L’Oréal shares fall as mass-market brands struggle

L’Oréal’s revenue fell short of analyst estimates. (Bloomberg pic)

CLICHY: L’Oréal SA shares fell as weakness in its mass-market brands hampered the cosmetics giant’s sales growth, despite buoyant Chinese demand for high-end potions.

The French beauty conglomerate reported revenue that fell just short of analyst estimates after the Paris stock market closed Thursday. While growth in the luxury division was helped by strong sales of Lancôme’s Genifique and Kiehl’s Midnight Recovery ranges, mainstream brands such as Maybelline fell short of expectations.

Shares dropped as much as 3.7% in early Paris trading on Friday.

A push to reinvigorate the consumer division bore fruit more slowly than expected, with sales rising 2.3% on an organic basis. The unit has faced a slump in US retail as well as more competition from niche brands. Sales were weak in France, the UK, and Brazil, the company said.

The luxury division did better, with sales rising 13%. Chinese consumers have kept their appetite for L’Oreal’s high-end names such as La Roche-Posay even amid concerns that luxury spending may slow in that market. LVMH, which sells Sephora beauty products, said earlier this week that demand hasn’t yet been dented by concern over China’s declining stock market and trade war with the US.

Second-quarter sales rose to 6.61 billion euros (RM31.22 billion) overall, excluding currency swings, narrowly missing the 6.62-billion (RM31.27 billion) average estimate of analysts.

The results “reinforce our confidence in our ability to once again outperform the cosmetics market in 2018, and to achieve significant like-for-like sales growth and an increase in our profitability,” Chief Executive Officer Jean-Paul Agon said in a statement.

In the first quarter, a spike in the euro’s value against the dollar wiped out nearly all of L’Oréal’s reported gains even as the company posted its fastest growth in eight years. The euro has since weakened, giving a boost to L’Oréal’s bottom line. First-half operating profit was 2.58 million euros (RM12.19 million).