L’Oreal SA, the world’s largest cosmetics company, reported second-quarter sales that missed analysts’ estimates as demand for Maybelline New York makeup and other consumer products remained sluggish in the US.
Like-for-like revenue increased 4.1 per cent, Paris-based L’Oreal said yesterday after European markets closed, accelerating from the previous quarter’s 3.5 per cent gain. Sales rose 2.4 per cent in North America, compared with a 0.6 per cent fall in the first three months.
L’Oreal has struggled this year to accelerate growth in the consumer-products division as American mass-market shoppers remain restrained in spending money and emerging economic growth slowed. Unilever, the maker of Dove shampoo, also flagged difficulties in newer markets though growth at the company’s personal-care division advanced 4.5 per cent in the period.
While the French company’s revenue fell just short of expectations, “this remains a far cry from what we used to see from L’Oreal, below what Unilever delivered in its personal-care business and far below what we believe” L’Oreal’s valuation requires, wrote Andrew Wood, an analyst at Sanford Bernstein, in a note to investors. The company trades at 23 times estimated earnings.
North America
L’Oreal predicted in April that North American consumer-product sales would return to growth in the second quarter and accelerate through 2014. While global sales at the unit, which includes Garnier shampoo, rose 2.8 per cent in period, that lagged behind the 3.2 per cent acceleration predicted by analysts, though it picked up from the 1.2 per cent reported in the first quarter.
To help stoke growth, the company is launching new products like Fibralogy by L’Oreal Paris for hair care. New facial skincare items, however, have been “less effective,” L’Oreal said.
The personal-care market is consolidating as companies from Germany’s Henkel AG to Japan’s Kose Corp. buy niche brands to widen product ranges. Since January, L’Oreal has acquired facial-mask maker Magic Holdings International Ltd. and spa brands Decleor and Carita. Including the buyback of 8 per cent of its stock from Nestle SA, L’Oreal has spent more than $5 billion on deals this year, and it is looking for more targets.
The maker of Giorgio Armani scents repeated it expects to outperform the market in 2014 and improve like-for-like sales, profitability and earnings per share. First-half operating income rose 0.2 per cent to €2.03 billion.
L’Oreal has said it expects the cosmetics market to grow 3.5 per cent to 4 per cent this year.
Bloomberg News, edited by ESM
