L’Oréal, the biggest beauty house in the global duty free and travel retail business, saw sales rocket +27.3% in the first half of 2018 and described the channel as one of its two ‘driving forces’.
The growth easily outpaced the company’s overall performance of +6.6% to reach a global value of €13.4 billion (US$15.2 billion) in H1 2018.
Both figures are like-for-like and based on a comparable structure and identical exchange rates. On a reported basis, total sales growth was down -0.2% as currency fluctuations had a negative impact of -7.2% (the figures below are all like-for-like unless stated).
Commenting on the travel retail figures, L’Oréal Chairman and Chief Executive Officer Jean-Paul Agon said: “L’Oréal reaffirms its leadership in travel retail, which grew by +27.3%.”
By division, the star performers were L’Oréal Luxe (+13.5%) and Active Cosmetics (+11.4%). By geography, the standout region was Asia Pacific (+22.0%). Digital was the other ‘driving force’ – posting +36.4% like-for-like growth in H1 and now representing 9.5% of sales.
Digital sales are those achieved on L’Oréal’s own brands’ websites plus estimated sales by those brands through retailers’ websites (non-audited data).
Agon commented: “In a beauty market which remains dynamic and is becoming more premium, L’Oréal is continuing to achieve strong growth. The L’Oréal Luxe and Active Cosmetics divisions have both recorded double-digit growth, driven by the power of their brand portfolios and the quality of their innovations.
“The Consumer Products division, especially with a robust performance at L’Oréal Paris, has recorded moderate growth, held back by an environment that is very difficult in some markets. The Professional Products division, meanwhile, has posted a slight increase in sales.
“Across geographic zones, New Markets accelerated once again, especially in Asia. North America is gradually improving, while Western Europe is affected by persistent difficulties in France, and by the slowdown in the UK.”
Profitability across the group improved by +30 basis points while net earnings per share increased +5.3%, and +10.7% at constant exchange rates.
Summary by division
Professional Products – up +1.6% and -6.2% (reported). All regions grew except for Western Europe which was sluggish in some markets. Hair colour benefited from strong growth of Shades EQ at Redken and the contribution of SoColor by Matrix and DIA Light by L’Oréal Professionnel. In haircare, Kérastase was boosted by the new Résistance Extentioniste line and the success of in-salon haircare treatment Fusio-Dose.
Consumer Products – up +2.5% and -4.0% (reported). L’Oréal Paris maintained growth momentum thanks to facial skincare, particularly its Revitalift anti-ageing franchise, but also launches such as Dream Lengths in haircare and Color Riche Shine in make-up. Maybelline New York also posted good growth. The division faced difficulties in France, where the market trend is negative, and in Brazil, while growth edged down in the UK. There were dynamic performances in Asia, especially in China and India, and in Eastern Europe.
L’Oréal Luxe – up +13.5% and +5.9% (reported). The division’s top four brands all recorded double-digit growth. Lancôme – thanks especially to Génifique, and Kiehl’s with its Line-Reducing Concentrate and Midnight Recovery range in particular, benefited from accelerating skincare sales and the strength of star franchises. Giorgio Armani accelerated in fragrances while Yves Saint Laurent built up its foundations with All Hours and lip make-up with Tatouage Couture. The division saw strong growth in Asia, especially China and travel retail growth. In Europe the division is said to be winning market share. In e-commerce, Yves Saint Laurent and Giorgio Armani launched on Tmall.
Active Cosmetics – Up +11.4% and +8.5% (reported). All key brands contributed to growth. La Roche-Posay posted a double-digit increase with the Hyalu B5 and Anthelios lines a big success. Vichy saw the acceleration of Minéral 89 and SkinCeuticals. CeraVe is now a significant contributor thanks to its strength in its US home market, and an internationalisation drive in 25 countries. E-commerce grew very strongly.
Summary by geographical zone
Western Europe – down -0.8% and -1.6% (reported). The region was held back by a slowdown in the UK and by persistent difficulties in France.
North America – up +3.0% and -6.8% (reported). While the mass market sector posted moderate growth, the Consumer Products division increased its market share in make-up, hair colour and haircare. L’Oréal Luxe continued to accelerate in skincare.
New Markets – split into four zones. Asia Pacific – up +22.0% and +13.2% (reported). The strong growth was boosted by Chinese consumers and demand for premium brands. E-commerce and travel retail accelerated. Southern Asia was extremely dynamic with market share gains in India and Malaysia. Latin America – up +0.6% and -10.4% (reported). Brazil consumer products continued to face difficulties, but other divisions were back to a good level of growth. Eastern Europe – up +8.1% and -1.0% (reported). Growth was driven by Turkey and Central Europe, especially Ukraine and Romania. Africa, Middle East – up +12.2% and +1.9% (reported). The Gulf states are growing, despite a “difficult market context” with positive trends in Egypt and South Africa.
Acquisitions and partnerships
During the H1 period, L’Oréal made the following acquisitions or partnerships:
– 100% of Nanda Co, the Korean lifestyle make-up company founded by Kim So-Hee in Seoul in 2004. The acquisition was finalised on 20 June 2018.
– On 25 May 2018 the company finalised the acquisition of professional hair colour brand Pulp Riot which, under founders David and Alexis Thurston, has been using social media to inspire stylists.
– L’Oréal and Valentino announced a long-term licence agreement for the creation, development and distribution of fine fragrances and luxury beauty products under the Valentino brand.
Overall, Agon concluded: “The group has delivered quality results paving the way for the future. The strong growth in gross profit enables us to increase profitability, support investments in research and innovation, and raise the business drivers to further develop our brands. The good sales growth and the quality of the first half results reinforce our confidence in our ability to once again outperform the cosmetics market in 2018.”