L'Oreal turns focus on US following poor European results
in the US market is being overshadowed by sluggish sales in Europe.
Meanwhile the company's continued focus on the China market is
market by a major product launch there this week, writes Simon
Pitman.
"I would not like the bad performance in Western Europe to mask the promising start in the United States, and the continued development of new markets," L'Oreal chief Lindsay Owen-Jones said at the company's AGM.
The executive's words came on the back of sales that were down 3.1 per cent in Western Europe, slipping from €1.83 billion (€2.37bn) in the first quarter of 2004, to €1.77 billion in the three months ending 31st March.
Meanwhile the company's performance in North America looked much healthier for the quarter, with sales increasing by 7.8 per cent to reach €893 million.
Overall sales for the entire group amounted to €3.54 billion, representing a 3.1 per cent increase on a like-for-like basis - figures that were below analysts expectations.
Owen-Jones also drew attention to the fact that the continued strength of the euro meant that currency impacted the results by a further 1.6 per cent.
"In Western Europe, sluggish consumer spending made distributors cautious in their purchasing patterns while our own product launch calender was a little intense during that period."
Owen-Jones said that the first quarter had represented a volatile period for the company because of the number of new product launches the company had made. Bearing this in mind, he said that he was still confident that the company would acheive its financial goals for the full year.
"The gradual return of Western Europe to positive growth over the year should be able to bring group sales growth similar to last year," he added.
In view of this the company says it still beleives it can meet last year's sales growth, which stood at 6.2 per cent.
Although still a relatively small part of the group's business operations, a significant proportion of that growth is expected to come from the group's operations in the developing markets.
One of the group's biggest hopes in this respect is undoubtedly China. In line with this L'Oreal this week announced that it was launching the Chinese make-up brand Yue-Sai onto the world market. The brand will first be launched throughout Asia, followed by Europe and the US.
That L'Oreal is choosing to turn a Chinese make-up company into a global brand is a significant move, reflecting the growing power and cachee associated with this market.
In 2004 L'Oreal's sales in China doubled to CNY3 billion (€280 million). The company also said that, largely derived from continued growth in the China market, its Asian sales for the first quarter of 2005 had jumped by 11.5 per cent to €337 billion.
