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L’Oréal struggles in U.S. as sales slow down

By Andrew McDougall+

15-Apr-2014

A sales slowdown in the U.S. and the effects of currency shifts have seen a slight drop in L’Oréal’s first quarter sales, though the alarm bells haven’t quite gone off for senior management just yet.

The cosmetics maker reported revenue of €5.64 billion ($7.79 billion), up 3.5% on a like-for-like basis, but this was below analyst forecasts and market expectations of over 4%.

North America is slightly down compared to last year, particularly in the Consumer Products Division, due to a flat market in the U.S. this year, and the launches of Advanced Hair Care by L'Oreal Paris and Olia hair coloring by Garnier in the same three months last year.

Along with this ‘sluggish trend’, L’Oréal has also seen currency movements reduced revenue by 5% in the period.

However it is no major shock to the cosmetics maker’s bosses as it was announced in February that first-quarter revenue growth in North America would trail the 6.3%it recorded in the same period last year, and company CEO Jean-Paul Agon remains confident it will pick up.

‘Flat market’

In a conference call transcribed on Seeking Alpha, the L’Oréal chief says he cannot remember a flat market for many years in the USA for its consumer division.

He says it was expected as the Advanced Hair Care last year was the biggest launch ever in the L'Oreal company worldwide, making it difficult to follow.

“In the U.S. as the market has been absolutely flat,” adds Agon. “Zero growth in this first quarter due to slow demand from consumers, but also some weather conditions that were not ideal [and has had an impact on] the Consumer Products Division U.S.”

Despite this, Agon notes that although there are ‘uncertainties’ still in the economic situation, L'Oréal’s sales and profits will grow this year despite the initial drop in revenue; and full-year revenue growth should exceed its forecast.

"The start of this year confirms our confidence in our ability to outperform the market once again in 2014 and to achieve another year of sales and profit growth," he states.

Elsewhere

Results for the total cosmetics division saw an increase of 7%; however The Body Shop sales decreased by 3.4%, slowing the overall figure.

In Europe, the French firm has confirmed the market recovery with 2.8% growth in Western Europe, while the Southern region has posted positive figures for the first time since 2007.

Active Cosmetics continued to lead growth up 8.7%, while L'Oréal Luxe grew 7.2%. As the Professional Products Division also continued to improve it highlighted that the Consumer Products Division is flagging, with the weakest growth, fuelled by the market slowing in the States.

In fact the States shows the most notable slowdown, offsetting the successes in Europe as sales have really stalled; whilst in the New Markets a considerable boost for the first three months has been reported.

Africa, Middle East climbed 14.9%, Latin America rose 8.2%, Eastern Europe increased 6.3% and Asia Pacific was up 6.8% with Japan up 9% and Asia excluding Japan, up 6.6%.

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