North America; 15.8 percent in the South Asia Pacific, Middle East, North Africa, Sub-Saharan Africa (or SAPMENA-SSA) zone, and 22.2 percent in Latin America.

China was a main topic of discussion during the L’Oréal call. Since mid-March, about 45 cities in the country have gone into total or partial lockdown, impacting about one-quarter of the country’s the population. L’Oréal’s business there varies by location, with Beijing achieving 100 percent of targets, but Shanghai totally closed.

The Chinese government has said that retail sales in the country were down 3.5 percent in March, versus minus 16 percent in March 2020.

Christophe Babule, executive vice president, group chief financial officer at L’Oréal, said after that period, recovery took place rapidly.

“We don’t know, of course, how long it will last,” he said about the lockdowns today. “But we are still confident about the capacity of the Chinese market to rebound very quickly.”

L’Oréal began 2022 with a strong January and February in China, where the market’s sales increased 7 percent. Babule explained the group has been able to mitigate the negative impacts that began there in March, and grow nearly three times the market by the end of the first quarter.

L’Oréal’s Consumer Products Division and supply chain issues were another talking point, especially in regard to mass-market products in the U.S.

“In the U.S., we import a number of raw materials or components from either Europe or Asia,” said Hieronimus, who referred to difficulties in U.S. shipping ports and the dynamism of the country’s beauty market, with some strong accelerations in certain categories, such as active cosmetics, which has led to shortages.

“We have reacted and improved to a certain extent the situation on CeraVe, for example, with the opening of a manufacturing line in Mexico,” he said.

The makeup market overall had softened during the health crisis, as people sported masks. But L’Oréal estimates the category’s sales grew by 8 percent in 2021 and is growing apace this year. There are differences in how the segment is evolving by region, however, and the CEO spotlighted developments in the U.S.

“The makeup market [there] is accelerating both in mass and luxury,” said Hieronimus. “That’s very interesting, because last year, the mass market in makeup had bounced back, while selective had remained a bit slow.”

Meanwhile, makeup and China will continue to be some primary focuses for analysts looking ahead.

“We continue to expect makeup and China to be risks to [fiscal-year 2022] consensus expectations as we move through the year with the latter in particular in focus on weaker sell-out data and continued ‘Zero COVID[-19]’ restrictions,” wrote Molly Wylenzek, an equity analyst at Jefferies, in a note.

Still, L’Oréal maintained its estimate that the beauty market should grow between 4 and 5 percent in 2022.

Despite the volatile, unstable geopolitical situation, Hieronimus reiterated L’Oréal’s optimism for the group’s ability to outpace the market, and to deliver improved sales and profits this year.


For more, see:

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