Key Takeaways
- L’Oréal SA (EPA:OR) posted third-quarter sales of €11.56 billion, with adjusted like-for-like growth of 7.7%, well ahead of analyst forecasts of roughly 5.4% to 5.9%.
- Professional Products and Dermatological Beauty led the beat, while luxury rebounded and China improved; Latin America was the only region to shrink.
- The update arrived after the Paris close, so Friday’s session will give the fullest read on how investors price the acceleration.
L’Oréal SA (EPA:OR) reported third-quarter sales after the Paris market closed on Thursday, Oct. 22, that topped expectations across almost every division and region. Revenue for July through September reached €11.56 billion, or roughly $13 billion, up 11.9% on a reported basis.
Investing.com reported a gain of about 4% in the shares following the release. Because the numbers came out after Euronext Paris closed, that move reflects trading outside the main session, and Friday’s open will offer a clearer verdict. U.S. investors can also hold the stock through over-the-counter American depositary receipts (OTC:LRLCY).
What the Numbers Show
The figure the market watches most is like-for-like growth, which strips out currency swings, acquisitions and divestitures. On that basis, third-quarter sales rose 7.2%. L’Oréal also published an adjusted figure of 7.7%, which removes the effect of timing shifts tied to an internal IT system overhaul that depressed last year’s comparable quarter and lifted this one. Consensus estimates compiled by Bloomberg pointed to about 5.4%, while a Visible Alpha poll cited by Reuters pointed to 5.9%.
By division, on an adjusted basis:
- Professional Products, led by premium haircare brands such as Kérastase and Redken, grew 13.9%.
- Dermatological Beauty, home to La Roche-Posay and CeraVe, also grew 13.9%.
- L’Oréal Luxe grew 7.0%, an acceleration driven mostly by fragrances.
- Consumer Products, the mass-market unit that includes L’Oréal Paris and Maybelline, grew 3.8%.
Regionally, the SAPMENA-SSA group, which covers South Asia Pacific, the Middle East and Africa, led with 19.5% growth. Europe rose 8.9% and North Asia 7.8%, with management saying it grew almost three times faster than the market in China. North America grew 5.6% on an adjusted basis but only 2.2% on a standard like-for-like basis, the region most affected by the IT timing adjustment. Latin America fell 3.0% as Mexico suffered commercial problems and supply disruptions in makeup.
What It Means for the Business
The quarter shows growth shifting toward L’Oréal’s higher-priced and more specialized categories. Salon haircare, dermatologist-recommended skincare and luxury fragrance typically carry better margins than mass-market products, so outperformance there can lift profitability more than a broad sales beat would suggest. The company reported a record 21.3% operating margin in the first half, and investors will look for the mix shift to keep supporting that level.
The weaker spots are also worth noting. Consumer Products, roughly a third of sales, grew at about half the group rate, and the Mexico problem shows how quickly execution issues can hit a single market. L’Oréal does not report profit with its third-quarter update, so the margin effect of these trends will not be visible until full-year results.
The company did not give numerical guidance. Chief Executive Nicolas Hieronimus said the first nine months gave him confidence that L’Oréal will again grow both sales and profit this year. Nine-month sales reached €35.33 billion, up 6.9% like-for-like. L’Oréal also completed its purchase of a majority stake in Innovist, an Indian online personal-care company, adding to its push into one of its fastest-growing markets.
Why Investors Should Care
The result marks a clear turn from a year ago, when a third-quarter miss sent the shares down about 6%, and from February, when fourth-quarter growth disappointed. A return to growth well above the roughly 5% pace estimated for the global beauty market supports the premium valuation L’Oréal has historically commanded.
The sustainability of that pace is the open question. Part of the quarter’s strength came from easier comparisons and timing adjustments, and investors will want to see whether China’s recovery holds and whether Consumer Products can reaccelerate.
Key items to watch include Friday’s trading in Paris, any analyst estimate revisions, progress on fixing the Mexico business and full-year results early next year, when L’Oréal will show whether faster growth in premium categories has translated into higher margins.