Assessing the coronavirus factor
Commenting on the current health crisis, L’Oréal Chairman and CEO Jean-Paul Agon commented: “The coming weeks will certainly be challenging for the people of China in their battle against the coronavirus epidemic, and we want to convey our deepest solidarity with them. We are of course fully supportive and united with our Chinese teams, and are carefully monitoring the situation. We trust the Chinese authorities to take effective and appropriate measures to best contain this epidemic.
“This context will have a temporary impact on the beauty market in the region and therefore on our business in China and Travel Retail Asia, even if it is too early to assess it. The experiences we have had with similar situations in the past (SARS, MERS, etc.) show that, after a period of disturbance, consumption resumes stronger than before.
“Therefore, at this stage, and assuming that this epidemic follows a similar pattern, we are confident in our capacity this year again to outperform the beauty market and achieve another year of growth in both sales and profits.”
Travel retail, with a +25% hike in revenues, was among the stars as French beauty giant L’Oréal today unveiled its full-year 2019 results, which show the “best sales growth of the decade”.
Group revenues rose +8.0% on a like-for-like basis (+8.8% at constant exchange rates; +10.9% reported) to €29.87 billion (US$32.79 billion).
Operating profit surged by +12.7% to €5.54 billion (US$6.08 billion). Earnings per share rose +9.3% to €7.74 (US$8.50) Operating cash flow rocketed by +29.8% to €5.03 billion (US$5.52 billion).
Chairman and CEO Jean-Paul Agon said: “L’Oréal closed the decade with its best year for sales growth since 2007, at +8.0% like-for-like, and an excellent fourth quarter, in a beauty market that remains very dynamic.
“All divisions are growing. L’Oréal Luxe sales exceeded €11 billion, driven by the strong dynamism of its four big brands – Lancôme, Yves Saint Laurent, Giorgio Armani and Kiehl’s – which all posted double-digit growth.
“The Active Cosmetics Division had its best year ever, with La Roche-Posay sales exceeding one billion euros. Growth at the Consumer Products Division was boosted by L’Oréal Paris which had a great year. Lastly, growth improved in the Professional Products Division; the highlight was the double-digit performance of Kérastase”
Performances by geographic zone were contrasted. The New Markets posted their strongest growth for more than ten years. Asia Pacific became the Group’s number one zone, with a “remarkable” end to the year in China, but the company also reported good growth in South Korea, India, Indonesia and Malaysia. Eastern Europe maintained its strong growth rate, and Western Europe returned to growth last year. North America was impacted by a poor performance in makeup.
Ecommerce and Travel Retail, which are also powerful growth drivers, contributed strongly to the Group’s success. E-commerce grew spectacularly by +52.4% and now accounts for 15.6% of sales. Travel Retail maintained its strong momentum and posted growth of +25.3%.
“2019 also saw good growth in our profits,” Agon continued. “The strong growth in sales and the increase in gross profit, combined with the lower weight of operating expenses, enabled us both to invest more in our brands and to improve our profitability.
“Once again this year, the strength of L’Oréal’s well-balanced business model paid off. It is the universal presence of L’Oréal, which covers the whole beauty market, combined with its talented teams all over the world, which enable the Group to keep on achieving profitable and sustainable growth, while again strengthening its position as the beauty market leader.”