The cosmetics giant L’Oréal performed unexpectedly weakly in the third quarter. Although the important business in mainland China continued to recover from the long period of weakness, the manufacturer’s sales development across the group fell short of expectations. And developments in North America were also disappointing. The share price fell sharply on the stock market on Wednesday morning.
In the first hour of trading, the price temporarily fell by almost eight percent, making the share bottom of the EuroStoxx 50. The stock has had a rollercoaster ride so far this year, after reaching a high of just under 462 euros in June 2024. The stock is now a long way from this record, although it has increased since the turn of the year. Around 375 euros per share were recently paid in the middle of the week, and the current losses have also reduced the previous annual increase to less than ten percent.
The current results miss market expectations
Analysts were unanimously disappointed by the figures. Jefferies expert David Hayes spoke of a clear “failure” compared to the high market expectations. According to RBC analyst Wassachon Udomsilpa, while the Professional division continued to be a standout performer, the personal care group’s other three divisions fell short of expectations. Celine Pannuti, industry expert at the US bank JPMorgan, is now counting on a recovery in the fourth quarter – but this is not certain, she admitted.
L’Oréal boss Nicolas Hieronimus himself was satisfied with the latest business development. “As expected, our comparable growth continued to accelerate,” he said, according to a statement Tuesday evening. Progress was broad-based and all regions contributed.
L’Oréal achieved particularly strong growth in professional products and specialty skin care brands in the third quarter. But luxury products and mass cosmetics also sold better. On a comparable basis, group-wide sales increased by 4.2 percent to 10.3 billion euros. However, analysts had expected an increase of 4.9 percent.
However, business in North Asia, which had collapsed in the previous quarter, went better than experts expected. In the third quarter, sales in the region increased by 4.7 percent to almost 2 billion euros – the market had only expected an increase of 3.2 percent. After falling behind in the first half of the year, L’Oréal has now worked its way into a slight plus in North Asia.
The North Asia region also includes business on mainland China, where the group had to struggle for a long time with the population’s strong reluctance to consume. After initial signs of recovery in the second quarter of the year, L’Oréal was now able to accelerate its growth there to a mid-single-digit figure. In addition to luxury brands, new products in particular were in high demand, it said.
The French were also able to boost growth in Europe, where they recorded a comparable quarterly increase of 4.1 percent. In North America, hair care products sold particularly well, as did fragrances and cosmetics. However, with a comparable sales increase of 1.4 percent in the quarter, the region lagged behind the other sales markets and performed significantly weaker than analysts expected.
L’Oréal, like its competitors, is struggling with weak consumer demand there, also as US President Donald Trump has disrupted global trade with tariffs. In the previous quarter, L’Oréal achieved growth of more than eight percent in North America.
Before taking over Kering’s beauty division: The outlook is optimistic
Meanwhile, CEO Hieronimus was positive for the year as a whole: “I am confident that we will outperform the global beauty market and achieve another year of sales growth and further increase our profitability.”
The manager also has high hopes for an alliance with the luxury group Kering that was announced just this week. For 4 billion euros, L’Oréal is taking over its perfume manufacturer House of Creed as well as 50-year licenses for the development and marketing of beauty products for some of Kering’s fashion labels.