L'Oreal bucks declining trend with Chinese sales growth in second qtr

Cosmetics group L'Oreal bucked a declining trend for the luxury and fashion industry in China with sales growing in the second quarter despite COVID-19 lockdowns, as the make-up market rebounds.

The group said on Thursday overall sales for the three months to June came in at 9.31 billion euros ($9.46 billion), an increase of 13.4% on a like-for-like basis. The figure beat analyst expectations for an 8.9% rise in revenues, according to a Visible Alpha consensus cited by UBS.

"Make-up is really bouncing back," L'Oreal Chief Executive Nicolas Hieronimus told Reuters in an interview, as post-pandemic socialising accelerates and people go out to parties and events.

The executive, who estimates the global cosmetics market is growing at 6%, noted a return of lip glosses and "a lot of colour," which he attributed to people emerging from two "very difficult years."

In China, where many Western labels have seen a drop in sales since mid-March due to store closures and restrictions on movement, L'Oreal grew revenues by 13% over the quarter, outpacing a decline of around 6% in the market, thanks to a lift from e-commerce sales, Hieronimus said.

"We really thrived (in China)," he added.

"L'Oreal has delivered another quarter of gravity-defying growth," said Jefferies, citing the group's performance in China.

Like-for-like sales grew 10.7% in North America, as shoppers flocked to stores to stock up on lipsticks and high-end fragrances.

The group's consumer products division, which owns labels spanning from Maybelline to L'Oreal Paris, grew by 9.1%, marking an acceleration from last quarter's rate of 6.9%, as consumers shrugged off rising costs and continued to splurge on beauty products.

"We have so far continued to see upgrading of consumers in every category," Hieronimus said, adding this was helping to offset rising input costs.

L'Oreal Luxe, the division behind Yves Saint Laurent lipsticks and Helena Rubinstein foundation, grew sales by 15.3%, outpacing the perfumes and cosmetics division of rival LVMH , which posted 8% growth over the same period, marking a slowdown from the previous quarter.

Despite an uncertain outlook for the second half of the year, the company is "overall pretty confident, even bullish," about business prospects, Hieronimus said.

($1 = 0.9838 euro)