Skip to main content

L’Oréal Q3 Sales Broadly Beat Expectations

The group posted its first positive quarter in North America in numerous quarters, driven by e-commerce.

PARIS — L’Oréal’s third-quarter sales returned to growth and broadly beat expectations, up 1.6 percent on a like-for-like basis to 7.04 billion euros, driven by its Active Cosmetics Division.

In reported terms, the maker of Lancôme, Kiehl’s and Garnier products saw sales decline 2 percent to 7.04 billion euros in the three months ended Sept. 30.

The results, released after the close of the Paris Bourse on Thursday, rocketed past analysts’ consensus, which forecast a 2.4 percent decline.

The company estimates the global beauty market in the third quarter was down about 6 percent.

L’Oréal’s like-for-like quarterly growth, according to Eva Quiroga, an analyst at Bank of America, “should pave the way for positive like-for-like growth in the second half of the year. Key to this has been — and is bound to remain — a very well-filled and well-supported innovation pipeline — both in absolute but also in relative terms as peers have been taking the foot off the pedal.

Related Galleries

“Had it not been for travel retail, like-for-like growth would have been very solid at 5 percent,” she wrote in a note.

You May Also Like

Pierre Tegnér, an analyst at Oddo BHF, noted from L’Oréal’s call with financial analysts on Thursday evening that chairman and chief executive officer Jean-Paul Agon had said that there were neither inventory effects nor anything in the third quarter to be considered as a one-off.

Tegner also highlighted that marketing aggressiveness will continue to support the company’s recovery and the fourth quarter, and that Agon said the group still expects “beautiful profitability” in the second half of the year.

L’Oréal’s strategy beginning in June was to start stimulating consumer demand for its brands and products both in brick-and-mortar and online, and to reengage all its business drivers. That plan succeeded.

L’Oréal’s Active Cosmetics Division posted record quarterly sales growth, up 29.9 percent on a like-for-like basis to 737.7 million euros.

With 11 percent comparable sales gains, to 861.7 million euros, the Professional Products Division registered its best quarter in years, due to the reopening of salons after coronavirus-related lockdowns and the acceleration of e-commerce.

The Consumer Products Division was back in the black, with sales up 0.8 percent in like-for-like terms to 2.86 billion euros, despite its widespread exposure to the struggling makeup category.

L’Oréal Luxe significantly outperformed its market, reporting sales down 6.2 percent on a like-for-like basis to 2.58 billion euros, the group said.

L’Oréal’s e-commerce sales grew 61.6 percent on a like-for-like basis.

All of the group’s product categories showed improvement. Skin care, hair coloring and hair care posted double-digit growth. Makeup, which still faced headwinds, made progress with sales down in the high teens, versus a market estimated to have fallen by 25 percent. Fragrance sales were slightly negative, in the high single digits, in a market estimated at minus 25 percent to 30 percent.

In comparable terms, the company’s business remained down in Western Europe, at minus 2.5 percent, while the new markets and North America ended the quarter with sales up 4.2 percent and 1.3 percent, respectively. It was the first time North America came through with a positive quarter in several quarters.

Agon fielded numerous questions regarding the U.S. beauty market, which L’Oréal estimates year-to-date is down by around 8 percent. In the U.S., the group’s business in sell-out is also at around minus 8 percent and its sell-in at minus 9 percent.

The executive said L’Oréal is overperforming the U.S. with its Professional and Active Cosmetics divisions.

“We are still probably underperforming the market slightly on mass and luxury, but all in all we are now back to being on par with the market,” he said, adding the group has not seen in the U.S. a buildup of inventory, promotional excesses or price deflation.

“It’s clear that the recovery of our business in the U.S. is mostly due to the acceleration that we have in e-commerce,” continued Agon. “We were a bit behind in e-commerce in the U.S., and this year the team there have been able to realize a very strong acceleration of their sales in e-commerce. In total, it’s at plus 83 percent this year. So the growth now is faster than the one we have in China.”

By division in the U.S., L’Oréal’s e-commerce sales are up 100 percent for Professional, 109 percent for Consumer, 116 percent for Active Cosmetics and 60 percent for Luxe.

As L’Oréal shifts resources to e-commerce, it’s scaling back its presence in U.S. brick-and-mortar stores. Agon reiterated the group’s announcement of a few weeks ago that it would exit about 1,000 U.S. stores, including small and underperforming doors.

“We have to adapt to the evolution of consumption in the U.S., [where there is] less traffic in malls and department stores, more consumption in e-commerce — and we have to follow our consumers,” he said.

In the first nine months of this year, L’Oréal’s sales declined 8.6 percent in reported terms to 20.11 billion euros. On a like-for-like basis, they fell 7.4 percent.