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L’Oréal Upbeat On China Despite Market's Softer Rebound

By Reuters
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L’Oréal Upbeat On China Despite Market's Softer Rebound

Second-quarter sales at French cosmetics giant L’Oréal slightly beat expectations, as a rebound in China helped offset slower growth in the United States where the rising cost of living is prompting shoppers to tighten their purse strings.

Paris-based L’Oréal, which owns labels ranging from Maybelline to Lancome said that sales in April-June were €10.1 billion ($11.1 billion), up 13.7% on a like-for-like basis from a year earlier, outpacing analyst expectations for 11.9% growth, according to a Visible Alpha consensus.

The Chinese market is "really picking up," although "not at the speed everybody had hoped for," L’Oréal chief executive Nicolas Hieronimus told Reuters.

L’Oréal sales in North Asia, which mostly come from mainland China, were up 5.9%, like-for-like, below analyst expectations for 9.5% growth there. Growth in Europe accelerated, up 20.8% while North American sales rose 9.7%, a slower pace than the first three months.

China has become a key focus for investors, as lacklustre economic figures and a softer rebound for the luxury goods sector in the country recently weighed on share prices of Cartier-owner Richemont and industry bellwether LVMH.

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Shift To Mass Market Segment

A study of online sales of international cosmetics labels in China showed a shift to the mass market segment, reversing a multi-year outperformance of higher-end products seen before the pandemic.

LVMH's finance chief Jean-Jacques Guiony also said some of the group's rivals in the cosmetics industry were for discounts and promotions to boost sales.

"Overall, consumers were more cautious in spending and preferred value-for-money products," said the report by Citi analysts, who analysed data from sales on Alibaba's Tmall e-commerce platform, and Douyin, a social media platform similar to TikTok.

The L’Oréal chief said the French company had not seen that trend, noting that the group had labels from both sides of the spectrum in the top Tmall, JD.com and Douyin rankings for the 618 shopping festival - China's second largest live-stream shopping event after the Singles' Day.

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Hieronimus said L’Oréal had surpassed an overall rise in the beauty market of around 6.5% in mainland China, gaining market share and growing in the "high teens."

L’Oréal's luxury division, which is the leader in the high-end cosmetics market in China with a share above 30%, made further gains.

It was helped by rising sales of its Lancome brand and its newly launched high-end Japanese skincare brand Takami in China, as well as by cosmetics it makes under the labels Yves Saint Laurent, Valentino and Prada.

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