Beauty revival boosts L’Oréal’s end-of-year sales

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A L’Oreal logo is seen at the company’s offices in Levallois-Perret, near Paris, France, May 7, 2021. REUTERS/Christian Hartmann

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  • L’Oréal will announce its fourth quarter sales and annual results on Wednesday
  • Results will be announced after market close.
  • Analysts see sales growth of 9.3% on average

PARIS, Feb 8 (Reuters) – The world’s biggest cosmetics group, L’Oreal, is expected to post strong fourth-quarter sales on Wednesday after pandemic-weary consumers emerged from lockdowns to dabble in beauty products .

Investors will be looking for the impact of increased marketing spending on L’Oreal’s (OREP.PA) margin and listening to executives’ earnings presentation on Thursday for any clues as to whether sporadic lockdowns to curb the coronavirus would have may have weighed on cosmetics sales in China.

The supplier of the Maybelline and Lancôme brands does not disclose its commercial objectives. It is expected to post like-for-like sales growth of 9.3% for the last three months of the year, according to consensus estimates cited by Credit Suisse.

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Like rival Estee Lauder, L’Oreal likely benefited from increased employment and rising wages in the United States, where consumers treated themselves to luxury goods as socializing resumed.

The trend is expected to boost L’Oreal’s second division, L’Oreal Luxe, which sells Yves Saint Laurent lipstick and Kiehl’s facial cleansers. Last year, the unit acquired Youth to the People, a California-based label that sells skincare with vegan ingredients. L’Oreal shares are up 21.5% over the past 12 months.

After cutting advertising and product launches when the pandemic hit in 2020, L’Oreal last year resumed spending on marketing and new products, including a range of Valentino cosmetics.

L’Oréal has also shifted its focus from brick-and-mortar stores to online distribution, training and recruiting stylists online and enlisting social media influencers to plug brands such as its skincare line without CeraVe flourishes, on TikTok.

Its operating margin is expected to have increased by 40 basis points in 2021, despite a 165-point margin increase in the first half, according to Credit Suisse estimates.

“While strong topline growth and company mix impacts may suggest that margin expansion should be stronger, we do not believe L’Oréal will stray too far from its proven reinvestment model. and therefore modest margin improvements,” said Credit Suisse analyst Eamonn Ferry.

L’Oréal has been steadily gaining market share in the beauty and personal care market over the past few years. Its 9.8% market share puts it ahead of rivals Procter & Gamble, Unilever and Estee Lauder in the category, a position it has held since 2016, according to data from Euromonitor International.

Estee Lauder, which owns the La Mer and Clinique brands, raised its full-year revenue and profit forecast last week after shoppers returned to stores over the holidays to stock up on make-up and skincare, undeterred by price increases. Read more

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Reporting by Mimosa Spencer; edited by Barbara Lewis

Our standards: The Thomson Reuters Trust Principles.

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