‘Spectacular’ China drives L’Oréal Q4 growth; travel retail ‘solid’

L’Oréal Chairman and CEO Jean-Paul Agon: “Thanks to the outstanding commitment of its employees, L’Oréal has traversed this crisis in the best possible condition and has even grown stronger”

French beauty products powerhouse L’Oréal turned in a strong fourth-quarter performance, which drove a return to growth in the second half, the company said in unveiling its 2020 results yesterday.

The group maintained an operating margin of 18.6%, and generated strong operating cash flow. On a like-for-like basis, L’Oréal group sales fell -4.1% year-on-year (-6.3% reported) in 2020. Operating profit decreased by -6.1% to €5,209 million, amounting to 18.6% of sales, stable compared to 2019.

L’Oréal singled out the “spectacular” performance of China in its contribution to group performance and said that the travel retail performance within the key L’Oréal Luxe division “remains solid”.

Digital and ecommerce were another area of strength. Ecommerce sales rose +62% year-on-year across all divisions and regions, generating a record 26.6% share of the Group’s revenues for the 12 months.

Revenues at L’Oréal Luxe fell -8.1% like-for-like (-7.6%) in a global luxury beauty market that was down approximately -14%. But the division gained market share in almost all geographic zones, with a notably strong performance in Asia Pacific – especially Mainland China – as well as many Western European countries. Sales in North America recovered progressively and travel retail, as mentioned, remained solid.

L’Oréal Chairman and CEO Jean-Paul Agon said: “Thanks to the outstanding commitment of its employees, L’Oréal has traversed this crisis in the best possible condition and has even grown stronger. As anticipated and announced, the Group returned to growth in the second half, with a fourth quarter in acceleration at +4.8%, and won significant market shares.

“Driven by the strength of its strategic choices and a determined dynamic across the year, L’Oréal has adapted to this unprecedented context and terrible pandemic with speed and agility, accelerated all of its transformations and will emerge stronger.

“At the beginning of this new year, which remains marked by uncertainty regarding the evolution of the pandemic, but also by consumer’s appetite for beauty that remains intact across the world, we are confident in our capacity to outperform the market again this year and, subject to the evolution of the sanitary crisis, achieve a year of growth in sales and profits.”

As reported, Agon will step down as Chief Executive Officer from 1 May to be replaced by Nicolas Hieronimus. Agon will remain as Chairman, a position he has held since 2011.

Stellar China showing

Mainland China grew +27.0% like-for-like and +24.1% reported. That market recovered significantly in the second half, growing around +4% in the year, boosted by strong omnichannel demand for selective brands and “very dynamic” e-commerce. L’Oréal China significantly outperformed the market with double-digit growth in all Divisions. Megabrands Lancôme and L’Oréal Paris ended the year as the No.1 selective and mass-market beauty brands respectively on Tmall.

L’Oréal Luxe outperforms the market

In an extremely difficult context with the closure of many points of sale and a drastic reduction in air travel, L’Oréal Luxe outperformed the market with a clear acceleration in the second half and a return to growth in the last quarter, the group said.

This performance was driven by strategic decisions to accelerate powerfully in ecommerce, particularly in direct-to-consumer, to maintain a strong programme of major global launches and to strengthen its leadership in China.

Destination Hainan: China in general and Hainan within travel retail have been star turns for the group over the past year. In December Helena Rubinstein Travel Retail Asia Pacific partnered with China Duty Free Group for the brand’s first online-to-offline luxury travel event in Sanya, Hainan. The event, to which over 100 of the retailer’s VIP customers were invited,  attracted an extraordinary audience of 25 million viewers via livestreaming from popular beauty influencers Teacher Xu and Kakakaoo.
Between 21 and 24 December, the VIP customers took part in a personalised travel experience at the Helena Rubinstein villa, situated in The Sanya Edition luxury boutique hotel. They were introduced to new digital innovations and services, which the brand owner said represented “the future of travel beauty”.

The division outperformed the market in its three categories, especially in skincare, driven by the power of its brands, notably Lancôme which resisted well, and the growth of Kiehl’s and Helena Rubinstein.

The latest fragrance launches – My Way by Giorgio Armani, Voce Viva by Valentino and Libre by Yves Saint Laurent –also delivered very strong performances and, with the resilience of established icons, helped to consolidate the division’s global leadership, the company said. Makeup remains the category most affected by the pandemic.

Hyper-Active Cosmetics Division

For the second year running, the Active Cosmetics Division achieved record growth (+18.9% like-for-like and +13.0% reported), with sales exceeding the €3 billion mark. CeraVe, La Roche-Posay and SkinCeuticals recorded very strong growth. CeraVe is now one of the top five dermocosmetics brands and almost doubled in size, driven by “exceptional growth” in North America and a promising outlook for sales globally.

Sales of SkinCeuticals and La Roche-Posay grew well ahead of the market in all Zones. The fourth quarter marked an acceleration, with all Zones and all the major brands posting growth, particularly Vichy which benefited from the launch of the anti-ageing serum Liftactiv Supreme H.A. Epidermic Filler.

For results of all other divisions and regions click here.

Food & Beverage The Magazine eZine