L'Oréal Looks To Counter Subdued Growth At Garnier Shampoo Unit
L'Oréal is still struggling to kickstart sales growth at its mass market unit that makes products like Garnier shampoo, and those challenges hit the company's shares on Friday even as its luxury brands posted strong revenues.
The company has been buoyed in recent quarters by demand for its luxury brands like Lancome or Kiehl's, particularly in China, while its active cosmetics division, which makes treatments for sensitive skins, has also done well.
But the French cosmetics group disappointed after reporting weaker-than-expected sales growth in its mass market division on Thursday.
Like-for-like revenue growth slowed to 2.3% in the April to June period from 2.6% in the first, below analysts' forecasts for a slight improvement.
"Clearly we are not happy in growth in the consumer division in the first half," L'Oréal chairman and chief executive Jean-Paul Agon told analysts on a conference call on Friday.
"We think that we have everything it takes to outgrow the market and clearly the ambition is to get back progressively, soon, to a rhythm, of 3 to 4%."
Agon added that aside from a weak backdrop in countries like France and the United Kingdom for this cosmetics division, the group had also struggled in Brazil for instance, which it believed should improve in the second half of 2018.
Big mass market products like Maybelline make-up and the company's L'Oréal Paris brands had outperformed others, Agon added.
Overall, the company's operating income grew 1.8% from a year ago €2.58 billion in the first half of the year, in line with forecasts.
Resilient demand from Chinese shoppers in the face of a trade spat with the United States has sustained sales at luxury goods firms in recent months.
The beauty sector is no exception with L'Oreal's premium labels riding high, while rivals like U.S.-based Estee Lauder , more squarely focused on luxury, have also benefited.
"The Group has delivered quality results paving the way for the future," Agon said in a statement announcing the results.
"The strong growth in gross profit indeed enables the Group at the same time to increase profitability, support investments in Research and Innovation, and raise the business drivers to further develop our brands."