Fragrance innovation to bolster L'Oréal in ‘flattish’ Western Europe

By Kacey Culliney contact

- Last updated on GMT

"...Of all zones, the one that is most important in terms of fragrance is Western Europe," says L'Oréal chairman and CEO - photo: Getty Images
"...Of all zones, the one that is most important in terms of fragrance is Western Europe," says L'Oréal chairman and CEO - photo: Getty Images

Related tags: L'oréal, financial results, Fragrance division, Fragrance, Lancôme, Yves saint laurent, valentino, Luxury beauty, Active cosmetics division

Amidst its strongest global sales growth in a decade, L'Oréal says fragrance innovation should liven up the relatively flat sales environment in Western Europe.

For the first-half (H1) of 2019, the French cosmetics giant pulled in net sales of €14.81bn, up 10.6% on the previous year. In like-for-like terms – based on a comparable structure and identical exchange rates – sales for H1 2019 were therefore up 7.3%.

L'Oréal has delivered its strongest first half like-for-like growth in more than a decade,” ​said Jean-Paul Agon, chairman and CEO of L'Oréal.  

Total global net profit (excluding non-recurring items) for the group in H1 2019 was €2.46bn, up 7.2% on 2018. After non-recurring items, net profit stood at €2.32bn.

“In a volatile and contrasted environment, this good first half gives us confidence to outperform the market in 2019 and achieve another year of growth in sales and profits,”​ Agon said.

Spritzing away Western Europe woes?

Geographically, the biggest contribution came from Asia Pacific with €4.62bn reported sales, up 30.4% on last year. These sales were just ahead of Western Europe which pulled in €4.21bn but only generated 1.9% sales growth – the slowest-growing market for L'Oréal, although ahead of sales losses in Latin America and Africa, Middle East.

“Western Europe continues to be flattish,”​ Agon told investors and analysts on the earnings call.

Responding to an analyst’s question on how L'Oréal planned to bolster business in this region, Agon said certain initiatives would help; more specifically, fragrance initiatives.  

L'Oréal has three fragrance initiatives planned - Getty Images
L'Oréal has three fragrance initiatives planned - Getty Images

Lancôme had an Idole launch planned​, he said, which would be “major”​ given the brand launched new fragrance every 15-20 years. There would also be a Yves Saint Laurent fragrance launch, he said, “which doesn’t happen often”​, as well as a Valentino initiative called ‘Born in Roma’.

“You know that of all zones, the one that is most important in terms of fragrance is Western Europe. So, we really believe that for the luxury division, for example, the launch of these three fragrance initiatives will definitely be very important,” ​Agon said.

L'Oréal Luxe ‘excellent start to the year’

Agon said while consumer products remained the largest division, representing 44.1% of total turnover for H1 2019 with €6.53bn in reported sales, the L'Oréal Luxe and Active Cosmetics divisions were growing fast.

Both, he said, had experienced double-digit growth during H1 2019, driven largely by the four luxury brands Lancôme, Yves Saint Laurent, Giorgio Armani and Kiehl's and a “growing appetite for healthy beauty”.  

L'Oréal Luxe reported an “excellent start to the year”,​ the company said, with sales up 17.3% in H1 2019 on the previous year. More specifically, Lancôme’s “iconic lines” Génifique​, Absolue​ and Kiehl's ​with Ultra Facial and Calendula, “delivered excellent performances over the period”.

For L'Oréal, its Luxe division was particularly strong in Asia Pacific, notably China, and in travel retail but also had seen good performance in Eastern Europe and Latin America. However, sales remained “sluggish”​ in North America and “difficult”​ in France albeit dynamic in Germany, Scandinavia and Southern Europe.

Active cosmetics ‘outstanding first half’

L'Oréal said its actives division had also seen an “outstanding first half”, ​pulling in sales of €1.41bn for H1 2019, up 15.1% on the previous year.

Within actives, La Roche-Posay posted double-digit growth and continued to accelerate in anti-aging, with continued success of Hyalu B5 and successful launch of Pure Vitamin C10 serum. Vichy had also maintained momentum through its “star product” Minéral 89 and was reinforcing its anti-aging expertise through Vichy SkinConsult-AI – the first algorithm for analysing signs of ageing from a selfie, developed with dermatologists.

SkinCeuticals was also “growing very fast across all zones”,​ L'Oréal said.

Active Cosmetics had performed well across “all zones” ​with Asia Pacific, North America and Latin America performing particularly well.

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