L’Oréal’s Share Price Falls 4.4 Percent

This story first appeared in the July 12, 2004 issue of WWD. Subscribe Today.

PARIS — L’Oréal’s share price fell 4.4 percent on the Paris Bourse Friday in response to what many analysts considered weak second-quarter sales announced the previous day. As reported, the French beauty giant said its sales grew 6.1 percent in the period, or 7.5 percent on a like-for-like basis.

UBS, which had forecast L’Oréal’s sales would increase by 9.1 percent in the quarter, downgraded its rating from Buy 1 to Neutral 1 and lowered its target share price to 71 euros, or $88, from 75 euros, or $93. Dollar figures are converted at current exchange.

“As much as we continue to believe in the strength of the long-term business model, we see few triggers for out-performance in the next couple of months,” UBS said in a research note.

“L’Oréal’s second-quarter [like-for-like] sales were disappointing,” said a Paris-based analyst, noting that, in the three-month period, L’Oréal rang up sales of 3.66 billion euros, or $4.41 billion, at average exchange for the period.

Goldman Sachs, which had forecast second-quarter sales growth of 10.5 percent, said in a research note: “The group’s performance in Western Europe and at its Consumer Products division struck us as particularly weak.”

Analysts also said L’Oréal’s goal to ring up full-year sales growth of more than 7.1 percent will be a challenge.

“For sales growth in the full year to be in excess of 7.1 percent, it will have to amount to plus-8 percent in the second half of the year, implying a further acceleration over the first quarters of the year,” UBS said. “We believe that this is quite an ambitious target given that year-on-year comparisons are getting increasingly difficult.”

As reported, L’Oréal announced first-half sales of 7.4 billion euros, or $9.09 billion, up 3.6 percent year-on-year. On a like-for-like basis, sales would have been up 6.4 percent. The firm also confirmed its aim to deliver full-year double-digit profit growth for the 20th consecutive year.

L’Oréal stock closed at 61.75 euros, or $76.62, Friday.
— Brid Costello

Lycogel Is Building on Its Foundation

NEW YORK — What do a loaf of bread and your face have in common? They’re both better with yeast.

But while the oxygen that yeast attracts makes bread rise, it has the opposite effect on skin. A Newport Beach, Calif.- based company has created a patented yeast makeup based on that principle.

The makeup is designed to bring 300 percent more oxygen to the skin, and this is thought to help decrease swelling and to accelerate healing caused by chemical peels and plastic surgery. And with a 40 percent increase in cosmetic surgery procedures each year, it is no surprise that the products are flying off shelves.

LycoScience, Lycogel’s parent company, maintains that its product will heal the skin 50 percent faster, while concealing redness and irritation at the same time.

Barry Knapp, a former spa owner and makeup artist, began the process of developing Lycogel five years ago after realizing the need for a sensitive yet effective post-procedure makeup. At that time, estheticians had to tell customers to hold off on using makeup for a few days after peels because none of the makeup available on the market was sufficiently benign. “I said to myself, if I could come up with a makeup that does provide heavy coverage and still breathes as if you didn’t have any makeup on, then I would have something major” Knapp said.

The product debuted in January, and is currently in 20 hospitals, 55 spas, and 135 doctors offices — and distribution is expanding rapidly. Executives at Lycogel decided early to limit distribution to doctors and spas, except in countries, such as Mexico, where doctors are legally prohibited from selling products in their offices.

In fact, Lycogel has just inked a deal with Mexican distributor Spite that puts the product in 3,745 Mexican doors: 3,000 Sanborn drugstores and 745 private pharmacies. Two more U.S. deals were just signed to sell the line in, ultimately, 200 Advanced Laser Clinics and 100 Renew Dermatology Clinics.

Lycogel does not sell to department stores.Currently the line consists of four core products: Camouflage Foundation, Concealer, Moisturizer Spray, and Skin Primer. Prices range from $37 to $110. Acne and body care collections will launch in September and January, respectively. Also coming soon to the Lycogel line will be a lip conditioner featuring a silica base, and the yeast compound.

For people who opt for a milder formula, LycoScience has developed Affirm, a similar line that will feature the yeast extract in lower concentrations. Fred Segal Los Angeles and Zitomer, New York will have three-month exclusives on the new line starting in early August. Sephora is also in negotiations to carry the new brand.

The brand is advertised in medical and trade magazines. According to Knapp, sales have been doubling each month,with the June volume hitting $265,000. Plans call for achieving an annual sales volume of $50 million by 2007, the company’s third year.
— Allison Altmann