L’Oreal Confirms 2012 Goal as Sales Disappoint Some Analysts

L’Oreal SA (OR), the world’s largest maker of cosmetics, reported third-quarter sales that disappointed some analysts as growth slowed more than expected, particularly at the professional products division.

Revenue climbed 4.6 percent, excluding currency shifts and acquisitions, Paris-based L’Oreal said today in a statement after European markets closed. The average of five analysts’ estimates compiled by Bloomberg News was for 4.9 percent.

L’Oreal’s quarterly growth was weaker than most of its major beauty and personal care peers, including Unilever and Estee Lauder, whose beauty divisions grew 8 percent and 6 percent respectively, according to Andrew Wood, an analyst at Sanford C. Bernstein.

“L’Oreal has now seen growth below 6 percent in 17 of the last 19 quarters, providing further support to our thesis that L’Oreal is no more than an average beauty and personal care company,” Wood said by e-mail. A 0.1 percent gain in sales of professional products such as Kerastase hair care was the lowest quarterly growth since 2009 on an organic basis, according to the analyst.

The third quarter “wasn’t fantastic,” said Eamonn Ferry, an analyst at Exane BNP Paribas, in an e-mailed note. “We would not be surprised to see some modest downward pressure on the shares tomorrow.”

Low Point

The professional products division’s performance was “a low point” and should improve starting in the fourth quarter, as should the rest of the business, Chief Executive Officer Jean-Paul Agon said on a conference call.

Revenue reached 5.52 billion euros ($7.07 billion), L’Oreal said in the statement, exceeding the 5.48 billion-euro average of 10 analysts’ estimates. The maker of Kiehl’s lip gloss aims to outperform the global cosmetics market, which it expects to expand about 4 percent this year.

“Despite the market slowdown observed in Asia and in travel retail, L’Oreal Luxe is proving highly dynamic,” Agon, who is also chairman, said in the statement. “We confirm our targets for 2012, and our ambition to achieve another year of growth in sales, results and profitability.”

Revenue increased 6.6 percent at the luxury division, 5.6 percent at the active cosmetics unit, which includes La Roche Posay face cream, and 4.9 percent in consumer products, L’Oreal said.

Sales rose 8.1 percent in new markets and 7.1 percent in North America, and declined 0.6 percent in western Europe, the cosmetics maker said.

Growth rates in southern Europe were negative as of the end of September, while in other countries in the region, growth was slightly positive, L’Oreal also said.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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