PARIS — L’Oréal’s growth curve continued to accelerate in the third quarter, significantly outperforming analysts’ estimates. Sales were boosted notably by the growth of its prestige, especially fragrance, and Active Cosmetics divisions, and by strong performance in the U.S. that counterbalanced relatively weaker gains in China, which suffered turbulence due to new lockdowns over the summer.
The world’s largest beauty group reported revenues of 8 billion euros in the three months ended Sept. 30, up 13.6 percent on the same period a year ago in reported terms and gaining 13.1 percent on a like-for-like basis. This contrasts with an analyst consensus for 8.9 percent like-for-like growth for the period.
Compared with the same period in 2019, sale gained 14.9 percent in like-for-like terms for the maker of Lancôme, Garnier and Kiehl’s products.
“The good news is that the growth is broad based (regionally and divisionally),” wrote Bernstein analyst Bruno Monteyne in a research note. “Standout performance is for the USA, growing at +23 percent this year; is L’Oréal making the USA an equal growth engine like China?” he asked.
During a conference call with investors and analysts, L’Oréal said it has been significantly outperforming the global beauty market in all categories.
For the first nine months of 2021, the company said its fragrance sales were up 40 percent versus an overall market gain of 19 percent. For skin care, it saw 20 percent gains compared with the market’s 9 percent, and in makeup, that figure stood at 15 percent versus 9 percent overall. In hair care and color, on a market that grew 7 percent, L’Oréal said it saw sales up around 12 percent.
By way of explanation, chief executive officer Nicolas Hieronimus said, “In the middle of the crisis, when a lot of our competitors were folding their innovation plans, reducing their spend…we were going full steam.”
He continued, “During the crisis, on top of continuing to invest, we have reorganized and rebalanced some of our activities,” citing for example the restructuring of brick-and-mortar distribution, closing around 1,000 smaller prestige doors and reallocating resources for the Professional Products division, both in the U.S., as having yielded results.
“I remain confident in our ability to outperform the market,” Hieronimus said. “We want to outperform as much as possible.”
He did warn, however, that growth rates would stabilize in the months ahead. “We are now more trying to maintain our rhythm than continue to accelerate.”
Gains have also been fueled by the greater weight of e-commerce, which accounted for 26.6 percent of L’Oréal’s sales in the first nine months of 2021. Online sales, which tend to favor higher-priced products, have continued to grow even in markets where brick-and-mortar retail has reopened fully, L’Oréal said. “E-commerce plays globally in favor of valorization,” Hieronimus said. The company’s sales gains this year have stemmed one third from volume increases and two thirds from value gains, he said.
Addressing the market’s ongoing supply chain issues, L’Oréal said it would be increasing prices next year for items from the Consumer Products division, which is more vulnerable to fluctuations in raw-materials costs, due to inflationary pressure.
Broken down by division, L’Oréal Luxe saw its sales up 21.1 percent in reported terms to 3.12 billion euros, while Consumer Products — an activity that has lagged in the recent past due to its dependence on the makeup category — gained 4.1 percent to 2.98 billion euros. Revenues for the Active Cosmetics division were up 29 percent to 951.3 million euros, while Professional Products grew 9.7 percent to 945.6 million euros.
L’Oréal’s sales in North America grew 19.2 percent in reported terms and 22.9 percent on a like-for-like basis during the third quarter. Its e-commerce sales in the region for the first nine months of the year were more than double those of the same period in 2019, and brick-and-mortar has returned to growth. Active Cosmetics has doubled its sales in the region over the past two years, in large part due to a boom in demand for CeraVe products, for which demand continues to exceed supply, fueled in part by the brand’s success on TikTok.
While growth slowed in China, with lockdowns in more than 40 cities during the summer meaning stores were closed and people were unable to travel, this did little to dint L’Oréal’s business. Sales in the North Asia region were up 17.3 percent in reported terms and 13.2 percent on a like-for-like basis in the third quarter, to 2.17 billion euros. This compared with like-for-like growth of 27.3 percent for the region in the first half.
While travel-retail hub Hainan was also hit, the company said, it continues to be an area of focus, and is drawing new consumers to the company’s products.
“It’s not cannibalizing the domestic sales of L’Oréal China, it’s replacing sales that were done outside China,” Hieronimus said. “Overall, as the middle classes are increasing and their appetite for beauty is not satisfied, the size of the Chinese cake continues to increase regularly.”
Hainan is recruiting “consumers that probably would not have bought our products in traditional department stores in China, who are looking for more affordable prices, people from tier-three and tier-four cities where our market share is lower than the one we have in Shanghai and Beijing,” Hieronimus said. “Overall, it’s a good recruitment place, and it’s not hurting our Chinese business, where we continue to grow.”
In Europe, L’Oréal saw sales of 2.57 billion euros for the quarter, up 8.3 percent on a reported basis and 7.5 percent in like-for-like terms. The European beauty market returned close to pre-pandemic levels in the three months to September, the company observed, with several markets seeing a rebound in makeup and fragrance.
In Latin America, there were also strong gains, with sales up 21.3 percent in reported terms or 15.7 percent like-for-like, to 495.1 million euros, with most countries in the region seeing gains on 2019 levels, and a strong performance from hair care, skin care and fragrances. CeraVe in particular more than doubled its sales in the zone, L’Oréal said.
It was only the SAPMENA-SSA (South Asia Pacific, Middle East, North Africa and Sub-Saharan Africa) region that remained static, with reported revenues for the quarter down 0.1 percent to 556.8 million euros, although revenues saw a return to pre-COVID-19 levels on a like-for-like basis, L’Oréal said. While the firm saw a recovery in India and a strong dynamic in the Middle East and North Africa, new pandemic-related restrictions in the Pacific and Southeast Asia weighed on overall results for the region, and the situation in these markets remains complex.
For the first nine months of 2021, L’Oréal’s total sales stood at 23.19 billion euros, up 15.3 percent based on reported figures and 18 percent on a like-for-like basis.