L’Oreal Shares Surge as Demand Grows for Premium Makeup Brands
(Bloomberg) -- L’Oreal SA’s shares soared the most in almost seven months after revenue beat analysts’ estimates on rising demand for the cosmetic maker’s high-end brands in North America.
Third-quarter sales excluding acquisitions, disposals and currency swings rose 5.6 percent, L’Oreal said Thursday after European markets closed. Analysts predicted growth of 4.5 percent. The maker of Urban Decay cosmetics reiterated that it expects second-half sales to improve on last year’s result. The shares rose as much as 5.2 percent in early Paris trading, the biggest intraday gain since April 19.
“While the market is positioned for a positive surprise from L’Oreal, it has not failed to deliver,” Jeff Stent, an analyst at Exane BNP Paribas, said in a note. The performance “stands head and shoulders above most consumer staples reporting in the third quarter.”
The company joins Nivea cream maker Beiersdorf AG in reporting a better-than-expected quarterly performance, providing a contrast to lackluster results from their consumer-sector peers. Estee Lauder Cos., Reckitt Benckiser Group Plc, and Unilever posted third-quarter sales that missed analysts’ estimates recently as price increases put off consumers.
“L’Oréal bucked the trend of a tough third quarter,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note.
L’Oreal Chief Executive Officer Jean-Paul Agon has acquired high-end fragrance and makeup brands such as Atelier Cologne and IT Cosmetics to build on its growth momentum in North America. Like-for-like sales in the region rose 7.5 percent in the quarter, compensating for slower demand in Asia and Western Europe, where L’Oreal said it is outperforming the market.
L’Oreal’s luxury unit had a particularly strong quarter, with like-for-like sales growth of 9.3 percent. The division, whose brands include Lancome, is making market-share gains worldwide, the company said.
The global rollout of NYX Professional Makeup was a highlight for the consumer-products unit, which posted like-for-like sales growth of 4.7 percent. The company’s struggling Body Shop unit also rebounded, showing growth of 2.8 percent.
- Group revenue was 6.15 billion euros ($6.8 billion), compared with the 6.09 billion-euro average estimate.
- Cosmetics LFL sales growth of 5.6 percent beat the 4.6 percent average estimate
- Western Europe LFL revenue rose 2.2 percent, new markets gained 7.1 percent