L’Oreal sales hurt by deepening demand slowdown in China

L’OREAL posted disappointing sales last quarter as the beauty company suffers from worsening consumer demand in China.

Like-for-like sales in North Asia, which includes China, fell 6.5 per cent in the third quarter, L’Oreal said on Tuesday (Oct 22). Analysts surveyed by Bloomberg had expected a gain. The decline marks the fifth straight quarter of falling sales in the region.

“In mainland China, the beauty market – already negative in the second quarter – continued to deteriorate, impacted by low consumer confidence,” L’Oreal said.

L’Oreal’s American depositary receipts fell as much as 4.7 per cent in New York on Tuesday following the release, dragging down shares of rival Estee Lauder as well.

Shoppers in China have curbed spending on makeup and skincare amid worries over slowing economic growth and a property market crisis – concerns that prompted the Chinese government to unveil a package of measures last month to revive the economy. Hainan, a duty free destination for Chinese consumers, in particular, remained under pressure, L’Oreal said.

In a call with analysts, chief executive officer Nicolas Hieronimus said he hopes the government stimulus will help boost local demand.

L’Oreal’s dermatological beauty division also grew well below estimates in the period. Hieronimus blamed the bad weather which hurt demand for suncare products in general as well as a lack of product launches at its CeraVe label.

“A few consumers left us,” notably Gen Zs in the US, Hieronimus said. “It’s up to us to recruit them,” by innovating more, he added.

The figures follow weak results in recent days from Coty, a rival beauty company, and French luxury group LVMH. Kering, the owner of Gucci, will report sales on Wednesday.

Overall, sales at L’Oreal rose 3.4 per cent in the quarter, missing estimates. The global beauty market is expected to grow between 4 per cent and 5 per cent next year, Hieronimus predicted in the call. BLOOMBERG