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L’Oréal Q4 Sales Beat Expectations

The world’s largest beauty company anticipates sales and profit growth for 2020, despite coronavirus concerns.

PARIS — L’Oréal said Thursday that it expects to register sales and profit growth for full-year 2020, despite the coronavirus crisis, which would have a temporary negative impact on its business in China and travel retail in Asia.

The world’s largest beauty company, in a release published Thursday after the close of the Paris bourse, reported fourth-quarter 2019 sales that strongly outpaced expectations and helped the group’s full-year sales rise 8 percent, L’Oréal’s best like-for-like revenues gains since 2007.

The maker of Lancôme, Garnier and Kiehl’s products noted that the Asia-Pacific region had become its largest geographic zone, and that the company’s e-commerce sales were up 52.4 percent, comprising 15.6 percent of overall sales.

L’Oréal said fourth-quarter sales gained 11.4 percent in reported terms to 7.88 billion euros. On a like-for-like basis, sales advanced 9.6 percent, far exceeding financial analysts’ consensus of 7.3 percent.

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By geographic zone in the quarter, Asia-Pacific registered a 33.3 percent sales uptick in reported terms to 2.75 billion euros. Western Europe rang up 2.14 billion euros and North America, 1.87 billion euros.

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L’Oréal chairman and chief executive officer Jean-Paul Agon in the statement highlighted “a remarkable end to the year in China, but also good growth in South Korea, India, Indonesia and Malaysia.”

He also said the coronavirus concern “will have a temporary impact on the beauty market in the region, and therefore on our business in China and travel retail Asia, even if it’s too early to assess it.

“The experiences we have had with similar situations in the past — SARS, MERS, etc. — show that, after a period of disturbance, consumption resumes stronger than before,” he added. “Therefore, at this stage, and assuming this epidemic follows a similar pattern, we are confident in our capacity this year again to outperform the beauty market and achieve another year of growth in both sales and profits.”

L’Oréal’s statement came a few hours after the Estée Lauder Cos. Inc. said Thursday that it had sharply lowered guidance, due to the coronavirus outbreak, which began in Wuhan, China.

Pierre Tegner, an analyst with ODDO BHF, wrote of L’Oréal in a note: “These results show the great efficiency of a company strategically focused on a dynamic market and operationally diversified….”

He made reference to L’Oréal’s fourth-quarter revenues in North America, which were down 2 percent on a like-for-like basis, due to weak makeup sales, but added that “with such a stellar [fourth quarter] at the group level, we do not think it would be a concern for investors. Such quality growth — despite the de-balance of the growth pockets — is scarce in current [times], even in [the] consumer space.”

For full-year 2019, L’Oréal sales advanced 10.9 percent in reported terms and 8 percent on a like-for-like basis to 29.87 billion euros. Dented by exceptional items, company net profits declined 3.7 percent to 3.76 billion euros.

“For us, one of the highlights of 2019, notably the latter part of the year, was the return of two of the nonluxury businesses to decidedly more palatable growth, with mass bouncing back to plus 4.4 percent in 4Q19 [the best in 12 quarters] and professional accelerating to plus 3.9 percent [the best in 38 quarters],” Eva Quiroga, an analyst at Deutsche Bank, wrote in a note. “All the while luxury remained strong [plus 15.1 percent, mirroring the strong growth reported by peers] and active cosmetics delivered an impressive plus 20.9 percent [as all the stars seemed to be perfectly aligned].”

Javier Escalante, an analyst at Evercore ISI, in a note referred to L’Oréal’s heavy reinvestment, “which clearly is paying off and in our view, adds to the sustainability of the current momentum — a reflection of a solid global economy.”

He noted, for instance, the group’s “digital transformation allows L’Oréal to plow back an incremental one billion euros in media in 2019 alone, while investing another billion every year in R&D, ensuring product superiority.”