L'Oréal is banking on a turnaround in the group's mass market division that makes Garnier shampoo and skincare treatments this year, despite pressures in the US and slowing make-up sales, its chief executive said.
The French cosmetics group has been trying to revive its sluggish mass market division at a time when its higher-end products like Lancome or Kiehl's are finding favour with shoppers seeking luxury anti-ageing treatments.
L’Oréal reported higher-than-expected first-quarter sales growth still largely driven by those pricier brands, which have outperformed the middle-of-the-road products sold in supermarkets for several years now.
But efforts to lure clients back to those aisles in western Europe with new organic Garnier ranges - chiming with a growing trend towards more natural ingredients - had produced some encouraging early results, chief executive Jean-Paul Agon told analysts.
“We think that we will be able to accelerate in the consumer division,” Agon said.
Thriving Chinese appetite for beauty products across all price points is also sustaining growth. The mass market results are still not stellar in comparison to other parts of L’Oréal’s business, even though that division - where analysts at Berstein described sales growth as “nothing special” - contributes the most to revenues.
Market backdrop
On a like-for-like basis, sales in the mass market division expanded by 3.3 per cent in the first quarter, up from 2.8 per cent a quarter earlier - but dwarfed by the more than 14 per cent growth in luxury brands.
Overall across the group, sales rose 11.4 per cent to €7.6 billion, and were up 7.7 per cent like-for-like, beating forecasts. Agon also flagged a “much more difficult” market backdrop in the US, potentially linked to a lower number of consumer tax refunds or increasing gas prices.
Make-up sales in this division are also lagging, he said, mirroring a slowdown in this category across the industry and spelling a period of more sluggish growth for L’Oréal brands like Maybelline. – Reuters
