L’Oreal announced on Thursday a 9.4% rise in first quarter sales on a like-for-like basis, surpassing expectations and easing concerns about a slowdown in the two biggest beauty markets, the United States and China.
The French cosmetics powerhouse, parent to renowned brands like Maybelline and Lancome, disclosed sales of 11.24 billion euros ($11.98 billion) for the initial three months ending in March.
The sales growth surpassed the analyst consensus of a 6.1% increase projected by Jefferies. Sales grew by 8.3% on a reported basis.
L’Oreal, the largest beauty company globally, reported sales growth of over 12% in both North America and Europe, driven by strong performance in its mass market and dermatological product lines, which offset declines in the luxury segment.
Continue Exploring: India’s beauty market booms: L’Oreal and Shiseido set sights on rapid expansion amid growing consumer demand
Jefferies analysts remarked that the West “continues to thrive,” noting that North America had defied weakening scanner data and negative commentary from retailers.
Earlier this month, U.S. retailer Ulta Beauty unsettled the market with comments about a faster-than-anticipated slowdown in the United States, causing shares across the sector to decline.
After Thursday’s results, L’Oreal’s American depositary receipts (ADRs) surged by up to 6.5% in New York trading, with shares of U.S. competitors Estee Lauder and Coty also experiencing gains.
L’Oreal reported that its consumer products division, encompassing its L’Oreal Paris line of mascaras and Elseve hair gloss, and contributing over a third of its revenues, grew by 11.1% on a like-for-like basis.
The company saw increased volumes and value within the unit, driven by robust demand in both Europe and emerging markets.
The company experienced heightened volumes and value within the division, propelled by strong demand in both European and emerging markets.
Sales in the luxury division, which includes fragrances like YSL’s Libre and Aesop products acquired last year, rose by 1.8%, surpassing expectations for a decline. Strong growth in Europe and North America mitigated the weakness in North Asia.
The company noted that North Asia faced challenges due to an unfavorable comparison base in Travel Retail and sluggish market growth in mainland China.
Jefferies analysts mentioned that travel retail sales were also impacted by a Chinese government crackdown on “daigou,” which refers to resellers of foreign consumer products.
Continue Exploring: L’Oreal expands into Indian dermocosmetic market with the launch of LDB
During a call with analysts, Chief Executive Nicolas Hieronimus stated that L’Oreal holds the largest share of China’s luxury beauty market, accounting for approximately 34%.
“We are disappointed that the market isn’t rebounding as we anticipated,” he stated, though he emphasized that the company continues to outperform the market.
He noted that the company achieved a growth rate of 6.2% in China, significantly surpassing the broader market’s growth of less than 1%.
L’Oreal, ranked as Europe’s 6th most valuable listed company with a market capitalization of approximately 220 billion euros ($234.26 billion), has experienced a 6% decline in shares year-to-date. This contrasts with a 5% decrease in shares at its U.S. counterpart, Estee Lauder.