Oriflame reports ‘modest’ first quarter sales growth

By Simon Pitman

- Last updated on GMT

Related tags Percent Currency

Oriflame has reported slight sales growth, pointing to difficult quarterly comparisons, but net profits show a healthier rise.

The company’s sales grew by 6 percent to €361.9m, compared to €341.3m in the previous quarter, which represented a local currency growth of 4 percent. Average prices increased by 3 percent during the quarter, while units sales were down by 4 percent.

The sales growth was mainly driven by a 12 percent increase in the average size of the labour force, which is integral to the company’s direct sales model.

Although the increased sales force pushed up costs, the company said this was offset by an 8 per cent decrease in productivity and €1.6m in lower third party sales, which ultimately meant a negative impact on the overall sales of just 1 percent.

Asian skin care is the rising star

On a global basis, the strongest performing category was that of skin care products sales in Asia, while higher priced fragrances in all markets also helped to boost the result.

Net profit before restructuring costs increased by 54 percent to €37.2m, compared to €24.2m in the corresponding period last year. This helped to give an operating margin of 11.7 percent, compared to 11.1 percent in the same period last year.

CEO Magnus Brännström said the result reflected the company’s prediction that the first half of 2010 would be challenging, particularly as the first half of 2009 saw the company perform well.

'Comfortable' about 2010 outlook

This has proven true as growth in the first quarter was rather modest. However, we are comfortable with our outlook for 2010 of around 10 percent sales growth with an operating margin above 12 percent at current exchange rates,” ​Brännström said

“Given the growth at the start of the year, we will focus our resources even more towards top line growth,”​ an initiative that is likely to see the company concentrating on the promotion of its biggest brands.

Looking to the future the company is sticking to its long-term target to achieve a 10 percent increase in local currency sales, while targeting operating margins of 12 percent.

“On the positive side, we see that currencies are moving strongly in our favour and if that remains it will have a positive effect on our operating margins for 2010,​” Brännström said.

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