L’Oréal CEO talks of ‘great business resilience’ amid global sales decline for H1 2020
L’Oréal generated sales of €13.07bn for the first half (H1) of 2020 – down 11.7% on a like-for-like basis versus the previous year, with the second quarter (Q2) contributing €5.85bn. Net profit declined 13% for H1 at €2.1bn.
Continued EMEA sales woes amid COVID-19
In Western Europe H1 sales dropped even more sharply, down 16.1% on a like-for-like basis at €3.5bn. Sales in Eastern Europe were also down 12.9% like-for-like at €789m and down 17.4% in Africa and Middle East at €288m.
L’Oréal said Western Europe had been “heavily impacted by lockdown measures, and by the closure of hair salons, department stores and perfumeries in almost all countries”, with Spain and Italy seeing the strongest negative impact. Germany, the Netherlands and the Scandinavian countries had fared better, L’Oréal said.
Despite clear difficulties in the region, the company said business had started to pick up since mid-May, particularly in hair care and skin care, and online sales across consumer products in the region had doubled.
In Eastern Europe, L’Oréal said Russia, Turkey and Ukraine were still facing an acceleration of the pandemic and had therefore been more impacted by the crisis and the Middle East also continued to be affected by COVID-19, particularly Saudi Arabia, Egypt and Pakistan.
For North America, L’Oréal H1 sales dropped 15.2% and in Asia Pacific sales dipped 3.9% like-for-like, though China sales surged.
‘Great business resilience’ despite difficult circumstances
Despite global sales declines, Jean-Paul Agon, chairman and CEO of L’Oréal, said the group had proven resilient during the first half of 2020.
Agon said L’Oréal had tackled a wave of challenges during the ongoing COVID-19 pandemic, from ensuring the health and welfare of its employees worldwide and protecting small clients and suppliers, through to a “real crisis of supply” with consumers unable to purchase products during lockdowns and store closures.
“In these exceptionally difficult circumstances, each division of L’Oréal has demonstrated great business resilience,” he said. Active cosmetics had continued to secure “good growth”; consumer products had “limited the impact on sales”, despite makeup slowing; and luxe and professional products had been “remarkably successful” at maintaining solid activity thanks to e-commerce, he said.
By business division, L’Oréal’s active cosmetics was up 9% like-for-like, with digital brand activation, e-commerce and the CeraVe brand fuelling growth. L’Oréal’s luxe division was down 16.8% like-for-like, with travel retail and makeup severely affected by the ongoing COVID-19 crisis, though China had returned to growth and there was promise in France and Germany. The consumer products division was down 9.4% like-for-like though considered stable, with difficulties in makeup and strength in hair care, particularly home-use hair colour. L’Oréal’s professional products division was down 21.3% like-for-like, “penalised by the health crisis, with the sudden closures of hair salons worldwide”, but showed strength in e-commerce and signs of progressive improvement as salons gradually reopened.
Moving forward with ‘lucidity, confidence and resolve’
Agon said L’Oréal’s business resilience had been the result of “several key strengths” across the group: e-commerce which had grown 64.6% in H1 2020; a growing business in China – up 30% in Q2 2020; and the overall power of its brands which had proven to be “a true refuge for consumers in these troubled times”.
Moving forward, he said L’Oréal would continue to accelerate business and engage with consumers.
“We approach this second half with lucidity, confidence and resolve,” Agon said. “Lucidity because the global health crisis is unfortunately not over. Confidence because consumers’ appetite for beauty is intact, access to points of sale should be easier going forward, and e-commerce will continue to get stronger. And finally resolve because in this second half of the year, we are embarking on an aggressive plan of new product launches and business drivers to stimulate, in partnership with our retail partners, the return of the consumption of beauty products.”