L’Oreal SA’s sales rose in the fourth quarter as strength in demand for beauty products in the Americas cushioned weakness in China.
(Bloomberg) — L’Oreal SA’s sales rose in the fourth quarter as strength in demand for beauty products in the Americas cushioned weakness in China.
Sales increased 8.1% on a comparable basis in the last three months of 2022, the French beauty company said in a statement Thursday. Analysts expected a 6.8% expansion.
L’Oreal’s active cosmetics unit saw the fastest growth rate, with solid demand persisting for its Cerave and La Roche-Posay creams. China’s decision to drop Covid-19 restrictions could bode well for sales in the coming year, analysts said.
The high-margin Luxe segment could see a steep recovery, supported by travel retail and China reopening, wrote Bloomberg Intelligence analyst Deborah Aitken. Moreover, the North America figures show no signs of a consumer “spending slowdown,” she added.
The shares were little change in early Paris trading Friday. The stock is up 13% this year.
“L’Oreal continues to deliver outstandingly well,” writes Gerrit Smit, manager of the $1.7bn Stonehage Fleming Global Best Ideas Equity fund.
On China, L’Oreal said “the beauty market was clearly affected by the public-health restrictions” in the country last quarter, describing conditions as “challenging” for its consumer products. It also noted a “drastic slowdown” for its luxury unit there.
Strict Chinese Covid-related lockdowns were followed by an abrupt dismantling of restrictions. That in turn caused a surge of infections that kept consumers and workers at home in December. The comparable sales growth of 4.9% in North Asia was the weakest among the regions L’Oreal tracks. It still outpaced market estimates.
The results follow a pessimistic outlook from Estée Lauder Cos. last week. The US competitor reported a high level of merchandise in stores in China and postponed its forecast for a return to growth there.
Read more: Estée Lauder Slashes Profit Outlook as China Recovery Stalls
L’Oreal’s annual operating profit was €7.46 billion ($8.02 billion), above analysts’ average estimate of €7.42 billion.
(Updates with analyst comment, share reaction)
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