L’Oréal reports 5% net profit drop for 2020 despite strong Q4 and ‘record year’ in actives

By Kacey Culliney contact

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Growth in Asia-Pacific had been particularly strong - the only region to report a sales rise for 2020, with China's performance described as 'spectacular' (Getty Images)
Growth in Asia-Pacific had been particularly strong - the only region to report a sales rise for 2020, with China's performance described as 'spectacular' (Getty Images)

Related tags: L'oréal, financial results, 2020, 2021, active beauty, active cosmetics, China

International beauty major L’Oréal has reported an overall loss in net profit for the full year of 2020, despite a spike in sales for the fourth quarter, most notably in active cosmetics and across China.

For the fourth quarter (Q4) of 2020, L’Oreal pulled in sales of €7.8bn, up 4.8% on a like-for-like basis on the previous year, with its Active Cosmetics division posting the most significant growth with a like-for-like sales spike of 30.7%. Q4 also saw sales rise 6.5% across L’Oréal’s Professional Products division; rise 4.4% across L’Oréal Luxe; but dip 0.4% in Consumer Products – the only division to see sales drop in the quarter on a like-for-like basis.

For the full year of 2020, L’Oréal’s total sales dropped 4.1% like-for-like to €27.9bn, with net profit after non-controlling interests down 5% to €3.5bn for the year.

Its Active Cosmetics division was the only business to grow in sales terms for the full year, up 18.9% like-for-like. L’Oréal Luxe sales dropped 8.1% in 2020; Professional Products sales were down 6.4%; and sales in Consumer Products dipped 4.7% on a like-for-like basis.

Regionally, Asia Pacific was the only market that reported growth for the full year of 2020, with sales up 3.5% like-for-like, surging 16.6% in Q4 alone. Sales in Western Europe declined 10.3% for 2020 and declined 7.4% in North America; both regions also reported total sales declines for Q4 – down 5.9% and 0.1%, respectively.

L’Oréal ‘returned to growth’ in H2 2020 despite COVID-19

Jean-Paul Agon, chairman and CEO of L’Oréal, said these results were indicative of a year defined largely by the ongoing COVID-19 crisis.

“In 2020, the COVID-19 pandemic, which spread across the world, triggered a crisis of supply due to widespread closure of points of sale which led to an unprecedented, if temporary, decline of the beauty market,”​ Agon said.

However, L’Oréal had “returned to growth”​ in the second half of 2020, he said, as had been anticipated and announced.

“After demonstrating its resistance over the first half of the year, the group engaged the second half with a determined and virtuous dynamic; launching major innovations, reinvesting in business drivers leading to a return to growth like-for-like, with flexibility and rigorous cost control allowing for an improvement in profitability.”

E-commerce had widely participated in this, Agon said, with growth up 62% across all divisions.

“Thanks to its strength in digital and e-commerce, which has again increased considerably during the crisis, L’Oréal has been able to maintain a close relationship with all its consumers and compensate to a large extent for the closure of points of sale.”

Looking to 2021, Agon said L’Oréal remained confident in its capacity to outperform the market again, despite this year continuing to be “marked by uncertainty regarding the evolution of the pandemic”, ​because consumer appetite for beauty “remains intact across the world”.

Active Cosmetics experienced a ‘record year’ in 2020

On a division-by-division basis, Agon said Active Cosmetics had seen “a record year driven by a dynamic skin care market and the remarkable success of its brands, recommended by healthcare professionals”.

CeraVe, La Roche-Posay and SkinCeuticals had clearly “all aligned with consumers’ health aspirations”​ and were the brands most widely recommended by medical professionals, notably dermatologists, according to L’Oréal.

Despite this, e-commerce had been the division’s “the main growth driver” ​in 2020, ​the company said, “supported by a dynamic activation strategy”​.

New product launches, including Vichy’s anti-ageing serum Lifactiv Supreme H.A. Epidermic Filler had also fuelled sales.

APAC spotlight – ‘the performance of China is spectacular’

Worldwide, APAC was the only region that reported growth in 2020, and mainland China generated a significant spike in like-for-like sales, up 27% for the year. This, L’Oréal said, had largely been boosted by “strong omnichannel demand”​ and a “very dynamic e-commerce”​ business.

Premiumisation had also played an important role in China’s growth for the year, it said, as consumers continued to seek out “higher performance and superior product quality”​.

Agon said: “The performance of China is spectacular and its contribution to the performance of the group is important.”

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