Deep impact: L’Oréal luxury division weighed down by China’s COVID-affected skin care market
Despite this, and while the French beauty giant did not share a breakdown of its skin care sales, CEO Nicolas Hieronimus revealed that all of its brands were growing at double digits.
Speaking during the firm’s latest third quarter (Q3) sales conference, he highlighted the strength of its luxury division, which posted growth of 4.6% like-for-like.
In contrast, the group’s consumer products and active cosmetics divisions grew by 10% and 26% respectively.
L’Oréal Luxe was penalised in Q3 mainly due to the repeated lockdowns in China, which incidentally is one of L’Oréal’s biggest skin care markets.
“Clearly, our luxe division is overperforming the market, but Q3 was impacted by China because China is the part of the world… where we have our biggest share in skin care. But the brands like Lancôme Abosolue, Helena Rubinstein are really doing great, and Kiehl’s has good momentum,” said Hieronimus.
Hieronimus clarified that this did not mean China’s skin care market was softening. “Skin care is not weak in China,” he emphasised.
“The number one category by far in China is skin care… If we look between make-up and skin care today in China skin care remains the better performing category.”
Hieronimus elaborated that given the significance of China’s skin care market to its luxury division, both were intrinsic, making an impact inevitable either way.
“It’s just that because L’Oreal Luxe is strong in China, and China is a big skin care market, the slowdown of China has had an impact in our overall skin care performance in Q3.”
In North Asia, which consists of markets like China, Japan and South Korea, L’Oréal posted like-for-like growth of only 0.3% due to the difficulties in China.
Despite the slow quarter, Hieronimus described the performance of skin care in China as “very positive”. He highlighted the performance of Lancôme Abosolue and Helena Rubinstein, which he was confident was on its way to becoming a billion-euro brand.
Furthmore, L’Oréal Luxe also managed to increase its market share in China Q3.
“When we discussed our Q2 and first half results, we said that we had hit a record 30% market share for L’Oréal Luxe in China in Q2. Well, we hit over 31% market share in Q3 with strong performance of Lancome and Helena Rubinstein,” said Hieronimus.
Moving forward, Hieronimus reiterated L’Oréal’s confidence in China as a source of growth.
“I must say we remain long-term and medium-term very bullish about China… we do believe in China and we do want to invest in China and we are launching new brands in China.”
Overall, for the third quarter, L’Oréal posted sales of EUR9.58bn (USD) up 9.1% like-for-like. Double-digit growth in Europe (10.5%), SAPMENA (30%), and Latin America (16.2%), as well as the 9.3% growth in North America helped offset disruptions in China.