L’Oréal’s acquisitions of Clarisonic and Magic fall short

29-Jul-2016

Company records goodwill impairment of €234m and €213m respectively

  • Clarisonic and Magic Holding’s fair market value have fallen substantially since acquisitions made

  • Goodwill impairment does not impact the strategic relevance of the two brands for the group

  • Overall, in H1 2016 L’Oréal sales grow 4.2% on a like-for-like basis

Clarisonic has not met expectations since being bought by L'Oréal

L’Oréal’s acquisitions of Clarisonic in 2011 and China’s Magic Holdings in 2014 have fallen below the company’s expectations.

As a result, the consumer goods giant recorded a goodwill impairment of €234m and €213m respectively in its first half 2016 results.

L'Oréal's strength, today more than ever, lies in its balanced business model. The first half reinforces our confidence in the Group's ability to outperform its market, and to achieve another year of sales and profit growth in 2016.

Jean-Paul Agon, Chairman and CEO

The non-recurring charge means that both Clarisonic and Magic Holding’s fair market value have fallen substantially since the acquisitions were made.

L’Oréal’s Jean-Paul Agon, Chairman and CEO, explained that the goodwill impairment does not impact the strategic relevance of the two brands for the group.

The company’s other recent acquisitions, NYX Professional, Urban Decay and Niely, were said to be making a “very positive” contribution to L’Oréal’s overall growth.

Growth in all divisions

In H1 2016, L’Oréal saw sales grow 4.2% on a like-for-like basis and 0.6% reported.

Growth was observed across all divisions and regions; Consumer Products grew 4.3% to €6,154.9m, while L’Oréal Luxe and Active Cosmetics saw sales jump 5.6% and 5% respectively. Professional products sales generated a small increase in sales of of 2.2%.

In Consumer Products, strong expansion was observed in North America and in New Markets. In Western Europe, L’Oréal did acknowledge that the situation in France “remains very difficult”, but recorded dynamic trends in the UK and Spain.

In the Luxe division, it was a similar story in Western Europe due to difficulties in travel retail and France. But good performances were seen in China, Japan, North America and Eastern Europe.

In particular YSL continued to expand with its Black Opium and Mon Paris fragrances proving successful.

New Markets for L’Oréal include: Asia Pacific, Latin America, Eastern Europe and Africa/Middle East; in Latin America, double-digit growth of 10.8% was observed like-for-like driven by good performances by brands including Maybelline, L’Oréal Paris and Vogue.

The Body Shop falters

L’Oréal’s weak spot appeared to be The Body Shop, where sales were down 0.6% like-for-like and down 3.2% based on reported numbers.

While expansion is said to be ongoing in main markets of the UK, Australia and Canada, L’Oréal noted that in Hong Kong and Saudi Arabia the economic slowdown is having an impact on business.

At the same time last year, The Body Shop appeared to be on track with growth of 2.8% like-for-like and 13.2% on a reported basis.

At the end of the first half 2016, The Body Shop was available in 3,047 sales outlets.

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