“Growth in sales, robust profits”: L’Oréal reports healthy 2016 as travel retail turns in solid performance

Beauty powerhouse L’Oréal’s 2016 sales climbed by +2.3% year-on-year to €25.84 billion, with net profit (excluding non-recurring items) rising +4.5% to €3.6 billion. Travel retail turned in a “solid” performance, noted the company.

Group revenue growth was buoyed by e-commerce sales, which rose by +33%. L’Oréal Luxe posted healthy gains, +6% on reported figures and +6.9% like-for-like with a strong second half at +8.1% like-for-like. The division has been strengthened by the acquisition of two new brands: Atelier Cologne and IT Cosmetics.

The Consumer Products Division posted double-digit growth in make-up, attributed to the success of NYX Professional Makeup and the development of Maybelline, L’Oréal Paris and Essie.

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The Professional Products Division had a contrasted year. Good growth was achieved in Europe, Africa, Middle East and Latin America but North America posted a mixed picture.

L’Oréal Chairman and CEO Jean-Paul Agon said: “L’Oréal achieved another good year, with significant growth in sales and robust profits. In a generally favourable cosmetics market, the group has once again accentuated its worldwide beauty leadership thanks to market share gains in its three main geographic zones.

“All the divisions recorded sales growth, especially L’Oréal Luxe which is significantly strengthening its positions. The Active Cosmetics Division also performed well, winning market share around the world. As announced, the Consumer Products Division, driven by its successful strategic choices, saw a clear acceleration in sales and outperformed its market.

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“As for the geographic zones, L’Oréal has accelerated sales and increased its lead in North America. The group has further accentuated its leadership in Europe, outperforming the market despite the difficult situation in France. Growth in the New Markets has remained solid.

“In terms of results, operating margin and cash flows have set new records, confirming that our business model is set to deliver robust performance and create significant value.

“2016 was also another year that strengthened L’Oréal’s leadership in connected beauty. Our e-commerce sales rose by +33%, and the digital dynamism of our brands – in both communications and services – means they can develop increasingly strong and personalised interactions with consumers.

“The strategic acquisition of IT Cosmetics, and the one in progress of CeraVe, strengthen our unique portfolio of brands and will more than ever enable us to meet our consumers’ beauty aspirations. As part of this brand portfolio optimisation, it has been decided to explore all strategic options regarding The Body Shop’s ownership in order to give it the best opportunities and full ability to continue its development. No decision has been taken so far.

“All in all, the fundamentals of L’Oréal are unique advantages in the bright new world of beauty that is emerging: clearly defined mission and strategy, highly engaged expert teams, a global flotilla of emblematic brands, a long-haul investment in research and innovation, a critical engagement in digital, a unique, flexible and agile organisation, and a strong entrepreneurial culture.

“In an economic context that is still volatile and uncertain, L’Oréal is confident that it will once again outperform the beauty market in 2017 and achieve another year of sales and profit growth.”

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Results by region

Western Europe

Despite the continuing difficult environment in France, Western Europe posted growth of +2.4% like-for-like, and +0.5% based on reported figures. The United Kingdom and Spain had a particularly dynamic year, while Germany and Italy delivered solid growth, outperforming their respective markets. Make-up is the number one growth driver, fuelled especially by the NYX Professional Makeup and Urban Decay brands.

North America

North America posted growth of +5.8% like-for-like and +6.7% based on reported figures. L’Oréal Luxe growth was driven by Urban Decay and Yves Saint Laurent, as well as good performances from Lancôme and IT Cosmetics.

New markets

Asia Pacific recorded growth of +3.6% like-for-like and +1.8% based on reported figures. Taiwan and South Korea posted good growth. In China, L’Oréal Luxe maintained its momentum, but the Consumer Products Division, in a transitional phase, has slowed down. In Southern Asia, growth remains sustained due to, in particular, dynamic trends in Australia and Indonesia, and the development of NYX Professional Makeup and Garnier.

Latin America posted growth of +11.1% like-for-like, and -1.8% based on reported figures. The acceleration is continuing in Mexico, Colombia and Peru because of strong growth of make-up brands Vogue, Maybelline and L’Oréal Paris, and good results from L’Oréal Professionnel and Kérastase. In Brazil, the Active Cosmetics Division is outperforming the market, and the Consumer Products Division is taking advantage of the successful integration of Niely.

Eastern Europe recorded growth of +10.4% like-for-like and +2.7% based on reported figures. Russia, Poland and Ukraine are driving growth in this zone.

Sales growth in Africa and the Middle East amounted to +7.9% like-for-like and +5% based on reported figures. Activity in the region slowed down at the end of the year, partly due to Saudi Arabia where the market decelerated. Egypt and Pakistan are maintaining “very strong” momentum.

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