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L’Oreal Sales Rise 8%, Beating Estimates, on Luxury Cosmetics

L’Oreal SA, the world’s largest cosmetics maker, said first-quarter sales increased 8 percent, beating analysts’ estimates, as shoppers spent more on luxury perfume and distributors stopped cutting inventories.

Revenue rose to 4.72 billion euros ($6.28 billion) from 4.37 billion euros a year earlier, Paris-based L’Oreal said in a statement after markets closed. The average estimate of five analysts surveyed by Bloomberg was 4.69 billion euros. Excluding currency swings and acquisitions, sales gained 7.4 percent.

L’Oreal sales declined last year as retailers reduced inventory and U.S. and European consumers pared spending on salon treatments and luxury products like Yves Saint-Laurent mascara and Lancome fragrances because of the recession.

Chief Executive Officer Jean-Paul Agon said in February he expected so-called organic sales to start growing again from the first quarter and gain momentum over the rest of 2010, boosted by investments in advertising and research.

“A gradual recovery in the global cosmetics market coupled with the absence of notable destocking should ensure a strong start to the year,” Harold Thompson, an analyst at Deutsche Bank AG in London, wrote in a note before the quarterly update. Thompson has a “buy” recommendation on the stock.

L’Oreal shares fell 12 cents, or 0.2 percent, to 79.88 euros in Paris today, giving the company a market value of 47.8 billion euros. The stock has gained 2.4 percent this year.

Signs of Improvement

BASF SE, the world’s biggest chemical company, said last week there are signs demand for luxury cosmetics is improving. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, and Givaudan SA, the world’s biggest maker of flavors and fragrances, reported earlier this month double-digit increases in first-quarter perfume sales.

Sales at L’Oreal’s luxury division, whose products also include Armani Code and Ralph Lauren scents, climbed 12 percent, excluding currency moves and acquisitions, the best performance of any of the French company’s business lines. That compares with a 4.7 percent decline in the fourth quarter of 2009 and a 9 percent drop for the full year on the same basis.

Sales at the consumer products division, L’Oreal’s largest source of revenue, whose brands include Garnier shampoos and Maybelline makeup, increased 6.9 percent on a comparable basis.

Sales at the active cosmetics unit, which sells anti-aging creams, gained 3 percent, while revenue at the professional products division, which includes Kerastase and Redken hair treatments, rose 5.8 percent. Body Shop sales rose 0.6 percent.

Revenue, excluding currency moves and acquisitions, gained 2.8 percent in western Europe, 5.7 percent in North America, and 15 percent in new markets, led by Latin America, where sales jumped 21 percent.

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