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L'Oréal Shares Down After Third Quarter Sales Disappoint

By Donna Ahern
L'Oréal Shares Down After Third Quarter Sales Disappoint

L’Oréal shares fell on Friday, sinking to their lowest level since March, after a larger-than-expected hit to its travel retail business in Asia and disappointing sales of its luxury division as inflation and a choppy economic environment curb high-end spending.

Shares were down 2.6% in early trading, the lowest performer on the Paris CAC-40 index.

Perfume And Cosmetics Division

A slowdown in the luxury division was most likely expected after LVMH’s perfume and cosmetics division slightly missed expectations last week, but 3.2% growth versus consensus expectations of 12.2% likely comes as a negative surprise to the market, Jefferies analysts said.

Analysts also pointed to a sharper-than-expected hit to business in Asia from tighter controls by the Chinese government of daigou resellers, who buy products at lower prices abroad and resell them at a discount in China.

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Although weakness in North Asia because of travel retail issues and the luxury division was expected by investors, the scale of the miss "took us by surprise," analysts at Barclays said.

Beating Expectations

On the 20 April, L'Oréal reported a 13% rise in first quarter sales, beating expectations thanks to strong business in the United States and Europe as shoppers shrugged off rising prices, but said it had not benefited yet from the end of COVID-19 curbs in China.

Sales of the French cosmetics group, which sells brands ranging from Maybelline to Lancome, came to €10.38 billion ($11.37 billion) over the first three months to the end of March.

Read More: L'Oréal Q1 Sales Rise 13%, Lifted by US, Europe

News by Reuters, edited by Donna Ahern, Checkout. For more a-brands stories, click here. Click subscribe to sign up for the Checkout print edition.

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