By Dominique Patton and Mimosa Spencer
PARIS (Reuters) – L’Oreal reported a 9.4% rise in first-quarter sales on a like-for-like basis on Thursday, beating expectations and easing concerns about a slowdown in the two biggest beauty markets, the United States and China.
The French cosmetics giant, owner of the Maybelline and Lancome brands, reported revenue of 11.24 billion euros ($11.98 billion) in the first three months to the end of March.
Sales growth beat the consensus of a 6.1% increase cited by Jefferies analysts. Sales increased 8.3% on a reported basis.
L’Oreal, the world’s largest beauty company, said sales in both North America and Europe grew more than 12% as its mass-market range and dermatological products offset weakness in luxury segment.
The West “continues to fire up,” Jefferies analysts said following the results, adding that North America weathered weakening scanner data and pessimistic comments from retailers.
US retailer Ulta Beauty (NASDAQ:) shook the market earlier this month with comments about a faster-than-expected slowdown in the US affecting stocks across the sector.
After Thursday’s results, L’Oreal’s American Depositary Receipts (ADRs) gained as much as 6.5% in New York trading, while shares of U.S. rivals Estee Lauder (NYSE:) and Coty (NYSE:) rose.
CONSUMER PRODUCTS
L’Oreal said its consumer products division, which includes the L’Oreal Paris mascara range and Elseve hair shine and accounts for more than a third of its revenue, grew 11.1% on a like-for-like basis.
The company benefited from increased volumes and unit value, with strong demand in Europe and emerging markets.
The smaller but fast-growing dermatology beauty unit, which sells La Roche-Posay and CeraVe skincare products, grew 21.9% as it continued to benefit from medical recommendations.
Sales in the luxury division, which markets fragrances such as YSL’s Libre and Aesop products acquired last year, grew 1.8%, beating expectations for a decline, as strong growth in Europe and North America helped offset weakness in North Asia.
North Asia suffered from an unfavorable comparison base in travel retail and slow market growth in mainland China, the company said.
Analysts at Jefferies said travel retail sales were also dented by the Chinese government’s crackdown on retailers of foreign consumer products, known as “daigou.”
L’Oreal has the largest share of China’s luxury beauty market, at about 34%, Chief Executive Nicolas Hieronimus told analysts on a call.
“We are unhappy that this market is not recovering as we expected,” he said, but added that the company is still outperforming the market.
The company grew 6.2% in China, compared with less than 1% in the broader market, it said.
Shares of L’Oreal, Europe’s sixth-largest publicly traded company with a market capitalization of around 220 billion euros ($234.26 billion), have lost 6% so far this year, compared with a decline in 5% of the US company Estee Lauder.
($1 = 0.9383 euros)