Nicolas Hieronimus, chief executive officer, remains confident about the beauty market and the group’s business. “Considering the global context, I’m very happy with the overall growth of L’Oréal,” he said during a sit-down interview at headquarters in the Paris suburb of Clichy Tuesday afternoon, a few hours before the company released its results after the market close.
In the nine months ended Sept. 30, sales at the maker of , and products came to 32.41 billion euros, a 6 percent increase in both reported and organic terms versus the same prior-year period. The executive called it “a solid growth that allows us to continue to increase our leadership on the market.”
In the third quarter, L’Oréal sales were 10.29 billion euros, up 2.8 percent in reported terms and 3.4 percent on a like-for-like basis. That rise was well below VisibleAlpha consensus of 6 percent. L’Oréal’s earnings came out soon after other beauty industry players, such as Coty Inc. and Ulta Beauty, published theirs and flagged headwinds in the beauty industry.
The industry slowed during the summer, and some issues were foreseen, while others were not. The biggest expected headwind, for which L’Oréal had planned, was the normalization of market growth across the Western world, as well as emerging markets with the fading of the inflation effect, which was very high last year and in the first part of 2024. That is waning currently.
“In the end, what’s positive is that whether in North America, Western Europe or emerging markets, the consumption remains globally dynamic, with growth in units that remain,” Hieronimus said. He called it the “elimination of the inflation effect, which is to some extent good for the consumer wallet, but less so for the market growth.”
“The turbulences that were unexpected, aside from a few regional hiccups, were first of all the situation in the Chinese ecosystem, which we were hoping at worst [would] stabilize, but it got worse,” Hieronimus said. “The market was negative over the summer — it was even double-digit negative on luxury products.”
That was true for both domestic China and travel-retail Asia. Minus those, year-to-date, L’Oréal’s sales would be up more than 8 percent. “Regionally, North Asia was the biggest miss at minus 6.5 percent vs. consensus of 2.1 percent,” wrote Callum Elliott, an equity analyst at Bernstein, in a note.
Besides China another, albeit smaller — though still impactful — negative phenomenon was the recent summer season, which was appalling due to poor weather. That was following a strong first quarter for the category. “We had a very negative third quarter because the sellout, unfortunately, was not good,” Hieronimus said.
Looking at bright spots, the executive said the L’Oréal brands or categories with true innovations and creative offers are working. “We’re doing fantastic in hair care, with double digits. We’re doing phenomenal in fragrance, where we’re almost at high mid-teens, and way above the market,” he said. “We’re progressively, slowly, coming back on makeup, where most of our innovations were back-loaded on Maybelline.”
L’Oréal is struggling in skin care, since the weight of the category in North Asia is 40 percent. “Overall, we grow, gain share and are preparing for a strong 2025,” Hieronimus said. “It’s mostly a value decrease,” he said, adding there are differences between categories and channels, however. “Mass market has been slowing down. Makeup has been slowing down quite a bit.” Post-COVID-19 there was a makeup frenzy, though today colorful looks have waned.
“But prestige remains pretty dynamic, particularly fragrances and less so skin care,” Hieronimus said. “So there are opportunities on the U.S. market.”
Looking ahead, he’s confident for both the country’s beauty market and economy — regardless of the presidential election outcome.“I don’t think it will affect consumption,” he said. “People have money, inflation has reduced.”
Europe is expected to remain a bastion of growth, though less value-driven. “The big difference between our last quarter and the previous one is that the value-effect has really reduced, but consumer confidence remains surprisingly high, considering everything,” Hieronimus said.
The Continent is where L’Oréal has all its brands present. “We’ve reorganized a lot in Europe to generate more fuel behind our brands, in terms of regrouping countries,” he said. One of the top 10 largest growth contributors at the company, five are European countries, even though L’Oréal already has high market share there. Eastern Europe is particularly dynamic at present and represents a growth pocket for the company.
L’Oréal Luxe, with third-quarter sales up 5.8 percent on a like-for-like basis, has been accelerating quarter after quarter. That’s despite that it is the division in which North Asia carries the most weight. “This growth is driven by their incredible track record in fragrance,” Hieronimus said. “The division has been accelerating progressively on makeup. It remains insufficient on skin care.”
The strength of L’Oréal’s Professional Products Division, with organic sales up 6.1 percent, was its shift to an omnichannel strategy, through which — more than ever — the company serves stylists, but simultaneously makes premium professional products directly available to consumers in selective distribution, according to the executive.
“It’s been done in a way that keeps the market clean, with no price wars and counterfeits,” Hieronimus said. He explained that, also in mass, there’s a great demand for sophisticated products to answer the needs of longer and more ethnically mixed hair.
“In the professional division, we are still impacted by the fact that the salon activity remains pretty stable,” Hieronimus said. “There’s no real growth there.” Two L’Oréal divisions missed financial analysts’ expectations.
“The Derma division missed by 10 ppts, while Consumer Products was also weaker than expected,” wrote Jefferies equity analyst Molly Wylenzek in a note. She described Dermatological Beauty as the big divisional surprise, with 0.8 percent like-for-like growth against 11.7 percent consensus.
Still, the Dermatological Beauty Division keeps gaining market share, Hieronimus said. “It’s a market that continues to boom in many parts of the world, and has slowed down very strongly in the U.S.,” he said. Part of that is due to sun care and also to young consumers, who tend to try out various brands and categories.
“But mid-term, there’s more skin issues, pathologies, UV,” Hieronimus said. “Here, innovation makes a big difference.” “L’Oréal’s mass Consumer Products division came in well below of the 4.6 percent consensus expectations with 1.4 percent growth driven by 1) weak demand in China; 2) ongoing softness in [the] North America makeup category with [company] flagging benefits from recent innovations to arrive mostly in 2025,” wrote Wylenzek.
It is at market level sell-through-wise. Hieronimus introduced the topic of L’Oréal’s beauty stimulus plan for 2025. “Beauty is an offer market, and when the market is a bit softer, we have to make extra efforts to stimulate the appetite,” he said.
The stimulus plan is an extension of what the company already does — more innovations and brands, such as the addition of Miu Miu on Jan. 1, according to Hieronimus. It also entails playing more on the company’s price piano.
“It’s a fantastic strength that we have today,” he said, explaining over the past couple of years the world has been undergoing a valorization process as cost of goods increased. “We see in some parts of the world, luxury is struggling a bit. Others, it’s more mass. Indeed, we have to use even more the breadth of our brand offering to seduce more consumers.”
Hair color, for instance, has not been a dynamic category since the pandemic. So L’Oréal has simultaneously launched the Colorsonic device in the U.S., which retails for a bit under $200, and a $3 sachet of hair color from Garnier. In the middle of those is Good, natural color from Garnier.
“Our way to stimulate beauty is to offer innovations at all price points, to make sure that no consumer is left behind, and they can always find a L’Oréal product that satisfies or stimulates their own appetite for beauty,” Hieronimus said.
For 2024 and 2025, he reiterated that if the beauty market overall is up by about 4.5 percent, with negative growth in China, that’s a fair result.
“When we talk about normalization of the market, that is what I foresee in the years to come,” he said. “If the beauty market grows by 4.5 percent every year between now and 2030, it’s 100 billion euros more. So plenty of growth opportunities.”
L’Oréal headquarters
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