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L’Oréal’s Q1 2024 Sales Rise, Bolstered by the Consumer Products and Dermatological Beauty Divisions

Updated April 18 5:00 p.m. EST

PARIS — L’Oréal’s first-quarter 2024 sales, driven by its Consumer Products and Dermatological Beauty Divisions, Europe and emerging markets, strongly surpassed analysts’ expectations.

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Sales at the French maker of Lancôme, Kiehl’s, Yves Saint Laurent and Garnier beauty products 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 were up 9.4 percent and advanced 8.1 percent adjusted for a one-off 130 million euro phasing impact prior to the implementation of new IT systems in North America, L’Oréal said after the close of the Paris stock market Thursday. The rise sped past VisibleAlpha consensus of a 6 percent gain.

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“The Luxe division missed slightly but was more than offset by continued strength in Consumer Products,” wrote Molly Wylenzek, an equity analyst at Jefferies, referring to the divisions’ organic growth of 1.8 percent and 11.1 percent, respectively.

She also highlighted how sales in North Asia, down 1.1 percent, were counterbalanced by the turnout in Europe, up 12.6 percent and posting the fastest growth of all geographies — with a 500 basis point beat versus consensus for the Continent.

“The market continued to be dynamic, and we gained further share,” said Nicolas Hieronimus, L’Oréal chief executive officer, during a call with analysts and journalists 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, was particularly impressive.”

He also underlined the 12.3 percent like-for-like growth in North America. That market remained dynamic even though it had slowed down over the previous quarters.

“You have a very strong dynamism of the e-commerce market,” said Hieronimus, giving Amazon as an example of a strong booster on the Continent. The one product category that has slowed down the most there is mass-market makeup. Conversely, premium fragrance and hair care continue selling well.

“The North American market is slower than in 2023, but we continue to see lots of opportunities in this part of the world, where we have good performance, but we can do better on a certain number of lines or divisions,” said Hieronimus. “Overall, we remain ambitious for the U.S.”

Of L’Oréal’s overall performance, Wylenzek wrote: “Amid a noisy few weeks on beauty with fears of a market slowdown, this result should drive a strong positive share reaction.”

David Kimbell, CEO of Ulta Beauty, which operates only in the U.S., said earlier this month that the retailer was seeing “a slowdown in the total category across price points and segments.”

“L’Oréal is able to move A&P around the world, across categories and demographics, thereby not only optimizing its global growth, but also making that organic growth a lot more resilient,” wrote Bernstein analyst Bruno Monteyne, a Bernstein analyst. “With Daigou drag out of the base by Q3, and ‘easy comps’ from destocking in H2, we think the markets will have to get used to double-digit organic growth again.”

Hieronimus said the beauty market grew by 6 percent in the first quarter.

He called out L’Oréal’s Dermatological Beauty division, with organic sales up 21.9 percent and which delivered its 15th consecutive quarter of double-digit growth, as well as the Consumer Products division, with 11.1 percent gains, as each of the four core brands and every category’s sales advanced by double digits.

One-third of L’Oréal’s growth came from volume and two-thirds from value. “Price and mix both contributed to the value component,” said Hieronimus. “Growth in the first quarter was not just strong, but also high-quality since broad-based across all metrics.”

For the remainder of 2024, L’Oréal expects the global beauty market to remain dynamic and continues to forecast its approximately 5 percent growth for the full year. “Our ambition is to outperform our market and gain share again,” he continued. “Price continued to play an important role in the first quarter. I would expect that to gradually diminish as inflation is easing.

“On the other hand, we expect a rebound in travel retail sales from the end of the first half, when we will have lapped the clampdown of daigous in Hainan,” said Hieronimus. The travel-retail channel negatively impacted first-quarter sales by roughly 230 basis points, versus 300 basis points in the fourth quarter of 2023.

The Chinese market is not rebounding as quickly as expected, but L’Oréal continues to outperform it. The country has seen a sales acceleration for mass-market beauty brands and a slowdown of luxury beauty brands — the inverse of what’s happening in the U.S.

On Douyin, TikTok’s counterpart in mainland China, L’Oréal began selling first its mass brands and has now added many of its luxury brands. “We’ve been doubling our business on Douyin in the first quarter, so it’s promising for the future,” said Hieronimus.

He added: “Our operating margin will be second-half weighted as travel retail Asia will bounce back after May and Aesop will be in the base from September.” The executive called the Australian brand acquired last year “one of our best-growing brands in luxury.”

Aesop’s teams have been integrated and employees onboarded. “We begin to look at the plans of rollouts, but we’ve made no major openings — whether online or in stores,” he said. “The plans have been written by the existing teams of Aesop.”

Hieronimus said as the year progresses, L’Oréal will probably 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 don’t want to fix what’s not broken, and we continue to accompany their existing strategy,” he said.

An analyst asked about a recent press report suggesting L’Oréal could be taking a minority stake in Amouage, the niche beauty brand based in Oman, and whether it is fair to assume that ultra premium fragrance is a top priority in terms of M&A for the group, after its investments into the To Summer and Documents fragrance brands in China.

Hieronimus said it would not comment on the rumors about Amouage. “But what is true is that the premium part of the fragrance market is the most dynamic one right now,” he said. “It’s growing significantly faster than the average. So it’s clearly an area of focus — not just of M&A, but including in our own brands.

“We have a brand like Maison Margiela, which is flying. We’ve just repositioned Atelier Cologne for China, making it more premium. And within the couture brands, whether it’s YSL or Armani Privé, we are really pushing this part,” said Hieronimus. “We presented recently a new premium collection for Valentino. So clearly, premium fragrance is a nice cherry on the cake of fragrance, which is already delivering a great performance.”

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