L’Oreal SA (OR), the world’s largest cosmetics maker, slid the most in more than 11 months in Paris trading after the company reported first-half profit margins that missed analysts’ estimates.
Gross profit as a percentage of sales narrowed to 71 percent in the six months ended June 30 from 71.5 percent a year earlier, the Paris-based company said yesterday after markets closed, less than the 71.9 percent average estimate of four analysts compiled by Bloomberg. L’Oreal attributed the decline to the weakening of the euro, the consolidation of Clarisonic, a maker of sonic skincare devices that it agreed to buy at the end of 2011, and an increase in promotional offers.
“L’Oreal’s results came in below our expectations with generally poor quality,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note. “Especially noteworthy was the miss on our and consensus estimates on margins.”
A 0.1 percentage point increase in the operating margin to 16.9 percent was also below estimates, Wood said. The profit measure would have declined were it not for a reduction in advertising and promotional expenditure, he said.
L’Oreal said first-half operating profit rose 11 percent to 1.9 billion euros ($2.4 billion) and repeated its target of outperforming the global cosmetics market, which it has estimated will grow about 4 percent this year. The company also said it will buy back as much as 500 million euros of shares by the end of the year that it will then cancel.
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