L'Oreal hurt by weaker make-up demand in North America
Jul 31, 2019
L’Oreal shares slid lower on Wednesday after the French cosmetics maker reported weaker-than-expected sales growth in the second quarter, dragged down by a fall in North American revenues where demand for make-up is slowing.
The beauty group, whose brands include high-end Armani cosmetics and more budget ones such as Garnier, posted a 6.8% rise in like-for-like sales across all regions in the period, missing expectations for growth of 7.4%.
Its shares were down 3.5% at 0726 GMT.
“L’Oreal trades on its top-line growth,” analysts at Bernstein said in a note, adding that revenue growth was still strong but had dipped below a quarterly pace of 7% for the first time in a year.
“The worry is whether we are past the peak and if growth will ‘normalize’ from here.”
The company is still thriving in key markets like China, where consumers have shown a growing appetite for high-end cosmetics, including pricey L’Oreal ranges like Lancome and labels such as La Mer sold by rival Estee Lauder.
L’Oreal Chairman and Chief Executive Jean-Paul Agon told analysts on Wednesday that demand in China had, if anything, picked-up in the second quarter from the first.
But he also flagged a weak outlook in North America for the rest of the year, after a bumpy start to 2019.
“In the United States the market has decelerated in make-up, where we are market leader,” Agon said.
Agon adding that the group had “strong initiatives” in the United States for the second half of 2019, especially in luxury brands, but that the market would likely remain soft.
L'Oreal's shares were among the worst performers on Paris' SBF 120 index of French companies.
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