L’Oréal shows the biggest drop in the Cac 40 on Friday, the day after the publication of its third quarter sales. The title of the cosmetics group has lost nearly 5% and now a quarter of its value since the start of the year.
However, at first glance, the level of activity presented for the period from July to September is excellent. Over the three months, L’Oréal’s sales amounted to 9.58 billion euros, up sharply by 9.1% on a like-for-like basis. This is even better than what the consensus expected, namely an increase of 8.3% on the same basis.
Less than 5% growth in luxury
In North America, they emerged up 9.3%, with, admittedly, a slowdown in demand in July, but renewed attractiveness with the start of the school year. Sales increased by 10.5% in Europe where L’Oréal says it has ” strengthened its positions in Germany, Spain and the United Kingdom in particular. Restrictions linked to China’s “zero Covid” policy have certainly weighed in Asia, but this is not a surprise for investors.
No, the problem is elsewhere. The Stock Exchange is concerned about the impact of the loss of consumer purchasing power on the sales structure of the cosmetics group. Shoppers seem to be turning to L’Oréal’s cheaper products in the makeup and skincare segments as soaring inflation is melting the customer’s wallet.
“Some points could be unwelcome”
Sales in the company’s luxury arm, which includes brands such as Lancome Paris and Ralph Lauren, were weaker than those in mass market products, affected by issues including lock-downs in China, which have slowed down travel and therefore sales in duty free, and supply, underlines the Bloomberg agency. It is this branch of luxury, with strong growth, which is the spearhead of the group given its weight, to the point of exceeding the share achieved in mass consumption. In the third quarter, activity only progressed by 4.6% in the luxury branch, growth was limited to a small 0.3% in North Asia.
This is confirmed by the analysis of the RBC research office this Friday morning, which does not fail to note that the turnover is ” in the top “, but that the sales structure is ” questionable quality “. L’Oréal’s luxury division is thus ” far below expectations “. ” Another strong quarter. Some points could be unwelcome. “, pointed to his side Oddo BHF, to “neutral” on the title, “ volume growth affects all divisions… except luxury, which is slightly in decline. It also concerns all major geographical areas except North Asia (China = 2/3 of the area). »