L'Oreal Jumps as Luxury Cosmetics Get Another Boost in China

(Bloomberg) -- L’Oreal SA surged after sales of its high-end cosmetics continued to surge in the third quarter, with Chinese demand leading the world’s biggest maker of beauty products to beat growth estimates.

  • Sales in L’Oreal’s luxury division, including Lancome and Kiehl’s, jumped 16 percent. Overall sales totaled 6.47 billion euros ($7.35 billion), besting the 6.34 billion euros forecast by analysts.

Key Insights
  • The same wave of China luxury demand that has boosted luxury giant LVMH and Gucci owner Kering SA is lifting L’Oreal, whose high-end products like $34 Yves Saint Laurent eyeliner are making up for sluggish performance in the company’s mass-market brands.
  • The latest quarter continues a pattern, with sales in the division including mainstream brands like Maybelline makeup falling below expectations. L’Oreal is investing in digital services and racing to expand its lineup of naturally inspired products to try to gain share.
  • Management signaled optimism that the China trend can continue, despite a trade war with the U.S. and a customs crackdown on undeclared purchases that have unnerved some investors in luxury companies. Chief Executive Officer Jean-Paul Agon said on a call that he’s seen no signs of a slowdown in the region.
  • L’Oreal has paved the way for luxury-goods sellers in marketing to the Instagram generation, including a “beauty squad” of video bloggers. E-commerce rose 38 percent and represents almost one-third of sales in China, the company said.

Market Action

  • The shares jumped as much as 6.4 percent early Wednesday in Paris. Through Tuesday’s close they had barely budged for the year.

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  • For more on L’Oreal’s sales report, click here.

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