Jean-Paul Agon: “In an economic context that remains volatile and uncertain, we are confident… that we can outperform the beauty market in 2019 and achieve another year of growth in both sales and profits.”

Travel retail played a starring role as French beauty powerhouse L’Oréal today posted its best annual groupwide sales growth in over a decade. Sales in the channel rocketed by 27.1% to over €2 billion in 2018, while like-for-like group revenues for the year rose 7.1% to €26.9 billion (8.8% at constant exchange rates; 3.5% reported].

Group operating profit climbed to €4.92 billion, representing an all-time record 18.3% of sales.

MOODIE DAVITT SNAPSHOT: HOW L’ORÉAL SHONE IN 2018

• Travel retail dazzles, up 27.1%; breaks €2 billion sales threshold;
• Travel retail “dynamic” for L’Oréal Luxe;
• Groupwide sales post highest growth in over a decade;
• Q4 performance best since 2007;
• Operating margin stretches to all-time 18.3% high;
• West to East shift: Asia Pacific (driven by China) overtakes North America in group sales
• E-commerce now second-biggest market
• L’Oréal commitment to Corporate Social Responsibility validated

Source: The Moodie Davitt Report

L’Oréal Chairman and CEO Jean-Paul Agon said, “In a beauty market that accelerated significantly in 2018, L’Oréal marked its best year of growth since 2007, at +7.1%, following a strong fourth-quarter increase of +7.7% [well ahead of consensus and L’Oreal’s best quarterly like-for-like performance since Q4 2007 -Ed].

“All divisions are growing, especially L’Oréal Luxe and Active Cosmetics, which both recorded double-digit growth,” Agon said. “The big brands are the star performers, particularly in the L’Oréal Luxe Division, where Lancôme sales crossed the 3 billion euro mark. The Active Cosmetics Division achieved its highest growth for more than ten years in a very dynamic skincare market.

“In the Consumer Products Division, 2018 was a good year for L’Oréal Paris and Maybelline New York. The Professional Products Division meanwhile recorded a modest increase in sales, thanks to a significant acceleration in the final quarter.”

Regional performance varies – Asia Pacific (driven by China) overtakes North America and travel retail hits new highs

Agon said that company performance by geographic zone remained differentiated. In Western Europe, progress was held back by difficulties in some markets, while growth in North America improved compared with the previous year. What L’Oréal dubs the ‘New Markets’ [Asia Pacific, Latin America, Eastern Europe, Africa and the Middle East] achieved their best performance since 2007, and the Asia Pacific zone, driven by China, has now overtaken North America with sales exceeding €7 billion.

“2018 was another very good year for two of our most powerful growth drivers,” Agon continued. “Firstly, e-commerce, which advanced by +40.6%, and now accounts for 11% of group sales. Secondly, travel retail, which broke the 2 billion euro barrier with an increase of +27.1%.”

Gross margin increased significantly, Agon said. After strong investments in research, innovation, and business drivers, the operating margin set a new record at 18.3% of sales.

2018 was a hugely successful year for L’Oréal Travel Retail, headed by Vincent Boinay, pictured addressing brand partners at the division’s annual dinner during the TFWA World Exhibition in Cannes.

How things have changed: e-commerce revenues are rocketing and now in total represent the group’s second-biggest market. The graphics below underline the pivotal role that digital now plays internally, as a sales tool and as a communications platform.

 

 

L’Oréal Luxe’s “historic year”

L’Oréal Luxe sales grew by 14.4% like-for-like and 10.6% reported, with a second half 15.1% like-for-like rise. The division outperformed the market and made 2018 an “historic year”, L’Oréal said.

The division’s four “billionaire” brands posted double-digit growth. Lancôme was driven by its skincare performance, with franchises Génifique and Absolue to the fore, and the “undisputed success” of women’s fragrance La Vie est Belle.

Yves Saint Laurent and Giorgio Armani also had a very good year in fragrances, L’Oréal noted, driven by Black Opium, Y, Sì Passione and Acqua di Giò Absolu.

The foundations category also prospered. Kiehl’s is benefiting from the acceleration in skincare, with an excellent performance from Line-Reducing Concentrate, the company said. The successful development of IT Cosmetics and Atelier Cologne is continuing.

“L’Oréal Luxe is winning market share in Asia Pacific, particularly in China where growth is double-digit,” the group said.

“The division performed well in dynamic markets in travel retail, Eastern Europe and Latin America. In Western Europe and Africa, Middle East, it is outperforming more difficult markets. Meanwhile, the division continues to accelerate in e-commerce.”

Magnifique Génifique: L’Oréal Luxe’s Advanced Génifique serum has proved a blockbuster success in travel retail. Pictured is a recent multi-sensorial pop-up at China Duty Free Group’s International Duty Free Shopping Complex in Haitang Bay, Hainan Island.

Corporate Social Responsibility leadership 

“More than ever, it’s the strength of L’Oréal’s business model, robust and well-balanced, covering all circuits, all categories, all price points and addressing all consumers, that enables the Group to seize opportunities wherever they are,” Agon said.

“All over the world, our teams are alert and listening to consumers’ needs and desires. They adapt and allocate resources with great agility, always in the pursuit of excellence. This is how L’Oréal delivers profitable and sustainable growth, and strengthens its position as the cosmetics market leader year after year.”

Agon also emphasised the critical nature of L’Oréal’s Corporate Social Responsibility agenda. He pointed out that the company had been recognised once again for its leadership in corporate environmental and social responsibility, notably by the CDP [a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts -Ed] which identified L’Oréal, for the third consecutive year, as a world leader in sustainable development, with three ‘A’ scores for the management of climate change, water security and forests.”

Agon said that L’Oréal has also been acknowledged for its commitment to gender equality, and was named number 1 in Europe for gender parity by Equileap [an organisation dedicated to gender equality in the workplace -Ed]. “In terms of ethics, L’Oréal remains exemplary, and is ranked number 1 worldwide by the ethical reputation index Covalence EthicalQuote,” Agon added.

He concluded: “In an economic context that remains volatile and uncertain, we are confident, thanks to our innovations, powerful brands, digital excellence and in particular our outstanding teams all over the world, that we can pursue our corporate social responsibility commitments, outperform the beauty market in 2019 and achieve another year of growth in both sales and profits.”