L'Oréal's headquarters

PARIS — L’Oréal’s fourth-quarter and full-year sales beat analysts’ expectations, and helped allay worries that a slowdown of China’s economy is dampening the appetite for luxury beauty products.

L’Oréal’s sales in the three months ended Dec. 31 gained 8.6 percent to 7.07 billion euros. On a like-for-like basis, group sales advanced 7.7 percent, the maker of Lancôme, Garnier and Maybelline products said Thursday evening, after the close of the Paris Bourse.

Financial analysts had predicted 6.3 percent like-for-like sales gains in the quarter.

By division in comparable terms, sales advanced 14.7 percent for Luxe, 11.9 percent for Active Cosmetics, 3.5 percent for Professional Products and 2.8 percent for Consumer Products.

The results were “a fitting end to an impressive year,” according to Eva Quiroga, an analyst at Deutsche Bank.

She said the fourth-quarter like-for-like growth was a strong beat not just in absolute terms but also in terms of quality, since it wasn’t only fueled by L’Oréal Luxe but by better-than-expected performances in the company’s other three divisions as well.

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“The [Consumer Products Division] continues to be softer than we would like it to be,” she added.

New Markets — including China — powered ahead in the quarter, with sales up 16.5 percent, while Western Europe’s sales were back in the black, registering revenues up 1.3 percent in reported terms and 0.9 percent on a like-for-like basis.

“North America finished on a somewhat softer than expected note [up 2.2 percent],” Quiroga said.

Andrew Wood, an analyst at Sanford C. Bernstein & Co. LLC, in a note said L’Oréal’s second-half operating margin, up 30 basis points, was above the investment manager’s estimate of 25 basis points but below the consensus of 45 basis points. Second-half earnings-per-share growth of 8 percent was slightly under consensus, of 9 percent, and well below Bernstein’s estimated 13 percent.

“L’Oréal is still not translating outstanding sales growth into outstanding margin/EPS growth,” he wrote.

For full-year 2018, the company’s net profit grew 8.8 percent to 3.9 billion euros, while earnings per share were 7.08 euros, up 6.5 percent. Sales in the period rose 3.5 percent on a reported basis and 7.1 percent in like-for-like terms to 26.94 billion euros.

Analysts had expected a 6.7 percent revenue gain in the period.

Jean-Paul Agon, L’Oréal’s chairman and chief executive officer, in a statement said that in a beauty market that had significantly accelerated in 2018, the company marked its best annual growth since 2007.

He noted all group divisions are growing, especially the Luxe Division, in which Lancôme’s sales surpassed the 3 billion euro mark, and the Active Cosmetics Division, which reached its highest growth level in more than a decade. Both of the branches posted double-digit like-for-like sales gains, of 14.4 percent and 11.9 percent, respectively.

Sales at L’Oréal’s largest division, Consumer Products, were up 2.5 percent on a constant basis.

“The Professional Products Division, meanwhile, recorded a modest increase in sales, thanks to a significant acceleration in the final quarter,” said Agon, referring to the period in which the division posted a 3.1 percent rise.

Geographic performances for the group were mixed, with the star being New Markets, which registered their best sales gain since 2007, thanks to the uptick in the Asia-Pacific region. Sales there were driven by China and advanced 20.4 percent to 7.41 billion euros, overtaking North America, which generated sales of 7.23 billion euros, down 1.6 percent.

Sales in Western Europe declined 0.7 percent to 8.07 billion euros.

Agon said that in an economic context that remains volatile and uncertain, the company is confident “we can pursue our corporate social responsibility commitments, outperform the beauty market in 2019, and achieve another year of growth in both sales and profits.”

L’Oréal’s results were released two days after those of the Estée Lauder Cos. Inc., which said China remains particularly strong for its business. LVMH Moët Hennessy Louis Vuitton, which published numbers on Jan. 29, also painted a picture of resilience, offering reassurance to investors concerned about Chinese luxury consumption.

These figures come amid expectations of a slowdown in Chinese consumption, and as trade tensions between China and the U.S. cast a cloud over the global economy.

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