(AOF) – In a market that closed yesterday up slightly, L’Oreal gleaned 0.78% to 415.50 euros. According to a market source, Bernstein readjusts his opinion from neutral to long. The target price is modified upwards to 440 euros against 425 euros previously.
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Key points
– World leader in cosmetics, created in 1909;
– Group organized into 5 divisions generating €38.3 billion in sales: luxury for 38%, consumer products for 37%, active cosmetics for 13% and professional products;
– Powerful international position, with 35 global brands and balanced revenues between Europe (30%), North Asia (30%), North America (27%) and the rest of the world;
– Business model based on 5 pillars: high R&D around 800 M€, innovation contributing to 15% of annual sales, release of new products between 15 and 20% per year, positioning in “premium” products, brands global and focus on e-commerce;
– Capital characterized by the strong positions of the Bettancourt and Meyers families -34.7%- and of Nestlé -20%-, Jean-Paul Agon chairs the board of directors of 16 members, Nicolas Hieronimus being managing director;
– Healthy balance sheet with €27.2 billion in equity and less than $5 billion in debt.
Challenges
– Average annual growth of more than 5% of the world beauty market, driven by the enrichment of the populations of emerging countries and their aging in the OECD;
– Innovation strategy aimed at making the group the leader in “Beauty Tech”;
– 3% of income invested in research & innovation, approximately 500 patents filed per year by 21 research centers,
– focus on digital, reinforced by acquisitions (ModiFace, leader in augmented reality and artificial intelligence), by equity investments in start-ups with the BOLD fund and partnerships with GAFAM, Alibaba and Tencent , Verily (skin aging),
– integration of sustainability criteria into products;
– “L’Oréal for the future” environmental strategy:
– carbon neutrality of sites by 2025 (North Asia, United States and Brazil since 2022) and, by 2030, all plastic packaging of recycled or biosourced origin and 50% reduction in CO2 emissions vs. 2018 for each finished product,
– display of the social and environmental impact of products;
– Ability to generate high operational self-financing -€5.6 billion;
– Integration of the Americans Youth to the people and Skin BetterScience;
– History of sales growth above the market for 14 years and reinforced by digital, at 29% of turnover.
Challenges
– Long-term evolution of the 8% stake in Sanofi;
– Expectation of a recovery in sales in China from the second quarter;
– 2023 objective of market outperformance and growth in sales and profit;
– 2022 dividend of €6, up 25%.
Learn more about the luxury sector
Market boom for several more years
According to Bain & Company, the global luxury market (fashion, cars, hotels, wines and spirits, cruises, etc.) will have recorded a 21% jump in sales in 2022, to 1,384 billion euros. The luxury personal products segment (jewellery, clothing, watches, leather goods, etc.) should grow by 22% and again grow by 3% to 8% in 2023 despite the expected economic slowdown. Growth should continue in the following years, with an increase that should reach 60% by 2030! According to Bain, spending by Americans in Europe has more than doubled between 2019 and 2022. This development is largely explained by a strong dollar. The Chinese market, on the other hand, is at half mast due to the “zero Covid” policy and strict confinements.