PARIS — L’Oréal’s sales accelerated in the fourth quarter of 2020, bolstered by the group’s Active Cosmetics division and emerging markets, which helped the group to widely beat analysts’ expectations.
“It’s a nice send-off for Jean-Paul Agon, as fourth-quarter 2020 organic top-line growth of 4.8 percent and full-year 2020 operating margins of 18.6 percent handsomely beat consensus — of 2.1 percent and 18 percent [on a like-for-like basis], respectively — making for a solid end to a very challenging year,” said Eva Quiroga, managing director of Bank of America.
Agon, as previously reported, on May 1 will pass the chief executive officer title at L’Oréal to Nicolas Hieronimus and remain on as company chairman.
The maker of Lancôme, Kiehl’s and Garnier products on Thursday night, after the close of the Paris bourse, said sales in the three months ended Dec. 31 were 7.88 billion euros, flat in reported terms.
In the period, the company’s Active Cosmetics division’s revenues increased 20.4 percent on a reported basis and 30.7 percent in constant terms.
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The Professional Products division posted 6.5 percent like-for-like gains, despite renewed salon closures, and the L’Oréal Luxe division returned to positive growth, of 4.4 percent, on a constant basis, “confirming clear outperformance vis-à-vis the listed peers that have already reported,” Quiroga said.
Meanwhile, sales at the Consumer Products division slowed, dipping 0.4 percent in like-for-like terms.
L’Oréal’s sales in the Asia Pacific region’s sales grew 16.6 percent on a constant basis, up 14 points versus in the third quarter.
“China was the [as expected] outlier in [the fourth quarter], accelerated to [plus] 27 percent like-for-like from plus 20.8 percent like-for-like in [the third quarter] and plus 17.5 percent like-for-like in 1H’20, reflecting stimulus, key shopping events and repatriation of travel-retail spend,” wrote Stephanie Wissink, an analyst at Jeffries, in a note.
She highlighted that all regions’ growth trends improved quarter over quarter.
“L’Oréal has traversed this crisis in the best possible condition and has even grown stronger,” Agon said in a statement. “As anticipated and announced, the group returned to growth in the second half, with a fourth quarter in acceleration, up 4.8 percent, and won significant market shares.”
For full-year 2020, L’Oréal’s sales reached 27.99 billion euros, representing a 6.3 percent decline in reported terms and a 4.1 percent dip on a like-for-like basis.
Net profits were down 5 percent to 3.57 billion euros, and operating profit came in at 18.6 percent of sales.
“Thanks to its strength in digital and e-commerce, which has again increased considerably during this crisis, L’Oréal has been able to maintain a close relationship with all its consumers and compensate to a large extent for the closure of points of sale,” Agon said. “As a result, sales achieved in e-commerce rose sharply by 62 percent [on a like-for-like basis], across all divisions and all regions, reaching a record level of 26.6 percent of the total group sales for the year.”
In a note, Bruno Monteyne, an analyst at AB Bernstein, called the results overall “another set of beautiful L’Oréal numbers.”
Monteyne highlighted Agon’s saying L’Oréal is “confident in our capacity to outperform the market again this year.”
“Given the extraordinary market share performance in recent years, to further accelerate ahead of a fast-growing market is reassuring for our view that the company is a 7 percent organic growth stock,” Monteyne wrote.
“To us the strength of performance, amid lockdowns weighing on Europe, is evidence that L’Oréal is firing on all cylinders, with its edge on digital driving market share gains and profit growth, and setting the company on the right footpath as Jean-Paul Agon passes the baton to Nicolas Hieronimus as CEO in May,” wrote Céline Pannuti, an analyst at J.P. Morgan Cazenove, in a note.
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