PARIS – L’Oréal’s third-quarter sales gain, bolstered by currency tailwinds, plus business in North America and its Active Cosmetics Division, fell below analysts’ consensus expectations on a like-for-like basis.
The world’s largest beauty company, which released numbers after the close of the bourse here on Thursday, registered sales in the three months ended Sept. 30 of 5.94 billion euros, or $6.63 billion, up 10.1 percent in reported terms.
Currency moves contributed 8.3 percent and acquisitions, 1.2 percent, to L’Oréal sales.
At constant group structure and exchange rates, the company’s revenues advanced 3.7 percent, coming in under analysts’ expectations of 4.3 percent, according to Andrew Wood, an analyst at Sanford C. Bernstein & Co., in a research note.
“Overall, this was somewhat lackluster reporting,” he wrote.
Eva Quiroga, an analyst at UBS, described the quarter in a note as “disappointing.”
Wood highlighted that L’Oréal’s sales growth compared unfavorably to that of its major household and personal-care peers in Europe, Unilever Personal Care, with a 6.2 percent uptick, and Reckitt Benckiser, which achieved a 7 percent rise.
The analysts noted the improved like-for-like gains anticipated by L’Oréal had not materialized, despite an un-demanding third-quarter comparable.
Wood wrote the only regions and divisions not underperforming expectations were North America – whose sales grew 22.5 percent in reported terms and 3.8 percent on a like-for-like basis – and Active Cosmetics – with sales advancing 7.6 percent in reported and 8 percent in like-for-like terms.
Quiroga called the performance of Asia and the luxury category “particularly disappointing.”
L’Oréal characterized the slowdown of its Luxe Division, which posted a gain of 4.2 percent at constant group structure and currency exchange, as “temporary” and resulting from market turbulence in the summer in Asia, where third-quarter sales declined 3.3 percent on a like-for-like basis, in Hong Kong and in travel retail.
Revenue growth in New Markets, meanwhile, decelerated on a constant basis to 4.8 percent in the quarter, impacted negatively by the challenging Brazilian market, turbulence in Asia and the taking over of agents’ contracts in the Middle East.
Also in the quarter, L’Oréal’s sales rose 8.7 percent in its Consumer Products Division, thanks to the strong momentum in makeup from Maybelline, L’Oréal Paris and NYX. Meanwhile, revenues in the Professional Products Division advanced 8.8 percent, and 4.4 percent in Western Europe.
L’Oréal’s sales in the first nine months of this year gained 13.2 percent to 18.76 billion euros, or $20.86 billion. On a like-for-like basis, they were up 3.7 percent.
Dollar figures are converted at average exchange for the period to which they refer.
L’Oréal chairman and chief executive officer Jean-Paul Agon said during a call with analysts on Thursday night that the company is confident for yearend, and confirmed its ambition to outperform the beauty market in 2015 – which is now expected to gain by about 3.5 percent – and to achieve considerable growth in both sales and profits.
Currencies are forecast to bolster L’Oréal’s overall sales by 6.7 percent this year. And the company’s e-commerce revenues are expected to “significantly exceed” 1 billion euros, or $1.1 billion at current exchange.
“Our growth in digital is pretty important,” said Agon. “It’s now 4.6 percent of our sales year-to-date, and it’s growing at 40 percent, which is … a significant portion of the growth.
“But it’s the same for the market,” he continued. “The market is shifting, progressively. It’s not a huge and brutal shift, but it is a definite shift.”