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North American sales and currency translations pose challenges for L'Oréal

By Simon Pitman+

04-Aug-2014
Last updated on 04-Aug-2014 at 16:33 GMT2014-08-04T16:33:53Z

North American sales and currency translations pose challenges for L'Oréal

L’Oréal's second quarter results have underlined the fact that regional sales are most sluggish in the North American market. And while the performance in the Latin American market looks far brighter, currency translation is taking its toll.

Gains were most significant in developing markets, which helped to push up second quarter group sales by 4.1% on a reported basis to €5.54 billion, which represented a figure a fall of 0.7% when taking into consideration currency fluctuations.

For the first six months of the year, revenues were up 3.8% to €11.17bn, which represented -1.5% when taking into consideration the negative impact of currency fluctuations.

Operating profit for the business was up by 18.2% for the six months of the year to €2.03bn, which compared favorably to the same period last year, when operating profits were also up by nearly 18%.

European sales continue to show signs of recovery

In the mainstay North America market, sales for the second quarter were up by 2.4% but currency translations meant the reported figure was down by 3.3% to reach €1.33bn, while for the first six months the revenues were up by 0.9% and down 4.4% on a reported basis, at €2.62bn.

In the Latin American market, which is classified as one of L’Oréal’s new markets, revenues for the quarter were up were up 7.6% to €466.1m, but this figure was significantly impacted by currency translation, which meant that in reported terms the revenues were down 7.6%.

For the full six month period the Latin American revenues were up 7.8% to €876.9m, which represented a decrease of 8.9% on a reported basis.

In the other principle regions, sales in Western Europewere up 2.8% for the quarter to €1.96bn, an increase of 2.9% in reported terms, whereas sales in the Asia Pacific region were up 6.3% to €1.05bn, an increase of 0.4 in reported terms.

In the other new markets, Eastern Europe posted quarterly growth up 5.9% to €397.5m, a fall of 7.8% in reported terms, whereas sales in Africa and the Middle East rose by the highest rate, up 14.0% to €141.3m, an increase of 7.9% in reported terms.

‘Contrasts’ show up in distribution channels

L’Oréal CEO Jean-Paul Agon pointed out that there were contrasts in the performance of the company’s four primary distribution channels – professional products, consumer products, luxe and active cosmetics.

The strongest performance came from the luxe division where revenues for the quarter were up by 7.5% to €1.44bn on particularly strong performances in the new markets, most notably in China.

However, growth was slowest in the professional products division, where sales grew by 2.2% for the quarter to reach €769.9m, where the company conceded that growth had been weaker than expected in the Asia Pacific region.

Outlook for the full year 2014

On the back of the global performance of the company, executives believe that it is still on track to reach its full year objectives, despite the fact that the business has been hampered by currency translations.

 

In an uncertain economic and monetary environment, we are confident in the Group's ability to once again outperform the market in 2014 and to post another year of like-for-like sales growth, improved profitability and increased net earnings per share,” said Agon.

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