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L’Oréal Returns to Pre-COVID-19 Growth in H1

The world’s largest beauty company’s sales accelerated in the second quarter of this year, bolstered by all divisions and geographic zones.

PARIS — L’Oréal returned to its pre-COVID-19 growth rate in the first half of 2021, following an acceleration of sales in the second quarter of the year that beat analysts’ expectations.

The maker of Lancôme, Kiehl’s and L’Oréal Paris products registered a 29.6 percent sales increase in reported terms to 7.58 billion euros. On a like-for-like basis, sales rose 33.5 percent.

“By the end of June, the group posted a very strong increase and returned to its pre-COVID-19 growth rate, up 6.6 percent like-for-like compared to the first half of 2019, with an acceleration of 8.4 percent in the second quarter compared to 2019,” said Nicolas Hieronimus, chief executive officer of L’Oréal, in a statement released Thursday after the close of the Paris Bourse.

L’Oréal notched up market-share gains in all of its divisions and geographic zones.

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“The Professional Products Division has successfully transformed its business model and achieved record performance. The Consumer Products Division recorded double-digit growth in the second quarter, thanks in particular to the recovery of makeup,” Hieronimus summarized. “L’Oréal Luxe also saw a sharp rise in fragrance sales and significantly outperformed the market. The Active Cosmetics Division achieved record growth, demonstrating that its brand portfolio is perfectly adapted to consumers’ health and beauty aspirations.”

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“Second-quarter like-for-like growth of 33.5 percent came in ahead of consensus (up 30.0 percent) with three out of the four divisions beating handsomely on a year-on-year basis (led by Professional Products, up 66 percent) and — more importantly, a two-year stack (led by continued strong growth in Active Cosmetics, up 55 percent, followed by Professional, up 13 percent, and Luxe, up 10 percent),” wrote Eva Quiroga, managing director at Bank of America, in a note.

The one division that fell short of expectations was Consumer Products, which was up 14 percent year-on-year and down 3 percent on a two-year stack.

“While the acceleration in growth was thanks ‘in particular to the recovery of makeup,’ the market may have gotten a little ahead of itself on the magnitude/timing of the makeup recovery,” wrote Quiroga.

Each of L’Oréal’s geographic zones registered double-digit sales gains.

“North Asia continued to perform well, still driven by mainland China, where L’Oréal continues to strengthen its undisputed leadership, while North America saw a return to growth with tremendous acceleration in the second quarter,” Hieronimus said, referring to the 44.7 percent like-for-like gain.

“In Europe, L’Oréal significantly outperformed the market, which is starting to recover gradually; all countries in this zone are growing, led by the United Kingdom, France and Russia. The group performed well in SAPMENA-SSA [or South Asia Pacific, Middle East, North Africa and Sub-Saharan Africa] and in Latin America, with a marked progression in Brazil,” he said.

In the six months ended June 30, L’Oréal’s operating profit was 2.99 billion euros, up 26.8 percent year-on-year. The group’s operating margin equaled 19.7 percent, in line with analysts’ expectations. However, they highlighted that the margin was ahead 170 basis points following 210 basis points of incremental advertising and promotion expenses, which came out as 32.6 percent of sales — a historical high.

L’Oréal’s sales in the first half were 15.2 billion euros, up 16.2 percent in reported terms and 20.7 percent on a like-for-like basis.

In the period, e-commerce represented 27.3 percent of the company’s total sales. L’Oréal’s travel retail business bounced back, thanks to a slight recovery in international travel and strong business in Hainan, the island in China that’s become a tax-free shopping mecca.

Hieronimus, who will lead a virtual conference with analysts and journalists on Friday morning to discuss the results, said L’Oréal is well-positioned to continue to grow at its pre-crisis pace.

“We are more than confident than ever in our ability to outperform the market and achieve a year of growth in both sales and results,” he said.


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