Updated as of April 18, 5pm EST
PARIS — L’Oréal’s Consumer Products and Dermatological Beauty Divisions’ sales in the first quarter of 2024 strongly exceeded analysts’ expectations, driven by Europe and emerging markets.
More from WWD
Sales at the French maker of Lancôme, Kiehl’s, Yves Saint Laurent and Garnier beauty products rose 8.3 percent to 11.24 billion euros, according to figures reported in the three months ending March 31.
Group sales rose 9.4 percent on a like-for-like basis and 8.1 percent adjusted to take into account a one-off phased impact of 130 million euros before the implementation of new IT systems in North America, L’Oréal said in a statement after the closing. Paris stock exchange on Thursday. The increase exceeded VisibleAlpha’s earnings expectation of 6 percent.
“The Luxe division lost some but more than made up for it with continued strength in Consumer Products,” Jefferies stock analyst Molly Wylenzek wrote, citing the divisions’ organic growth of 1.8 percent and 11.1 percent, respectively.
It also highlighted how sales in North Asia, down 1.1 percent, were offset by engagement in Europe, up 12.6 percent, posting the fastest growth of all geographies with a 500 basis point increase versus consensus for the Continent.
“The market continued to be dynamic and we gained more share,” L’Oréal CEO Nicolas Hieronimus said in a call with analysts and journalists Thursday evening. “Each of our emerging markets grew by over 16 percent plus. “The strong momentum in Mexico and Brazil, now our 10th and 11th markets, was particularly impressive.”
It also highlighted comparable growth of 12.3 percent in North America. This market has remained dynamic, although it has slowed in previous quarters.
“You have a very strong dynamism in the e-commerce market,” Hieronimus said, citing Amazon as an example of a strong booster on the Continent. The product category that slowed the most was mass market makeup. In contrast, premium perfume and hair care continue to sell well.
“The North American market is slower than in 2023, but we continue to see many opportunities in this part of the world where we have a good performance but can do better in a certain number of lines or divisions,” Hieronimus said. “In general, we are assertive for the USA”
“Amidst a noisy few weeks for beauty amid fears of a market slowdown, this result should lead to a strong positive stock reaction,” Wylenzek wrote of L’Oréal’s overall performance.
David Kimbell, CEO of U.S.-only Ulta Beauty, said earlier this month that the retailer was seeing “an overall category slowdown across price points and segments.”
“L’Oréal is able to move A&P globally across categories and demographics, thereby not only optimizing its global growth but also making organic growth much more resilient,” wrote Bernstein analyst Bruno Monteyne, a Bernstein analyst. “We think markets should get used to double-digit organic growth again, with the ‘easy make-ups’ of Daigou’s base withdrawal in the third quarter and destocking in the second half.”
Hieronimus said that the beauty market grew by 6 percent in the first quarter.
He called out L’Oréal’s Dermatological Beauty division, whose organic sales increased 21.9 percent and posted double-digit growth for the 15th consecutive quarter, as well as its Consumer Products division, which gained 11.1 percent as each of its four core brands. Sales of all categories increased by double digits.
One-third of L’Oréal’s growth came from volume and two-thirds from value. “Price and mix contributed to the value component,” Hieronimus said. “Growth in the first quarter was not only strong but also of high quality, being broad-based across all measures.”
L’Oréal expects the global beauty market to remain dynamic throughout the remainder of 2024, forecasting growth of around 5 percent for the full year. “Our goal is to exceed our market and regain share,” he continued. “Price continued to play an important role in the first quarter. I expect this to gradually decrease as inflation declines.
“On the other hand, we expect a recovery in travel retail sales from the end of the first half, when we overcome the daigous restriction in Hainan,” Hieronimus said. The travel-retail channel negatively impacted first-quarter sales by approximately 230 basis points, compared to 300 basis points in the fourth quarter of 2023.
The Chinese market is not recovering as quickly as expected, but L’Oréal continues to outperform it. The country has seen an increase in sales of mass beauty brands and a slowdown in sales of luxury beauty brands; It’s the exact opposite of what’s happening in the US.
L’Oréal first started selling its mass brands on Douyin, TikTok’s mainland Chinese equivalent, and has now added many of its luxury brands. “We doubled our business on Douyin in the first quarter, which is promising for the future,” Hieronimus said.
He added: “Our operating margin will be second-half dominant as travel retail Asia recovers from May and Aesop is at the bottom from September.” The executive described the Australian brand, acquired last year, as “one of our best growing brands in luxury.”
Aesop’s teams were integrated and employees were included. “We started looking at rollout plans, but we haven’t had a grand opening, whether online or in stores,” he said. “Plans were written by Aesop’s existing teams.”
Hieronimus said L’Oréal will likely have more input as the year progresses, and Aesop will benefit from the group’s teams in North Asia and North America.
“It’s a very successful brand, so we don’t want to fix what isn’t broken and continue to play along with their current strategy,” he said.
One analyst asked about a recent press report suggesting that L’Oréal could take a minority stake in Oman-based niche beauty brand Amouage, and whether it was fair to assume that ultra-premium fragrance was a top priority in terms of M&A. following the group’s investments in the To Summer and Documents fragrance brands in China.
Hieronimus said he would not comment on rumors about Amouage. “But the truth is that the premium part of the perfume market is the most dynamic right now,” he said. “It is growing much faster than average. So this is clearly an area of focus; not just mergers and acquisitions, but also our own brands.
“We have a flying brand like Maison Margiela. We repositioned Atelier Cologne for China, making it more premium. And in couture brands, whether it’s YSL or Armani Privé, we’re really pushing that part,” Hieronimus said. “We recently launched a new premium collection for Valentino. Clearly, premium fragrance is a beautiful cherry on top of the fragrance cake that already delivers great performance.”
The best of WWD