French cosmetics giant L’Oréal reported a rise in third quarter sales that missed expectations after low consumer confidence in China sapped demand for beauty products.
The company – which owns the Maybelline and Lancôme brands – said sales for the three months to the end of September were €10.28 billion.
This indicated a 3.4% rise on a like-for-like basis at constant exchange rates, but below a Visible Alpha consensus of 6% cited by Jefferies.
In a note, an analyst at RBC wrote, ‘The last time L’Oréal reported quarterly organic sales growth lower than this was Q3 2020 in the darkest days of Covid.’
A Barclays analyst added that investors will likely receive the scale of the miss negatively.
They said, “While investors were nervous going into results, these are still weaker than feared.”
China
Shares in the Paris-based company have lost 20% since June – wiping about €50 billion off its valuation – on investor concerns about consumption in China.
The North Asia region – which China dominates – accounts for a quarter of group sales.
However, a property crisis and high youth unemployment has curbed consumer spending in the area.
Sales in North Asia declined 6.5% in the third quarter, worsening from a decline of 2.4% in the prior three months.
Chief executive of L’Oréal Nicolas Hieronimus said the dip in the market in China was high single-digits in the third quarter and the luxury segment fell the most, in “negative mid-teens.”
Hieronimus said, “We are doing better than a very negative market, but it’s not good enough.”
Data in the wider economy on Friday showed China grew at its slowest pace since early 2023 in the third quarter, while last week luxury brand LVMH said consumer confidence in the country was at an all-time low.
Reduced demand for suncare and dermatological products also eroded growth at L’Oréal, with the Dermatological Beauty division slowing to 0.8% compared to 10.8% in the second quarter.
The miss was partly attributed to lapping a €57 million insurance payout in the prior year’s same quarter, but analysts at Barclays said it was still disappointing.
L’Oréal is now aiming to increase the number of launches next year, according to Hieronimus, as it no longer benefits from the tailwinds of resurgent post-pandemic demand and inflation.
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