L’Oréal reports optimistic half-year results

By Deanna Utroske

- Last updated on GMT

L’Oréal reports optimistic half-year results

Related tags Marketing

Business for the beauty giant is booming everywhere—except in Brazil—and the success of some niche brands acquired by the company says a lot about evolving consumer behavior and which business models work well in the current economy.

L’Oréal is reporting a 3.8% like-for-like growth is sales for the first half of 2015, with group sales amounting to €12.82bn. "At the end of June, our reported growth is the strongest recorded for the last twenty years, with a very positive currency effect,” ​says Jean-Paul Agon, chairman and CEO of L’Oréal, in a media release outlining the figures.

Agon, who has served as CEO with the company for just over four years, is confident that L’Oréal is well positioned for further growth in sales and in profits for the coming quarters. “Thanks in particular to a rich innovation portfolio, prospects of rapid e-commerce growth and the continuing roll-out of recently acquired brands, we are projecting an acceleration in growth in the second half.”

Sales numbers
L’Oréal’s active cosmetics business performed best in terms of like-for-like sales in the first half of the year, with growth in that division reported at 7.1%. The company notes that the active business is doing well in every market, “all Zones are contributing to growth, with outstanding performances in Brazil, the United States and China,” ​according to the media release. (For Brazil, this product division is an outlier. Read more below.)

The L’Oréal Luxe division followed closely with 6.7% growth, while professional products tallied 3.5% like-for-like growth and consumer products 1.9%. A mix of product categories is driving the company’s Luxe and consumer products business, while much of the growth in professional products is due to hair care and hair color.

About Brazil
With the exception of the active cosmetics business, Brazil did L’Oréal no favors.

The company counts Latin America among its new markets, and as a whole that region saw sales grow 5.3% like-for-like. “In a difficult economic environment, the Brazilian market is…being held back by the recent reform of the IPI (Tax on Industrialised Products),” ​observes the L’Oréal report.

Things may get more challenging for beauty brands in Brazil before they get better. The IPI tax took full effect just last month​. And, L’Oréal has reportedly raised product prices to offset for the expense. Though local and international companies across the industry are opting for an array of pricing strategies to win consumers in Brazil.

Acquired traits
L’Oréal’s acquisitions are paying off. The Kiehl’s brand, which the company picked up some 15 years ago continues to do well in the Luxe division, and was highlighted in the half-year report: “The American skincare brand Kiehl’s is maintaining a very high growth level, confirming the relevance of its business model.”

A more recent purchase in the Luxe division, color cosmetics brand Urban Decay (2012) is going international and, as such, poised for growth.

Two of the company’s 2014 acquisitions, “NYX and Carol’s Daughter, are maintaining momentum with market share gains,” ​according to the media release. L’Oréal acquired Carol’s Daughter​ late last year, a move designed to build the groundwork for a multicultural beauty division as part of the company’s consumer products business in the States.  

Last year the multicultural beauty market performed better than beauty at large, according to market researcher Kline, which put growth in that category at 3.7% for 2014.  As the population in the States continues to shift and personal care and cosmetics players cater to the growing multicultural population, brands like Carol’s Daughter will do quite well.  

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