L’Oréal’s fourth quarter results have come in below analysts expectations due to a difficult sales environment in Asia.
The French beauty group’s sales soared 6.9% to €10.6bn for the three months ended 31 December 2023, but the figure fell short of analysts expected growth of 9.5%.
Sales in North Asia, which includes China, were down 6.2%.
“North Asia continued to be impacted by the reset in travel retail following the change in policy regarding daigous,” read a statement from L’Oréal.
Daigou is a form of cross-border exporting which refers to individuals or agents who purchase and import goods from overseas for resale in the Chinese market.
“The miss comes almost entirely from China,” said Bernstein Analyst Bruno Monteyne about L’Oréal’s results in a note entitled ‘Disappointing end to the year’.
“Travel retail is still a bigger drag than expected, but mainland China was possibly in decline as well,” he added.
“The company states 5% for the mainland for the full year, but looking at previous quarters, that would suggest 0% to 2% growth in Q4.
“Until now, L’Oréal was always able to find some hot spots of growth around the world to offset weakness in another area.”
L’Oréal’s performance in Asia is in stark contrast to the 11.6% sales growth it achieved in Europe and 9.4% in North America for the period.
CeraVe is a top perfomer in L’Oréal's Dermatological Beauty Division
What else did L’Oréal’s financial results reveal?
L’Oréal’s full year sales for 2023 reached €41.18bn, up 7.6% in reported terms and 11% on an organic basis.
This is the beauty congolmerate’s third consecutive year of double-digit growth.
The division’s sales surged 4.5% to €14.92bn, with new distribution channels in the US and Amazon offsetting any stagness in Asia and travel retail.
Sales increased 28% to €6.4bn, delivering the division’s sixth consecutive year of double-digit growth.
Momentum was “strong” across all regions and driven by increased consumer interest in aesthetic-related brands.
Skin care brand Vichy reported its best growth in 18 years, while La Roche-Posay’s latest sun care product UVmune400 proved popular.
CeraVe also continued to cement its presence in the US, where it is now the number-one skin care brand in the region.
CeraVe has also just teased a humorous new Super Bowl ad, which stars unlikely brand ambassador actor Michael Cera.
Maybelline New York is driving sales in the Consumer Products Division
How did L’Oréal’s other divisions perform?
L’Oréal’s Consumer Products Division reported its best growth in more than 30 years at 12.6% like-for-like, surpassing €15bn.
Make-up was the top contributor to the growth, with L’Oréal Paris a strong performer.
The cosmetics brand crossed the €7bn sales mark thanks to successful launches like Infallible Matte Resistance Lipstick.
The division performed best in Europe, “where momentum saw a truly spectacular acceleration, making it a key growth contributor,” said a statement from L’Oréal.
It also delivered “robust growth” in emerging markets, particularly Mexico, Brazil and India.
L’Oréal’s Professional Products Division also delivered a financial boost thanks to its strategic focus on hair care.
The division reported growth of plus 7.6% like-for-like as it “strengthened its omnichannel approach and conquered new markets,” read a company statement.
Momentum was “positive across all regions”, but led by demand in China, which is the division’s second largest market.
L’Oréal’s future plans
“2023 was a very successful year for the group,” said L'Oréal CEO Nicolas Hieronimus.
“In a challenging environment of geopolitical tensions, inflationary pressures and a stagnating beauty market in China, we delivered our best like-for-like growth in more than 20 years (excluding 2021).
“This is a clear vindication of the power of our multi-polar model.”
Hieronimus said the group remains “optimistic” about the outlook of the beauty market in 2024 and is “confident” in its ability to achieve another year of growth.
He said its future will also have beauty tech at its core.
“Beauty tech will shape our industry and enable us to further strengthen our leadership,” said Hieronimus.
“It will allow us to know our consumers ever-better, to bring them ever-more impactful and sustainable products and services, and to become ever-sharper in our execution.”
Lead image: L’Oréal Paris.
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