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L’Oréal Q2 Sales Slightly Miss Expectations

The group posted like-for-like revenue growth of 6.8 percent in the period.

PARIS — L’Oréal’s second-quarter sales growth, negatively impacted by business in North America, fell slightly short of financial analysts’ expectations.

The maker of Lancôme, Garnier and Maybelline products said Tuesday night, after the close of the Paris Bourse, that its revenues in the period advanced 9.8 percent in reported terms to 7.26 billion euros.

On a like-for-like basis, stripping out currency fluctuations and acquisitions, sales in the three months ended June 30 were up 6.8 percent.

“There is no doubt that with 2Q19 LFL [second-quarter 2019 like-for-like] growth of 6.8 percent, L’Oréal will be the best performing of the European HPC players. With the market having hoped for better [up 7.3 percent] this may not be good enough — all the more so that past debates over the growing polarization of that growth remain very much on trend,” Eva Quiroga, an analyst at Deutsche Bank, wrote in a research note.

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Sales gains in L’Oréal’s divisions were highly contrasted in the quarter. In like-for-like terms, the Luxe and Active Cosmetics divisions posted upticks of 12.2 percent and 14.4 percent, respectively, while the Professional Products and Consumer Products divisions registered increases of 2.7 percent and 2.8 percent.

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“On a category basis, both Consumer and Luxury came up short of expectations,” Céline Pannuti, an analyst at J.P. Morgan Cazenove, wrote in a note. She said the Active Cosmetics division “remains robust” and noted that the Professional Products division outpaced consensus of 2.6 percent.

Second-quarter 2019 marked the first time in a year that the world’s largest beauty company’s like-for-like sales gain was under 7 percent. It decelerated from the 7.7 percent posted in the first quarter.

“The worry is whether we are past the peak, and if growth will ‘normalize’ from here,” Andrew Wood, an analyst at Sanford C. Bernstein & Co. LLC, wrote in a note. “Given the strong YTD rally in the stock, we expect some weakness tomorrow.”

Also in the second quarter, on a geographic basis, L’Oréal’s sales in North America declined 1.1 percent in like-for-like terms to 1.91 billion euros.

“North America is still being held back by the slowdown in makeup,” Jean-Paul Agon, L’Oréal chairman and chief executive officer, explained in a statement.

Comparable sales increased 16.5 percent in New Markets, which includes the Asia-Pacific region, where they rose 25.5 percent. Meanwhile, revenues inched up 0.9 percent in Western Europe.

In the first half of 2019, L’Oréal net profits gained 2.5 percent to 2.33 billion euros, and net profits after non-controlling interests came to 2.33 billion euros, up 2.3 percent. The latter was negatively impacted by costs linked to reworking the NYX Professional Makeup distribution channels, and goodwill and brand impairment related to Clarisonic. Operating profit rose 12.1 percent to 2.89 billion euros.

Group sales increased 10.6 percent to 14.81 billion euros in the six months.

Agon said L’Oréal “has delivered its strongest first-half like-for-like growth in more than a decade at plus 7.3 percent, outperforming a dynamic market that has, for the second year running, posted one of its highest-ever growth rates.

“In a volatile and contrasted environment, this good first half gives us confidence in our capacity to outperform the market in 2019 and achieve another year of growth in sales and profits,” Agon continued.

L’Oréal also said Tuesday that it will buy back up to 750 million euros of shares in the second half of 2019, then cancel the acquired shares.