L’Oreal, which introduced skincare and hair dye maker Garnier to China in 2006, will focus on marketing the L’Oreal Paris and Maybelline brands there, Stephanie Carson Parker, a spokeswoman at the French company, said today by phone.
While not materially significant given Garnier’s underperformance in China relative to L’Oreal Paris and Maybelline, terminating the brand’s activities there “reads negatively” and adds to concern about a slowdown in the country, Alex Howson, an analyst at Jefferies International Ltd. in London, said by phone.
Some European and U.S. beauty-product makers have struggled to gain scale in China as economic growth cools. Revlon (REV) will cease operations and eliminate about 1,100 positions in the country, the New York-based company said Dec. 31. Procter & Gamble Co. (PG) said in May that it has been losing Chinese market share in skin and oral care.
L’Oreal fell as much as 2.1 percent, the steepest intraday drop since Nov. 11, and was trading down 2 percent at 123.60 euros as of 1:30 p.m. in Paris. That reduced the stock’s 12-month gain to 18 percent.
Garnier accounts for about 1 percent, or 15 million euros ($20.4 million), of L’Oreal’s Chinese sales, Carson Parker said.
“We believe this will enable our consumer-products division to accelerate its conquest of the Chinese beauty market,” Paris-based L’Oreal said in a statement. “We are committed to ensure a smooth transition process will be put in place for our employees and associates.”
The company’s nine-month Chinese sales rose 11 percent, L’Oreal said in October. The beauty market in the country is “slowing, although still dynamic,” the cosmetics maker said at the time.
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