L’Oréal Groupe sales have missed growth expectations in the third quarter sending shares down as much as 7% in early trading on the Euronext stock exchange on Wednesday morning (22 October).
The beauty giant, which owns Garnier, CeraVe and Maybelline, said sales for the three months to 30 September were €10.3bn, up 4.2% on a like-for-like basis.
However this missed analysts’ consensus of 4.9% for the period.
Progress was “broad-based” with all regions contributing to growth and continued recovery in its two largest markets, the US and mainland China, said Nicolas Hieronimus, CEO of L'Oréal.
Europe “remained robust” while “ongoing strength in SAPMENA-SSA [South Asia Pacific, Middle East and North Africa] more than offset the softness in Latin America”.
“Growth accelerated across all divisions, as the weight of new launches further increased in the third quarter fuelled by our Beauty Stimulus Plan,” he said.
“The global beauty market remains dynamic with a progressive improvement in luxury.
“Our strength online allows us to outperform what is today the most dynamic channel.”Sales grew 12.2% in SAPMENA-SSA in the third quarter, 4.7% in North Asia , 4.4% in Latin America and 4.1% in Europe, while growth in North America was 1.4%.
L’Oréal’s Professional Products led the way with growth of 9.3%, followed by a 5.1% rise in Dermatological Beauty, 3.8% in Consumer Products and 2.5% in the Luxe division.
Analysts at Deutsche Bank said they expected the stock to be under pressure “given the lack of visibility provided by management and the risk of slower China growth and Fragrance de-stocking”.
“The L'Oreal CEO stated that it was ‘fingers crossed’ for 11:11 in China and a strong holiday season in the US and Europe,” they said in a research note.
“This lacked conviction, in our opinion, and we expect the market wanted a lot more visibility.”
Deals update
The financial results come hot on the heels of announcing a blockbuster €4bn deal with Kering to acquire the luxury fashion group’s beauty business.
Commenting on the deal in the financial results, Hieronimus said: “We just announced a strategic alliance with Kering, one of the world’s most creative and visionary luxury groups.
“I am delighted by this partnership: the acquisition of Creed will make us one of the leading players in niche fragrances; and I see enormous potential for growth for the beauty and fragrance licenses of Gucci, Bottega Veneta and Balenciaga, all truly exceptional couture brands.
“This partnership will further solidify our position as the world’s leading luxury beauty company.
“As we head into the last quarter of the year, I am confident that we will continue to outperform the global beauty market and to achieve another year of growth in sales and an increase in our profitability.”
The deal does not derail a potential tie-up with another luxury giant – Armani.
L’Oréal was named a preferred buyer of the business in the will of Italian fashion designer Georgio Armani following his death in September at the age of 91.
He was the sole shareholder in the Armani Group, incorporating his fashion and beauty empire.
L’Oréal already holds the licence to produce Armani’s fragrance, skin care and make-up.
“The deal we just did with Kering does not prevent us from considering any of the options that are on the table with Armani,” said Hieronimus in a call with investors.
Meanwhile, the conglomerate said that its acquisition of hair care brand Color Wow, which was announced in July, closed in September.
The acquisition of UK skin care brand Medik8, first announced in June, was also completed last month, and “maintained strong double-digit growth”.