MOODIE DAVITT SNAPSHOT: L’ORÉAL’S FIRST HALF… AND BEYOND – L’Oréal Travel Retail up +21.2%, three times the group’s growth of +7.3% Source: The Moodie Davitt Report |
Travel retail sales at global beauty giant L’Oréal rocketed by +21.2% in the first half of 2019, helping to propel the company to an overall increase of +7.3%* (like-for-like) and reach €14.8 billion in the period. L’Oréal said that there was “strong progression” from three other growth drivers: Asia, ecommerce and skincare.
The business also generated a substantial +12.1% increase in operating profit to €2,888 million.
L’Oréal Chairman and CEO Jean-Paul Agon, said: “L’Oréal has delivered its strongest first half like-for-like growth in more than a decade, outperforming a dynamic market which has, for the second year running, posted one of its highest-ever growth rates.”
The vibrant travel retail performance comes on top of a stellar 2018 when sales increased by +27.1% to top €2 billion. L’Oréal’s strong regional growth in Asia, now the epicentre of travel retail, suggests that the channel will continue to remain in the ascendency.
Asia Pacific overtakes Western Europe
Asia Pacific – a stronghold for travel retail – was the most dynamic region for L’Oréal. It grew by +24.3% to €4,626.4 million, overtaking Western Europe (€4,212.6 million) in the process (see table below). According to L’Oréal, “China is maintaining its pace of growth, and India, Malaysia, Indonesia and Vietnam are all posting double-digit growth”.
Asia Pacific falls within the New Markets geographic zone (also including Latin America, Eastern Europe and Africa, Middle East) as designated by L’Oréal. The zone grew by +16.6%. This offset the two other zones of Western Europe, which was stable at +1.0%, and North America which was flat (0.0%) “held back by the slowdown in makeup”.
Divisional drivers and the digital effect
Among the French group’s four divisions – Professional Products, Consumer Products, L’Oréal Luxe and Active Cosmetics – all aw growth. However, L’Oréal Luxe, key for travel retail, and Active Cosmetics, also being expanded in the channel, both raced ahead by more than +13%.
L’Oréal Luxe is being driven by its four big brands: Lancôme, Yves Saint Laurent, Giorgio Armani and Kiehl’s while Active Cosmetics “continues to benefit from the growing appetite for healthy beauty and is posting geographically balanced growth” said the company.
Looking ahead, current exclusive negotiations with Clarins Group for the Mugler and Azzaro fragrances are set to conclude before the end of the year and will boost the division. L’Oréal Luxe, President Cyril Chapuy said: “The perfume category is at the heart of our global strategy for growth at L’Oréal Luxe. We would be thrilled to welcome Mugler and Azzaro: these signatures, with a long history in fashion and olfaction, would perfectly complete our portfolio.”
Meanwhile, digital continued to boost growth and reinforce L’Oréal’s relationship with consumers. Ecommerce soaredby +48.5% and now represents 13.2% of total group sales.
In a statement, L’Oréal concluded: “In a volatile and contrasted environment, this good first half gives us confidence in our capacity to outperform the market in 2019.”
* All financial percentages shown are 1H2019 like-for-like (based on a comparable structure and identical exchange rates) unless stated.
[Watch out for a detailed interview with L’Oréal Travel Retail Managing Director Vincent Boinay in September, the same month that he joins L’Oréal’s Executive Committee.]
SUMMARY OF PERFORMANCES BY DIVISION AND BY REGION PROFESSIONAL PRODUCTS – Sales up +2.5%*, driven by acceleration in the US and Asia Pacific where L’Oréal claims to be making market share gains. Eastern Europe remained dynamic, while Latin America and Western Europe saw inertia in certain markets. Haircare, the number one contributor to growth, was boosted by the strong growth of Kérastase, while hair colour benefited from double-digit growth of Shades EQ at Redken and the acceleration of Inoa. CONSUMER PRODUCTS – Sales up +3.1% as L’Oréal Paris maintained growth momentum, helped by the successful launch of Revitalift Filler ampoules and the roll-out of Elvive Dream Lengths, plus Elvive Colour Protect Purple shampoo. Garnier grew too, driven by Micellar Cleansing Water and Tissue Masks, and a promising start for Garnier Organic. Korean makeup brand 3CE Stylenanda also started well in China. NYX Professional Makeup meanwhile is implementing “a reworking of its distribution channels”. Travel retail and ecommerce remain strong growth drivers for the division, which has also been performing well in Western and Eastern Europe, particularly Russia, and accelerating in Asia, particularly in China, India and Indonesia. It has been sluggish in the US. L’ORÉAL LUXE – Sales up +13.2% driven by skincare. “Excellent performances” were seen by Lancôme, thanks to the lines Génifique and Absolue; and Kiehl’s with the Ultra Facial and Calendula lines. Giorgio Armani and Yves Saint Laurent took advantage of the lip segment and fragrances respectively. Helena Rubinstein was successful in the ultra-premium skincare market, and Atelier Cologne continued to expand rapidly. The division posted strong growth in travel retail and Asia Pacific, particularly China. Eastern Europe and Latin America also performed well though North America was slow. ACTIVE COSMETICS – Sales up +13.6% with all geographic zones contributing, led by Asia Pacific, North America and Latin America. La Roche-Posay posted double-digit growth. Vichy is maintaining momentum and reinforcing its anti-ageing expertise with Vichy SkinConsultAI, the first algorithm for analysing signs of ageing from a selfie. SkinCeuticals had a record performance in Asia; and CeraVe saw a sharp acceleration in the US, the brand’s original market – and it has launched in China. WESTERN EUROPE – Sales up +1.0% in a moderately growing mass market in which L’Oréal claims its Consumer Products division is winning market share, particularly in makeup and face care. L’Oréal Luxe was dynamic in Germany, Scandinavia and across Southern Europe, but the second quarter was difficult in France. Growth in Active Cosmetics was driven by La Roche-Posay, which continued to outperform its market. NORTH AMERICA – Sales flat at 0.0% in a slowing market, but where skincare and fragrances are still growing and the Active Cosmetics division posted double-digit growth. In skincare and fragrances L’Oréal Luxe did well, driven by the Kiehl’s and Yves Saint Laurent brands, but was held back by a decline in makeup. The Professional and Consumer divisions are both said to have won market share, the latter in skincare with L’Oréal Paris. NEW MARKETS – Sales up +16.6% were led by Asia Pacific’s +24.3%. All product divisions achieved double-digit growth here, with the best performances coming from L’Oréal Luxe and Active Cosmetics. Growth is being driven by Chinese consumers, and by the success of ecommerce in China and the whole region. Premium skincare brands are doing particularly well (Lancôme, Yves Saint Laurent, Giorgio Armani and Helena Rubinstein). Growth in the Consumer division is being driven by L’Oréal Paris and the roll-out of 3CE Stylenanda. Argentina held back Latin America which grew +1.9%. Sales accelerated in Mexico and Chile. In Brazil, the Consumer division continued to face difficulties, while other divisions were growing. Across the zone, L’Oréal Luxe and Active Cosmetics continued to grow while in Consumer Products, makeup brands Maybelline New York and Vogue did well. Kérastase, in Professional Products, is recording double-digit growth. Eastern Europe recorded growth of +7.5%, with Russia, Turkey and Central European countries such as Romania and Ukraine the drivers. The Consumer and Active Cosmetics divisions had the highest growth rates, thanks respectively to Maybelline New York, NYX Professional Makeup, and La Roche-Posay. A contraction of -5.4% was seen in Africa/Middle East due to the luxury market remaining difficult in the Middle East. Egypt, Morocco and Pakistan are growing, as well as sub-Saharan countries. Active Cosmetics brands showed good growth, driven by La Roche-Posay and SkinCeuticals. * All financial percentages shown are 1H2019 like-for-like (based on a comparable structure and identical exchange rates) unless stated. |