by Updated April 18 5:00 pm EST
Paris – L’Oréal’s first quarter 2024 sales, driven by its Consumer Products and Dermatology Divisions, Europe and emerging markets, greatly exceeded analysts’ expectations.
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Sales at the French maker of beauty products Lancôme, Kiehl’s, Yves Saint Laurent and Garnier grew 8.3 percent in reported terms to 11.24 billion euros in the three months ended March 31.
On a like-for-like basis, group sales rose 9.4 percent and advanced 8.1 percent adjusted for a one-off gradual impact of 130 million euros before the implementation of new IT systems in North America, L’Oréal said after the end of the year. the stock market in Paris on Thursday. The last increase increased the VisibleAlpha consensus by a gain of 6 percent.
“The Luxe division lost slightly but was offset by continued strength in Consumer Products,” wrote Molly Wylenzek, equity analyst at Jefferies, citing the divisions’ organic growth of 1.8 percent and 11.1 percent, respectively.
She also highlighted how sales in North Asia, down 1.1 per cent, were counterbalanced by attendance in Europe, up 12.6 per cent and posting the fastest growth of all geographies – by 500 basis points against consensus for the Great Department.
“The market continued to be dynamic, and we gained additional share,” said Nicolas Hieronimus, chief executive officer of L’Oréal, during a call with analysts and journalists on Thursday evening. “Each of our emerging markets grew by more than plus 16 percent. The strong momentum in Mexico and Brazil, now our number 10 and 11 markets, has been particularly impressive.”
He also highlighted the similar 12.3 percent growth in North America. That market remained dynamic even though it had slowed down over the previous quarter.
“You have very strong dynamism in the e-commerce market,” Hieronimus said, citing Amazon as an example of a strong booster on the Continent. The one product category that has slowed down the most is mass market makeup. Conversely, premium fragrances and hair care continue to sell well.
“The North American market is slower than it was in 2023, but we still see a lot of opportunities in this part of the world, where we have a good performance, but we can be better on a number of lines or divisions,” said Hieronimus. “Overall, we remain ambitious for the US”
Regarding L’Oréal’s overall performance, Wylenzek wrote: “Amidst weeks of noise around beauty and fears of a market slowdown, this result should prompt a strong positive reaction among the shares.”
David Kimbell, CEO of Ulta Beauty, which only operates in the United States, said earlier this month that the retailer was seeing “category-wide slowdown across price points and segments.”
“L’Oréal is able to move A&P around the world, across categories and demographics, which not only optimizes its global growth, but also makes that organic growth much more resilient,” an analyst wrote Bernstein Bruno Monteyne, Bernstein analyst. “With Daigou being pulled out of the base in Q3, and ‘Easy Coms’ from destocking in H2, we think the markets will have to adjust to doubling organic growth again.”
Hieronimus said the beauty market grew 6 percent in the first quarter.
He called L’Oréal’s Dermatological Beauty division, with organic sales up 21.9 percent and delivered its 15th consecutive quarter of double-digit growth, as well as the Consumer Products division, with gains of 11.1 percent, as all one of the four core brands and. sales of all categories advanced by double digits.
One third of L’Oréal’s growth came from volume and two thirds from value. “Both the price and the mix added to the value component,” Hieronimus said. “The growth in the first quarter was not only strong, but also high quality since it was broadly based across all metrics.”
For the rest of 2024, L’Oréal expects the global beauty market to remain dynamic and continues to predict its growth of around 5 percent for the full year. “Our ambition is to outperform our market and regain share,” he continued. “Price continued to play an important role in the first quarter. I would expect that to gradually decrease as inflation moderates.
“On the other hand, we expect a recovery in travel retail sales from the end of the first half, when the pressure is down on the home in Hainan,” said Hieronimus. The travel retail channel had a negative impact on first quarter sales of approximately 230 basis points, compared to 300 basis points in the fourth quarter of 2023.
The Chinese market is not emerging as quickly as expected, but L’Oréal continues to outperform it. The country has seen sales acceleration for mass-market beauty brands and a slowdown for luxury beauty brands – the opposite of what is happening in the US.
On Douyin, TikTok’s counterpart in mainland China, L’Oréal first started selling its mass brands and has now added many of its luxury brands. “We’re doubling our business on Douyin in the first quarter, so it’s promising for the future,” Hieronimus said.
He said: “Our operating margin will be weighted in the second half as Asian travel retail bounces back after May and Aesop will be on base from September.” The executive called the Australian brand acquired last year “one of our fastest growing luxury brands.”
Aesop teams were integrated and employees were brought on board. “We’re starting to look at the plans for a rollout, but we haven’t done any grand openings — online or in stores,” he said. “The plans were written by current Aesop teams.”
Hieronimus said that as the year progresses, L’Oréal is likely to have more input, and Aesop will benefit from the group’s teams in North Asia and North America.
“It’s a very successful brand, so we’re not trying to fix what isn’t broken, and we continue to stick with their current strategy,” he said.
Analysts have questioned a recent press report suggesting L’Oréal may be taking a minority stake in Amouage, the niche beauty brand based in Oman, and whether it is fair to assume that ultra-premium fragrances are a top priority from M&A side of it. group, following its investments in fragrance brands To Summer and Documents in China.
Hieronimus said he would not comment on the rumors about Amouage. “But what is true is that the main part of the fragrance market is the most dynamic at the moment,” he said. “It’s growing much faster than average. So it’s clearly an area of focus — not just M&A, but including our own brands.
“We have a brand like Maison Margiela, which is flying. We have just repositioned Atelier Köln for China, making it more premium. And within the couture brands, whether it’s YSL or Armani Privé, we’re really pushing this segment,” said Hieronimus. “We recently presented a new premium collection for Valentino. So, premium fragrances are obviously a nice cherry on the fragrance cake, which already has great performance.
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