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This piece has been updated.
L’Oréal said on Thursday that second-quarter sales were up 13.7 per cent like-to-like at €10.19 billion, narrowly beating analyst expectations.
By category, skincare led the charge, with sales up 27.3 per cent like-for-like (down from last quarter’s 30.6 per cent growth). The category was led by La Roche-Posay, followed by Cerave, Vichy and Skinceuticals. This was followed by consumer products, which includes large brands Maybelline New York, Nyx and L’Oréal Paris (15.4 per cent); luxe, comprised of higher-end brands such as Yves Saint Laurent, Prada and Valentino (8.6 per cent); and professional products, made up for haircare brands including Kérastase and L’Oréal Professionnel (7.7 per cent).
“In a beauty market that is more dynamic than ever, L’Oréal delivered a remarkable performance and further strengthened its global leadership in the first half,” CEO L’Oréal CEO Nicolas Hieronimus said in a statement. “In keeping with our virtuous circle, we improved our profitability, all while significantly increasing investment in our brands. At the same time, in line with our dual ambition of economic and corporate performance, we continued to invest in the transition towards a more sustainable operating model that will ensure long-term value creation.”
Sales in China began to bounce back after sluggish sales in the first quarter, with sales in North Asia up 5.9 per cent like-for-like. After slower sales in North Asia (primarily China) in the first quarter, L’Oréal began to bounce back in the region, with sales up 5.9 per cent like-for-like. Last quarter, sales were up 1.9 per cent. Hieronimus told analysts at the time he was confident about China’s rebound. “I was in China three weeks ago, and I was very impressed with the normalisation,” he said.
During Friday’s earnings call, the CEO identified China’s “remarkable bounce-back” as a key takeaway for the quarter. “We are seeing clear signs that consumption is recovering and consumer confidence is improving,” he told analysts. Despite the uptick, the Chinese growth did not meet analyst expectations of 9.5 per cent, suggesting a full turnaround will take time. “The recovery has been a bit longer than expected,” Hieronimus said. “But, let’s be honest. Three years of Covid will take a bit of time to be fully digested.”
North America took a hit with 9.7 per cent growth, down from last quarter’s 16.6 per cent. Amid an ongoing pullback in consumer spending as inflation continues to impact consumers, luxury brands across the board (including Prada, also today) have felt the pinch in the region. Hieronimus acknowledged these economic headwinds, but says he doesn’t see a slowdown in the region. “In the USA, it’s very dynamic,” he said on Friday. “When you’ve got high interest rates, people tend to be a bit more shy on more real estate, cars, expensive items. Typically, this benefits beauty.”
Latin America, on the other hand, exhibited strong growth at 24.9 per cent. Europe and Sapmena (South Asia Pacific Middle East North Africa Sub Saharan Africa) followed suit at 20.8 and 20.7 per cent, respectively.
L’Oréal expects the Aesop acquisition to be completed in the second half of the year. “Our brand portfolio will soon be enriched by Aesop,” Hieronimus said on Friday. “In the global luxury market, Aesop is uniquely positioned to stand out with its sensorial product, distinct packaging and unique retail philosophy.”
The CEO is confident about L’Oréal’s momentum for the second half of the year. The reasons are fivefold, he told analysts: consumer demand for beauty remains solid; the company’s 36 international brands have strong innovation plans for the second half of the holiday season; L’Oréal will continue to enforce its digital leadership (including exploring generative AI and metaverse opportunities); the company will stay true to its R&I roots; and the L’Oréal team will continue to drive strong performance.
“In an economic context that is still uncertain, we remain ambitious for the future, optimistic about the outlook for the beauty market, and confident in our ability to keep outperforming the market and achieve in 2023 another year of growth in sales and profits,” Hieronimus said.
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