L’Oréal growth remains strong in China despite economic slowdown

By Simon Pitman

- Last updated on GMT

L’Oréal growth remains strong in China despite economic slowdown

Related tags Asia pacific region Asia

Despite the economic slowdown in China, L’Oréal’s performance in the country continues to go from strength to strength as the product innovation pipeline is maintained.

The results mirror strong growth for the company throughout the Asia Pacific region, as the company revealed its latest quarterly and half year results.

The results for the region showed that on a like-for-like basis, second quarter sales were up 4.8% to €1.30bn, while on a reported basis the growth was 0.6% when factoring in the negative effects of currency translation.

For the first six months of the year like-for-like growth was 4.6 to €2.8bn, while on a reported basis it rose 0.6%.

L’Or​éal Luxe maintains momentum in China

Growth in China was fuelled by strong sales from the company’s Luxe division, which was underlined by the performance of the Yves Saint Laurent ​and Giorgio Armani ​brands.

Meanwhile, the company pointed out that the performance of its consumer brands division in the Asia Pacific region has been driven by the successful launch of Ultra Doux ​in China and India, and by the roll-out of the Garnier ​brand in Southern Asia.

Company executives also pointed out that while success is also being driven by the general performance of the business in Southern Asia, Northern Asia is doing a lot more slowly, while there are also continued challenges in Hong Kong and with the Magic brand in China. 

International results

On a group basis, accounting for all global markets, the cosmetics giant posted strong like-for-like results, on a reported basis the company’s second quarter performance shows a big impact from a weakened Euro.

For the second quarter ending in June, the group revenues were up by 4.3% to €6.34bn, but with the Euro being hammered against foreign currencies during the period, on a reported basis the revenue was down 0.6% compared to the same period last year.

The company pointed out that currency negatively impacted the results by 3.9% for the first six months of the year, with this impact increasing in the second quarter as the Euro continued to lose value.

For the first half of the year group like-for-like revenues were up by 4.2% to €12.89bn, which represented reported growth of 0.6%, taking into consideration the negative impact of currency exchange.

Growth in all divisions and geographies

However, despite the impact from currency translation, the bottom line reflected growth in revenues from all the company’s four division and all geographies.

Commenting on the results by division, L’Oréal CEO Jean-Paul Agon pointed out that the strongest performance was seen in the Luxe and Active Cosmetics divisions, although they were not without challenges.

L’Oréal Luxe, in a market that remains solid, is continuing to deliver sustained growth by capitalising on its unique brand portfolio and by maintaining its innovation drive,” he said.

“The Active Cosmetics Division, in a dermocosmetics market that has slowed due to an unfavourable season, is developing its major product ranges and continues to increase its market share.”

In the second quarter growth in the Professional products division was up by 1.8% on a like-for-like basis to €870.1m, while Consumer Products was up 4.7% ​to €3.04bn, L’Oréal Luxe up 5.6% to €1.76bn and Active Cosmetics up 5.7% to €460.7m.

Europe struggles

Agon went on to point out that on a global basis, the US market was performing strongly, while in Europe, things were slowly, held back by a particularly weak performance in France, which has been hit by a significant drop in tourism during the first half of the year.

In Western Europe sales increased by 1.4% on a like-for-like basis during the second quarter to reach €2.05bn, overshadowing much stronger performances in other regions.

In North America results for the quarter were up 4.9% on a like-for-like basis to reach €1.74bn, while in new markets, which includes Latin America, Eastern Europe and Asia Pacific, results were up 7.4% to €2.34bn.

Outlook for the rest of 2016

Looking ahead to the second half of 2016, company executives believe that socio-economic uncertainties can be counterbalanced by the company’s geographic reach and its wide-reaching product portfolio.

"In an environment that is still volatile and uncertain, particularly on the monetary front, L’Oréal’s strength, today more than ever, lies in its balanced business model,” ​Agon said.

“The first half reinforces our confidence in the Group’s ability to outperform its market, and to achieve another year of sales and profit growth in 2016.”

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