L’Oreal reports healthy 2017: notes “strong potential” of travel retail
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L’Oréal’s 2017 sales climbed +2% year-on-year (at constant exchange rates) to €26 billion. Like-for-like sales were up +4.8% and net profit (excluding non-recurring items) increased +2.8% to €3.7 billion.
The company noted the “strong potential” of its travel retail business, which celebrated its 40th anniversary last year.
Group revenue growth was buoyed by e-commerce sales, which rose +33%.
L’Oréal Luxe sales grew by +10.6% on a reported basis with Asia Pacific delivering a double-digit increase. China and travel retail both achieved “particularly good figures”.
Sales in the Active Cosmetics division rose by +11.9%, with sales breaking €2 billion.
The Consumer Products division posted +1% growth while Professional Products sales decreased -1.4%.
L’Oréal Chairman and CEO Jean-Paul Agon said: “In a beauty market that pursued its steady growth in 2017, L’Oréal had a good year with sustained sales growth momentum, and robust profits. As announced, the second half accelerated compared with the first, particularly in the fourth quarter with +5.5% like-for-like growth. All the divisions recorded sales growth, especially L’Oréal Luxe which is delivering spectacular growth, particularly in Asia. The Active Cosmetics division achieved more than €2 billion in sales for the first time.
“Growth in the Consumer Products division is being slowed by the continuing difficulties of the American and French markets, while sales in the Professional Products division improved at the end of the year. Today more than ever, L’Oréal can rely on its unique portfolio of powerful and complementary brands, eight of which now have sales above €1 billion.
“As for the geographic zones, the New Markets exceeded more than €10 billion of sales for the first time ever, thanks especially to the dynamism of Asia Pacific. Performance in Western Europe remained solid.
“2017 was especially notable for the accentuation of our digital edge and the strengthening of our positions in two strategic channels. Firstly in e-commerce, where our sales accelerated to reach €2 billion, an increase of +33.6%. Secondly in travel retail, a channel with strong potential, in which L’Oréal celebrated 40 years of presence by strengthening its number one position.
“In terms of results, as announced, operating margin has reached the record level of 18% of sales, while increasing research expenses and business drivers. There were improvements in all our operating parameters; the quality of the results is also reflected in the record cash flow.
“And finally, in 2017, L’Oréal was recognised for its leadership in corporate social responsibility with, for the second year running, the best score awarded by the CDP, three ‘A’s, and L’Oréal has been ranked number 1 in all sectors by Vigeo Eiris. L’Oréal has also obtained first place in the world ranking by Equileap for gender equality.
“The Consumer Products division posted +1% growth while Professional Products sales decreased -1.4%.”
“As for 2018, in a market that should remain dynamic and contrasted, L’Oréal more than ever before has the best advantages in terms of innovation, brand power, digital prowess, and the quality of its teams all over the world, to win market share and strengthen its beauty leadership. We are therefore confident that, this year once again, we will outperform the market and achieve significant growth in like-for-like sales and an increase in profitability.”
RESULTS BY REGION
Western Europe
In 2017, Western Europe posted growth of +2.6% like-for-like and +1.5% reported. Growth was particularly robust in Great Britain, Spain and Germany, fuelled by the make-up and skincare categories. Sales in France continued to be held back by a slightly contracting market. The two main divisions, Consumer Products and L’Oréal Luxe, outperformed their respective markets, and the Active Cosmetics division’s growth accelerated in the second part of the year.
North America
North America posted growth of +1.7% like-for-like and +3.5% reported. Make-up sales were driven by NYX Professional Makeup and L’Oréal Paris. Haircare is “proving less dynamic”, L’Oréal said. The strong performance of Active Cosmetics was bolstered by the recent acquisition of CeraVe and the SkinCeuticals and La Roche-Posay brands.
New markets
Asia Pacific recorded growth of +12.3% like-for-like and +9.2% reported. China’s strong growth was fuelled by ‘very good’ e-commerce results across all divisions. India, Thailand and Malaysia all posted strong gains.
Latin America sales increased +5.6% like-for-like and +6.2% reported. Mexico and Argentina recorded double-digit growth, while the economic environment remains difficult in Brazil. The L’Oréal Luxe and Active Cosmetics divisions achieved double-digit rises, driven by Lancôme and La Roche-Posay. Make-up turned in a solid performance for Consumer Products, reflecting the expansion of NYX and the continued growth of Maybelline.
Eastern Europe was up +8.6% like-for-like and +11.4% reported. Turkey and Central Europe were the growth drivers, while sales in Russia were ‘satisfactory’. E-commerce now accounts for more than 5% of sales in this region.
Sales growth in Africa and the Middle East was -7.1% like-for-like and -9.4% reported, with a “clear improvement” in the second half. Despite substantial declines in markets, the situation is stabilising in the Gulf states, said L’Oréal. Sales in Egypt were “dynamic”.
Questions & Answers
Q.Which specific markets were challenging for L'Oréal's Consumer Products division in 2017?
Which specific markets were challenging for L'Oréal's Consumer Products division in 2017?
The growth in the Consumer Products division was slowed by ongoing difficulties in the American and French markets. This impact was noted by Chairman and CEO Jean-Paul Agon in his comments on the company's performance.
Q.Which regional markets showed particularly strong growth for L'Oréal in Western Europe during 2017?
Which regional markets showed particularly strong growth for L'Oréal in Western Europe during 2017?
In Western Europe, growth was robust in Great Britain, Spain, and Germany, largely driven by sales in the make-up and skincare categories. This helped the region achieve 2.6% like-for-like growth.
Q.What contributed to the strong performance of the Active Cosmetics division in North America?
What contributed to the strong performance of the Active Cosmetics division in North America?
The Active Cosmetics division's strong performance in North America was bolstered by the recent acquisition of CeraVe. Also, the SkinCeuticals and La Roche-Posay brands also contributed positively to its results.
Q.What was the significance of the travel retail channel for L'Oréal in 2017?
What was the significance of the travel retail channel for L'Oréal in 2017?
Travel retail was highlighted as a channel with strong potential, where L'Oréal strengthened its number one position. The company also celebrated 40 years of presence in this strategic channel during 2017.
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