PARIS (Reuters) – L’Oreal reported a 5.3 percent rise in second-quarter like-for-like sales on Tuesday, slightly below expectations as China continued to weigh on the cosmetics giant.

Sales at the Paris-based group, which owns brands ranging from Maybelline to Lancôme, reached 10.88 billion euros in the second quarter. Analysts had expected quarterly growth of 5.9%, according to a Visible Alpha consensus.

The quarterly growth is the slowest since at least the start of 2022, as the global beauty market adjusts to a slower sales pace after the post-pandemic surge.

Last week, LVMH posted a 4% increase in its perfume and cosmetics sales in the second quarter, a slowdown from the first quarter.

On Wall Street, shares of rivals Estée Lauder and Coty fell 2.7% and 3% respectively after the results were released.

L’Oréal shares, the sixth largest European company in terms of market capitalisation with around 211 billion euros, have lost 12% since the start of the year.

DIFFICULT MARKET CONDITIONS

In North Asia, sales fell by 2.4% in the second quarter on a comparable basis while “market conditions in the Chinese ecosystem remain difficult,” L’Oréal said in a statement.

The group’s CEO, Nicolas Hieronimus, had warned last month of a slowdown in the global beauty market, anticipating growth of 4.5 to 5%, largely due to the lack of a rebound in the Chinese market.

In mainland China, the group explains, “the beauty market is negative in the second quarter on the basis of a high comparable, exacerbated by the persistent low consumer confidence”.

Previously a powerhouse of the beauty and luxury sectors, China has been hit by a real estate crisis and high youth unemployment.

The group’s other regions, however, remain dynamic with sales up 9.7% in Europe and 12.3% in Latin America. North America appears resilient, with growth of 3.4% over the quarter.

“Europe continues to defy gravity,” Jefferies analysts commented.

L’Oréal also highlighted the good performance of its luxury division, which includes perfume brands such as Yves Saint Laurent and Prada makeup. Business grew by 2.8%, compared to expectations of 1.6%, thanks to “strong” growth in Europe and “double-digit” growth in North America and emerging markets.

In the consumer products division, which notably sells L’Oréal Paris mascaras and Garnier skincare products and represents more than a third of turnover, sales increased by 6.7% in comparable data.

The smaller but growing dermatological beauty segment with La Roche-Posay and CeraVe brands grew 10.8%, a much slower pace than previously due to a slowdown in demand in the United States.

(Written by Kate Entringer, with Dominique Patton)

Copyright © 2024 Thomson Reuters