PARIS — The stock market smiled on L’Oréal on Friday, sending its shares up 2.4 percent a day after the company released financials that beat analysts’ forecasts.
As reported, the beauty giant’s fourth-quarter 2015 sales of 6.5 billion euros, or $7.11 billion, gained 4.2 percent on a like-for-like basis versus analysts’ consensus expectations of 3.6 percent and marked its highest quarterly growth last year.
For 2015, L’Oréal’s revenues rose 12.1 percent in reported and 3.9 percent in comparable terms to 25.26 billion euros, or $28.02 billion.
Meanwhile, the global beauty market last year grew an estimated 3.5 percent to 4 percent, according to Jean-Paul Agon, L’Oréal chairman and chief executive officer, who addressed financial analysts and journalists at the company’s headquarters in the Paris suburb of Clichy on Friday morning.
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He said the industry should continue gaining despite a volatile and unpredictable economic context.
“At this point of the year, we believe as we did one year ago that the market should be around plus 3.5 percent,” said Agon, reiterating that L’Oréal expects to outperform the market again in 2016.
He predicted a progressive acceleration of growth since in the first quarter the company will face unfavorable comparables in Brazil, Hong Kong and travel retail, which were rather strong in the same time frame last year. Agon said new major product initiatives, especially in the Consumer Products Division, will positively impact L’Oréal sales starting in the second quarter.
The Consumer Products Division, which underperformed in 2015, is expected to return to market share gains and stronger growth this year, the executive said.
The division, L’Oréal’s largest, last year posted sales of 11.84 billion euros, or $13.14 billion, up 10 percent in reported terms and 2.5 percent on a like-for-like basis.
Dollar figures have been converted at average exchange for the period to which they refer.
Marc Menesguen, president of the division, said it “underperformed in a well-oriented market, which was estimated to have grown at close to 4 percent.”
By region, the division outperformed in Eastern Europe and the Africa and Middle East zone, and grew on par in North America.
“[It] slightly underperformed the market in other parts of the world with increased competition from local brands, who have been able to seize great trends faster than international players,” said Menesguen. “In order to outperform the market again, from this year onwards, we worked hard last year to identify the reasons behind the numbers, and to make sure we position the division for accelerated growth in 2016 and beyond.”
That strategy involves four main drivers: Repositioning the division’s core brands, including giving Maybelline a new communication platform; leveraging global beauty trends, particularly the makeup boom and the focus on naturals in hair care; maximizing innovation, such as the global launch of L’Oréal Paris’ Nude Magic Cushion foundation, and amplifying the Consumer Products Division’s digital drive, according to Menesguen.
Throughout the L’Oréal meeting there was an emphasis on the importance of digital overall.
“In 2015 we made great and fast progress in the digital transformation of our company,” said Agon.
L’Oréal’s e-commerce sales reached 1.3 billion euros, or $1.44 billion, up 38 percent on-year. Accounting for more than 5 percent of the company’s total revenues, they generated the same sales level as L’Oréal’s fifth-largest country, Germany.
Some 25 percent of the company’s total media spend went toward digital, and in the makeup category that threshold reached 50 percent.
L’Oréal plans to up its digital quotient even more with the proposed appointment of Eileen Naughton, Google’s vice president and managing director for the U.K. and Ireland, to L’Oréal’s board of directors. The nomination, among others, will be put to a vote on April 20 at the company’s annual general meeting of shareholders.
“It’s clear that digital is really for the beauty market — and for us in particular — opening new avenues of growth that are absolutely amazing,” said Agon.