L’Oréal predicts 1920s-style boom for beauty

L’Oréal, the world’s biggest cosmetics maker, envisions a boom for beauty once the Covid-19 pandemic subsides similar to the roaring 1920s that followed the global influenza pandemic of 1918.

 

“This will be the fiesta of make-up and fragrances,” predicted chief executive Jean-Paul Agon at an investor conference on annual results on Friday. “Putting on lipstick again will be a symbol of returning to life.”

 

The upbeat message came after the company behind brands such as Maybelline, Garnier and Kiehl’s reported stronger-than-expected sales in the fourth quarter driven by Chinese shoppers and a surge in ecommerce. Both trends helped offset the damage wrought by the coronavirus pandemic last year, allowing L’Oréal to limit the profit hit from store and salon closures.

 

The centre of gravity of the French company has shifted to Asia in recent years. China is now its second-biggest market by revenue after the US. Its business there grew 27 per cent on a comparable basis last year, helped by consumers’ appetite for premium products, especially in skincare.

 

Asia was the only region to have posted revenue growth last year, with pandemic-driven store closures and business disruption proving more shortlived than in the US and Europe.

 

L’Oréal’s quarterly sales were €7.9bn in October to December, an increase of 4.8 per cent when the impact of currency movements and acquisitions were stripped out. Analysts had expected roughly 3 per cent growth.

 

Its sales performance at the end of last year was slightly better than rival Estée Lauder, which reported 3 per cent comparable growth, and far better than the 18 per cent decline for Coty, its problem-plagued smaller peer.

 

For the year, net profit fell by 5 per cent to €3.75bn, while the group held operating margins steady at 18.6 per cent by trimming spending on marketing, research and development, and on general costs.

 

L’Oréal shares rose 3 per cent on Friday morning, making it the biggest gainer on the blue-chip CAC 40.

 

The group, whose biggest shareholder is the billionaire Bettencourt-Meyers family, will have a leadership change in May when veteran boss Agon retires. Nicolas Hieronimus, the current deputy chief executive, will be tasked with leading L’Oréal during a global recession and at a time of rapid change for the sector.

 

The $500bn global beauty industry has had to pivot its messaging during the pandemic to emphasise wellness and self-care now that people are spending more time at home and occasions to dress up are rare.

 

Skincare products such as masks and lotions have sold well, while lipsticks have suffered from the broad adoption of wearing masks.

 

Repeated store closures caused by Covid-19 lockdowns meant that selling online became even more important.

 

Ecommerce, which includes sales on L’Oréal’s own websites as well as those of its partner retailers, rose by 62 per cent last year to account for more than one-quarter of group sales, up from 15.6 per cent of sales in 2019.

 

L’Oréal did not provide specific guidance for 2021, saying only that it was “confident in our capacity to outperform the market again this year” and that it would achieve “growth in sales and profits” if the health crisis permitted it.

 

L’Oréal said it would propose a dividend of €4 per share for 2020, up 3.9 per cent from 2019.

 

Source: Financial Times

Photo by freestocks on Unsplash

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