Strong Asian demand gives L'Oreal a sales bounce

Maybelline parent L'Oreal posted a stronger than expected rise in third quarter sales on Tuesday, driven by booming demand for its luxury brands even as it struggled to revitalise sales in its largest mass market division.

Like luxury goods makers, cosmetics companies like L’Oreal or Japan’s Shiseido have been hit by fears over a slowdown in China, which sparked a stock market sell-off. Shares in the French beauty group are down 15 percent since a peak in August.

But the company said on Tuesday that appetite for its mass-market brands like L’Oreal Paris and especially luxury labels like Lancome remained robust in Asia, with the pace of revenue growth in the region even accelerating from a quarter earlier.

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“The group is growing rapidly in Asia, especially in China where the boom in luxury products continues,” CEO Jean-Paul Agon said in a statement.

A particularly strong performance in the luxury division, which also houses Yves Saint Laurent make-up and brands like Clarisonic, helped L’Oreal to beat expectations in the July to September period.

Overall revenues came in at 6.47 billion euros ($7.34 billion), up 6.2 percent from a year earlier and rising 7.5 percent on a like-for-like basis, which strips out currency swings and the effect of acquisitions.
Analysts polled by Inquiry Financial for Reuters had expected comparable sales to rise 5.79 percent.

Rivals more squarely focused on the luxury segment like U.S.-based Estee Lauder have also been performing well.

L’Oreal has been struggling, however, to counter more sluggish growth in its consumer products division, with sales coming in a little below forecasts and matching the lackluster 2.3 percent like-for-like growth of the second quarter.

The company said there were some improvements in western Europe during the third quarter in this division, which also comprises brands like Garnier shampoo, but said that the Brazilian market in particular was still tough.