As the results of the cosmetics leader L’Oréal are set to be released at the stock market’s closing this Thursday, the group is concerned that the boost provided by China to its beauty product sales may not be sustainable.
L’Oréal’s skincare and beauty product brands are expected to make a significant contribution to the company’s sales growth in the third quarter, thanks to the presumed acceleration in purchases in China.
At the stock market’s closing on Thursday, the French company will reveal its third-quarter results, with global sales expected to increase by 11.5% organically compared to the previous year, according to a consensus cited by Barclays. Additionally, sales in North Asia, primarily driven by mainland China, have increased by 14.4%.
However, investors will be watchful for any indications suggesting that Chinese consumers are turning to more affordable or locally sourced products.
“Investor nervousness about a slowdown in China appears to be high,” said Iain Simpson, an analyst at Barclays, noting that disappointing reports from LVMH and Estée Lauder have raised concerns about L’Oréal’s outlook.
L’Oréal, which markets a range of brands in China, from Maybelline to the domestic brand Yuesai to the luxury brand Lancôme, held the largest share of the Chinese beauty and personal care products market last year, valued at $78.9 billion.
Its shares have outperformed those of its competitors but still saw a decrease of around 9% over the past six months, compared to a 45% decline for Estee Lauder.
Growth revision
The post-pandemic spending wave is slowing in Europe and the United States, while in China, an uneven recovery has dashed hopes for a strong economic rebound. Last week, LVMH’s third-quarter results showed a slowdown in the growth of its perfumes and cosmetics sales, dropping from 16% in the previous quarter to 9%. This observation has prompted investors to lower their expectations for spending in the high-end market segment.
JPMorgan analysts slightly reduced their annual sales growth forecast for L’Oréal to 12.1% at constant exchange rates, citing a slowdown in North Asia.
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