French cosmetics giant L’Oréal reported a rise in third quarter sales on Tuesday, October 22, that missed expectations. Sales for the three months to the end of September were EUR 10.28 billion (USD 11.11 billion), up 3.4% on a like-for-like basis at constant exchange rates. The group said the turmoil in Chinese is harsher than expected.
"The situation in the Chinese ecosystem has become even more challenging, but we believe in the future of this market and hope that the governmental stimulus will help improve consumer confidence," said Nicolas Hieronimus, CEO of L’Oréal.
From January to the end of September, L’Oréal sales increased by 6% to EUR 32.4 billion (USD 34.99 billion). “We delivered solid growth in the first nine months, despite multiple turbulences,” add Hieronimus.
The group recorded growth in all regions, except North Asia, and across all divisions, with L’Oréal Luxe accelerating a third consecutive quarter.
Sales decline in North Asia
Sales in North Asia declined 6.5% (like-for-like) in the third quarter to reach EUR 1.95 billion (USD 2.11 billion), worsening from a decline of 2.4% in the prior three months. The region accounts for a quarter of group sales.
“In mainland China, the beauty market – already negative in the second quarter – continued to deteriorate, impacted by low consumer confidence,” commented the group in a statement.
"Even for luxury products," the market is down at least 10%, Mr. Hieronimus told an AFP journalist.
While Travel Retail in the region returned to growth in the third quarter, sell-out in Hainan in particular remained under pressure.
Regarding the stimulus plan announced by the Chinese government, “it is too early to know whether this will boost consumer confidence and consumption,” he added.
North America growth normalising
In North America, sales in North America grew +5.2% like-for-like, to reach EUR 3.1. billion (USD 3.35 billion). The market is gradually normalising, “with growth rates a little higher than pre-Covid levels,” according to Hieronimus.
The luxury market “is very resilient in the United States, unlike in China, but the mass market, has slowed down more, especially makeup,” Nicolas Hieronimus said. The US perfume market is also very “dynamic” while sales of dermatological products have “slowed down.”
"Beauty Stimulus"
“In a context that continues to be marked by economic and geopolitical uncertainties, we remain confident to achieve another year of growth in sales and operating profit and are preparing our own beauty stimulus plan for 2025,” stated Mr. Hieronimus.
In short, "this means that I have remobilized all the L’Oréal teams to have a products launch plan ready for 2025," he explained to AFP. "When the market softens a little, it’s our job to give it a new impulse," he added.
