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L'Oréal Sees Sales Rise By 13.1%, Boosted By Growth In China

L'Oréal has posted better-than-expected revenue growth of 13.1% for the third quarter, fuelled by continued strong demand for its luxury lines and sustained growth in China.

The French personal care and cosmetics group saw luxury sales surge over 20% in the period to 30 September, as it benefited from e-commerce channels it expanded during the pandemic and stores that reopened.

“The Group’s sales increased by +9.3% like-for-like over two years, compared with the first nine months of 2019, with a remarkable acceleration in the third quarter," commented chief executive Nicolas Hieronimus.

"As the public health situation has evolved, our employees have been safely and enthusiastically returning to the office in many countries over the last few months. As a result of our agility, relevant strategic choices and strong investment in our brands, L’Oréal continues to significantly outperform a beauty market that is gradually returning to pre-crisis levels."

Hieronimus added that all the group's zones and all divisions are in growth, contributing to the business' "well-balanced growth" overall.

China A Key Market

Though mainland China continued to post double-digit growth during the quarter, helped by strong demand for hair and skincare products, growth was tempered by a resurgence of some regional coronavirus curbs.

Hieronimus said the restrictions had mostly impacted in-store sales and that the country's e-commerce business continued to flourish.

"China's population and its middle classes are increasing and their appetite for beauty is not satisfied," he told analysts in a call.

China last year became the world's second-largest market for beauty and personal care products after the United States, according to market research firm Statista, as a growing middle class and social media influence boosted demand for premium brands.

Calls from the Chinese government for a "common prosperity" - a broad policy drive to narrow the gap between rich and poor - have however stoked investor concerns the state could seek to restrict high-end purchases.

But Hieronimus said that efforts to redistribute wealth would likely increase the middle classes and benefit L'Oréal's business.

He said that premium lines were L'Oréal's fastest growing categories in China, citing cosmetics brands Lancome Absolue and Helena Rubinstein.

Sales Beat Analyst Forecasts

The company, which recently restructured its operations, reported sales up 13.1% from July to September, excluding currency swings and acquisitions, materially beating analysts' forecasts.

Consensus estimates cited by Deutsche Bank had predicted growth at around 8%, fearing that demand would taper off following a post-lockdown boom.

Sales had surged 33.5% in the previous three months, when L'Oréal and fashion labels benefited from booming Chinese and U.S. demand amid easing coronavirus curbs.

News by Reuters, additional reporting by ESM. For more A-Brands stores, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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