"We confirm for 2012 our ambition to outperform the market, and achieve another year of growth in sales, results and profitability," summed-up Jean-Paul Agon, L’Oréal’s CEO at the end of the presentation of the French cosmetics giant’s first-half results.
While they are slightly below expectations of financial analysts, the 10.5 per cent growth in sales (+6.7 per cent at constant exchange rates) and the 11.4 per cent growth of the operating profit, are even more impressive as they come from all the group’s divisions: +7.3% for professional products, +8.1% for consumer products, +6.6% for active cosmetics and, above all, +17.9% for luxury products (respectively: +2.9%, +4.7%, +5.4% and +10.4% at constant exchange rates).
The group has particularly benefited from the strong growth of its luxury division that is dramatically bouncing back after the harsh years that followed the 2008 crisis. Lancôme is reporting double-digit growth, Khiel’s is growing by more than 20%, and Clarisonic by more than 40%.
Strong growth in emerging markets
Geographically speaking, the group’s growth is clearly driven by the dynamism of “new markets” (Asia, Pacific, Latin America, Africa, Middle East, Eastern Europe). Outside these areas, L’Oréal’s growth remains strong in North America (+7.3% at constant exchange rates), while the group grew by 0.8% (at constant exchange rates) only in Western Europe.
However, Jean-Paul Agon highlights the group gained market share in all geographic areas outperforming the market everywhere.
For instance, while the cosmetics market grew by 3 or 4% in the United States, L’Oréal increased sales by 7 to 8%. Even in France, the group’s home market and the country where it has the biggest market share, L’Oréal grew 4%, in a flat growth context.
As far as product categories are concerned: skin care products enjoyed the highest rate, followed by perfumes and makeup, hair care and hair dyes recording lower rates.
Global market growth
Of course, as pointed out by Jean-Paul Agon, half-year figures are not particularly representative of the whole-year activity. However, the group confirm its growth target for 2012, as the global cosmetics market should grow by 4%. “Despite the strong uncertainties of the economic environment, we are considering the second half year with confidence. The cosmetics market is expected to remain buoyant, although we noticed clear signs of slow down during the summer, for instance in the Asian and US luxury markets and in travel retail," he said.
According to Jean-Paul Agon, the slow down of sales in Asia is particularly spectacular in Korea, where the market for luxury goods, which was growing by 20% two years ago, could record a flat growth this year. The group also noted a significant decrease in passenger flows and consumption in Asian airports.
Nevertheless, Jean-Jacques Agon confirms its growth expectations for the group, saying that it is primarily the result of initiatives, innovations and launches from its brands. In view of scheduled launches, he also anticipates the 4th quarter should outpaced the third one. However, Jean-Jacques Agon admitted L’Oréal had to adapt its marketing mix in the European countries that are strongly impacted by the crisis. "In Greece or in Spain, it is probably smarter today to invest in promotional activities rather than in television advertising.”