L’Oreal Sales Rise Helped by Chinese Duty-Free Demand in Hainan

L’Oreal SA sales rose in the first quarter as the beauty giant got a boost in demand from a duty-free island in China.

Sales in that country jumped 38%, the company said in a statement Thursday. In a call with analysts, Deputy Chief Executive Officer Nicolas Hieronimus said demand in Hainan partially drove the performance.

“Hainan is becoming a big piece” of the travel retail market in Asia which is still suffering in other regions, he said. The Chinese couldn’t travel last year for the New Year holiday, but this year they were able to head to Hainan, he added.

China’s growth rate shows how important that market has become, said Jonathan Siboni, CEO of Paris-based data-intelligence firm Luxurynsight. L’Oreal is “cementing its dominant position in the Chinese beauty market by taking advantage of the duty-free opportunities represented by Hainan as international travel remains subdued.”

Revenue in North America also rose, although to a less degree, with early signs of a recovery for the makeup category, Hieronimus said. Western Europe remains slow, with revenue shrinking 2.4% as many countries faced renewed outbreaks. L’Oreal’s home country of France is going through its third lockdown with non-essential stores shut. Virus fatalities in the country topped 100,000 on Thursday.

There are early signs that show how a successful vaccination drive can be linked to a rebound, with Israel showing strong demand in March, Hieronimus said.

Broad Range

L’Oreal’s broad range of offerings has helped it weather the pandemic. A boom in skincare products, for example, helped offset lower demand for makeup as social occasions dwindled. Revenue at the active cosmetics unit, which includes brands including CeraVe and La Roche-Posay, rose 29%. Chief Executive Officer Jean-Paul Agon expects growth for this unit to continue even once the pandemic recedes, highlighting CeraVe in particular.

L’Oreal is about to go through a major management shift, with Agon set to hand over the reins after 15 years to Hieronimus on May 1. Agon will stay on as chairman. L’Oreal holds its annual general meeting on Tuesday.

Overall, the company’s sales climbed 10% on a comparable basis to 7.6 billion euros ($9.1 billion) in the first quarter, outperforming the overall beauty market, according to Agon. Analysts were expecting revenue of almost 7.7 billion euros.

©2021 Bloomberg L.P.

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