Weighed down by the Chinese market, the world’s Number One in Beauty recorded sales growth in the third quarter, but below analysts’ forecasts. Its Luxury and Professional Products divisions proved more resilient.
L’Oréal performed less well than expected in the third quarter of 2024, ended September 30, weighed down in particular by the Chinese market. The fact that “growth in the global beauty market is normalizing as the year goes by”, after the post-Covid explosion, was also mentioned by Nicolas Hieronimus, the CEO of the world leader in an interview with AFP.
L’Oréal’s Professional Products and Luxury Goods divisions held up better than Consumer Products and Dermatological Beauty.
Below expectations
The Number One in Beauty thus posted third-quarter sales up 2.8% on a reported basis and +3.4% on a comparable basis to 10.28 billion euros. This performance was below the consensus expectations of Factset and Bloomberg analysts, i.e. 10.52 billion euros and 10.57 billion euros.
For the first nine months, the Group grew by 6% on a reported and comparable basis to 32.4 billion euros.
In the October 23 press release, Nicolas Hieronimus hailed “ solid growth, well distributed between value and volume, despite the multiple turbulences that impacted our third quarter.” The bad surprise of the quarter was the worsening situation in the Middle Kingdom.
The head of L’Oréal admitted that “the situation in the Chinese market has not only not improved over the summer, but is tending to be even more difficult”. But he also said that he and his teams “ believe inthe future of this market ‘ and hope ’that the government stimulus will help improve consumer confidence”.
Decline in North Asia
In the third quarter, North Asia was the only market to post a decline, down -4.4% on a reported basis and -6.5% on a comparable basis. Over the first nine months, sales were down 3.5% on a reported basis and 3% on a comparable basis, to 7.4 billion euros.
Behind this underperformance, L’Oréal cites the situation in mainland China, “where the beauty market, already in decline in the second quarter, continues to contract, due in particular to the low level of consumer confidence”. However, the L’Oréal Luxe division continues to “gain share in the selective beauty market, which remains particularly difficult”.
The news about Travel Retail in the Chinese market, on the other hand, is a mixed bag. While this segment returned to growth in the third quarter, “sales, particularly in Hainan”, the island paradise of local tourism and duty free, “remain under pressure”.
Trends remain solid
On the other hand, on the same continent, mature Japan became the leading foreign beauty group, outperforming a dynamic market“driven by both local consumers and tourists”.
“In Europe and North America, as well as in emerging markets.” Nicolas Hieronimus stresses that “underlyingtrends in the beauty market remain solid”. In the third quarter, sales rose by +5.2% on a reported basis and +5.6% on a comparable basis in Europe. Over the first nine months, the Old Continent thus maintained its strong growth of +9.9% as reported and +9.3% on a comparable basis to 10.7 billion euros. “All categories posted double-digit growth, led by hair care and fragrances”.
“The Group outperformed the market in most countries, particularly in the Spain-Portugal, UK-Ireland and Germany-Austria-Switzerland clusters, as well as in a number of medium-sized countries,” the press release points out.
North America is also proving resilient, thanks to both “an expanded presence across all distribution channels and ongoing value creation”. In the third quarter, sales grew by 4.3% on a reported basis and 5.2% on a comparable basis. From January to September, sales in North America rose by +7.1% (reported) and +6.9% (comparable) to 8.9 billion euros.
Dynamic emerging markets
Finally, the Sapmena-SSA region (South Asia, Pacific, Middle East, Africa) and Latin America proved to be the most dynamic zones in the third quarter as in the first nine months. Their contribution to Group sales is, admittedly, more modest than that of mature countries.
Sales in the SAPMENA-SSA zone soared by +7.9% (reported) and 8% (comparable) in the third quarter, and by +12.1% and 12.6% to 2.8 billion euros over the first nine months.
While sales in Latin America grew by just 0.7% (reported) but +8.7% (comparable) in the third quarter, and by +10.3% and +12.3% to 2.5 billion euros in the first nine months.
L’Oréal Luxe in good shape
Among the divisions, L’Oréal Luxe showed the most remarkable dynamism, with the Professional Products division.
Sales for the Luxury division rose by 8% on a reported basis and +5.8% on a comparable basis in the third quarter, and by +5.3% and +3.4% to 3.8 billion euros in the first nine months.
“In North America and in emerging markets, the Division maintained double-digit growth and remained very dynamic in Europe. In mainland China and Travel Retail Asia, the Division outperforms a beauty market still in decline, and continues to strengthen its leadership. In Japan, L’Oréal Luxe continues its double-digit growth in a market that remains dynamic.”
In the Fragrance market, where L’Oréal Luxe is Number One, double-digit growth is exceptional. “All segments contributed to growth: Couture brands continued their spectacular performance, supported by their flagship products, in particular Yves Saint Laurent Libre, Valentino Born in Roma and Prada Paradoxe. Super-premium collections such as Maison Margiela Replica and Armani Privé continue to make strong progress, as do the Azzaro and Victor&Rolf brands, which are making a major contribution to growth”.
In make-up, L’Oréal Luxe reports “a very solid comeback performance by Yves Saint Laurent, with double-digit growth in all regions”, while “Prada continues its ambitious expansion” and “Valentino is enjoying strong growth with the launch of its latest innovation, Spike Valentino”.
Consumer Products and Dermatological Beauty at half-mast
Professional Products sales rose by 4.8% on a reported basis and +6.1% on a comparable basis in the third quarter, and by +4.8% and +5.8% to 3.6 billion euros in the first nine months.
Consumer Products fared less well, with a drop of -0.6% (reported) and a rise of +1.4% in the third quarter, and an increase of +5.3% (reported) and +6.4% (comparable) to 12 billion euros over the first nine months.
Dermatological Beauty also posted a slowdown in the third quarter (-1.6% (reported) and +0.8% (comparable)). Over the first nine months, the division nevertheless continued to grow, by +9.8% and +11.3% to 5.3 billion euros.
Confident in the future
Despite this less pleasing third quarter, Jérôme Hieronimus stressed that “overall, the beauty market continues to grow, including in units, demonstrating once again its resilience and long-term potential”, and that his Group “continues to outperform ” thanks to its power of innovation, the agility of its teams and its ability to reallocate resources to new growth drivers.
And despite a “context still marked by economic and geopolitical uncertainties”, the Group says it is “confident of achieving another year of growth in sales and operating income”. And it is preparing its “own beauty stimulus for 2025. ”
On the other hand, the group would surely have done without another less pleasant simulis. It has estimated at “just over 250 million euros” the exceptional contribution introduced in the draft 2025 budget, which it will have to pay. This tax, aimed at groups with sales in excess of one billion euros, is intended to help offset the French public deficit.
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Read also > L’Oréal posts outstanding results for the first half of 2024
Photos à la Une : © Lancôme
