(News Bulletin 247) – The American cosmetics group has published a growth forecast for its first quarter that is lower than its previous projections. Which penalizes L’Oréal shares.

L’Oréal shares are weighed down by a negative cross reading this Tuesday. As a reminder, “cross-reading” occurs when investors analyze a company’s publication and deduce lessons for another listed company in the same sector.

If applicable this Tuesday with Coty and L’Oréal. The American Coty remains one of the French company’s most direct comparables, selling makeup, perfumes and even creams.

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Growth below expectations

Monday evening after Wall Street closed, Coty announced preliminary results, anticipating like-for-like revenue growth of 4% to 5% for the first quarter of its 2024-2025 fiscal year, a period that runs from July at the end of September (thus corresponding to the third calendar quarter). This performance remains below the indications given by the company, which previously expected an increase of 6%.

“The global beauty market maintained solid but slightly weaker overall growth. In this context, the prestige fragrance category continues to outperform, supported by volume and price/mix expansion, while luxury beauty mass continues to experience slower growth trends, driven entirely by unit demand,” the company explained.

“While beauty growth remains solid in many regions of the world, growth in the American market slowed in the second part of the first quarter,” detailed the group. The adjusted gross operating profit (Ebitda) is also expected to be “relatively stable or even “down slightly” over one year.

Coty is counting on “moderate” growth for its second quarter, an outlook which takes into account the slowdown in the market in the United States.

See you on October 22

In pre-opening on Wall Street, Coty shares dropped 5% while in Paris, L’Oréal lost more than 3%, showing the second biggest drop in the CAC 40.

“Coty is one of L’Oréal’s main competitors in the mass makeup and prestige fragrance categories. Thus, Coty’s sales warning for the first quarter and first half of fiscal 2024- 2025 could indicate moderate development of L’Oréal’s makeup business (around 20% of the group’s turnover, like-for-like growth of 8.8% in the first half of 2024), partially offset by continued dynamic of prestige perfumes (13% of L’Oréal’s turnover, growth of 14% in the first half of 2024)”, explains UBS.

“In addition, the weakness of the American market (25% of L’Oréal’s turnover) and a new destocking in China and in ‘travel retail’ (sales in train stations and airports, editor’s note) in Asia ( approximately 20% of turnover) could prove to be substantial headwinds for L’Oréal’s like-for-like performance,” the Swiss bank continues.

The establishment underlines that the visible Alpha consensus currently expects growth of 6% on a comparable basis in the third quarter with an acceleration in the fourth quarter of 6.95%.

L’Oréal will publish its third quarter revenues on October 22.