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L'Oréal Shares Fall as Mass-Market Drugstore Brands Struggle

Lower-end brands such as Maybelline fell short of estimates.
L'Oréal cosmetics | Source: L'Oréal
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  • Bloomberg

PARIS, France — L'Oréal shares fell as weakness in its mass-market brands weighed on the cosmetics giant's sales growth, despite buoyant Chinese demand for high-end products.

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

Shares dropped as much as 3.7 percent in early Paris trading Friday.

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

“Clearly we are not happy with the growth of this division,” Chief Executive Officer Jean-Paul Agon said Friday on a call. “We’d like to get back progressively, but soon get back to 3 or 4 percent growth.”

The luxury division did better, with sales rising 13 percent. Chinese consumers have kept their appetite for L'Oréal’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 U.S.

Second-quarter sales rose to 6.61 billion euros ($7.71 billion) overall, excluding currency swings, narrowly missing the 6.62 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,” Agon said in a statement Thursday.

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.

By Robert Williams.

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