L'Oreal reports limp sales as luxury takes a tumble

By Simon Pitman

- Last updated on GMT

L’Oreal reported flat first quarter sales but differences between divisions were marked with luxury and professional product sales being the hardest hit.

As many of its competitors have filed falling sales for the first quarter of 2009, L’Oreal kept its head above water thanks to the resilience of its Consumer Products division and the YSL Beauté acquisition.

The company announced that its sales during the quarter finishing March 31 increased by 0.3 per cent on a reported basis to €4.37bn, which L’Oreal CEO Jean-Paul Agon attributed to a good product mix across global markets and the acquisition of YSL Beauté.

However, like-for-like sales, based on identical exchange rates and a comparable structure, were less impressive falling by 4.3 per cent.

Body Shop and Active Cosmetics hold strong

The performance of the company’s different divisions varied greatly, with The Body Shop, and the Active Cosmetics proving to be ‘resilient’, while its Luxury Products division was particularly hard hit in Europe.

Referring to this poor Luxury performance, Agon pointed to a “very large inventory adjustments by distributors, after a disappointing end-of-year holiday period.”

The company only released its sales figures for the quarter and is expected to release operating profit and net income in the coming weeks.

The investment world had mixed reactions to the results, with share prices on the Paris Bourse rising moderately in early morning trading, up 1.6 per cent to €7.66.

However, analyst Andrew Wood of Sanford C Bernstein, said the results showed that L’Oreal had continued to ‘under-deliver’, making reference to the fact that like-for-like sales had fallen even further than he had expected.

'Worst quarterly perfomance in a decade'

“It represents the worst quarterly performance by L’Oréal for over a decade (possibly ever)…significantly worse than the previous record of -0.6% in Q4 2008, despite much easier compares,”​ Wood said in his update.

Breaking the figures down, on a divisional basis, sales in the Professional Products division fell by 5.3 per cent on a like-for-like basis to €601m, while like-for-like sales in the Luxury products division fell by 17.5 per cent to €392m.

Reported sales for the Luxury Products division were only down by 0.4 percent, reflecting the impact of the YSL Beauté acquisition.

On a geographical basis the Asia Pacific market was the star performer, with sales on a reported basis growing by 23.6 per cent to €574m, while Eastern Europe dragged the performance down, with reported sales falling 18.2 per cent to €293m.

The company’s mainstay Western European market also showed weak reported sales, falling 5.4 per cent to €1.83bn, while North American reported sales propped things up, growing 8.3 percent to €968m.

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