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L’Oreal Gains Most in 2 1/2 Months on 2012 Outlook: Paris Mover

L’Oreal Gains Most in 18 Months on 2012 Optimism
A customer picks an item from the display inside a Body Shop store, owned by L'Oreal SA, in London. Photographer: Chris Ratcliffe/Bloomberg

L’Oreal SA rose the most in two-and-a-half months in Paris trading after the world’s largest cosmetics maker reported 2011 profit that beat estimates and gave an upbeat assessment of the outlook for this year.

The stock gained 3.8 percent to 84.73 euros, the steepest advance since Nov. 30, after climbing as much as 4.3 percent.

Operating profit last year rose 7.7 percent to 3.29 billion euros ($4.35 billion), L’Oreal said yesterday after the market’s close, exceeding the 3.23 billion-euro average estimate of 25 analysts compiled by Bloomberg. The company aims to at least maintain profitability this year and sees no sign of a slowdown in the global cosmetics market, which it expects to expand about 4 percent, Chief Executive Officer Jean-Paul Agon said at a press conference in Paris today.

“Contrary to what many believed, the cosmetics consumer has not changed their behavior since the crisis,” Agon said. “There has been no downgrading” to cheaper alternatives.

A 1.5 percentage-point increase in the fourth-quarter profit margin was “the big positive news,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a report. Sales growth also beat estimates, though it was still below that of competitors Estee Lauder Cos. and Unilever, he said.

Profit margins are becoming “a key pillar to bottom-line delivery,” Celine Pannuti, an analyst at JPMorgan Chase & Co., said in a note to clients.

Buoyant Demand

The maker of Maybelline expects the global cosmetics demand to continue to be buoyant in 2012, led by the Asia Pacific region, even if the pace of growth may be slightly slower so far this year than in 2011, Agon said. Estee Lauder, based in New York, said this month that global demand for prestige beauty products is softening amid economic uncertainty in Europe.

L’Oreal is confident it can reverse the underperformance of its consumer unit, particularly at Garnier and in eastern Europe as it introduces products, Agon said. The company will focus on taking market share in all regions as its business in the euro zone decreases on a relative basis, he said.

Asia offers the most substantial growth prospects for L’Oreal’s brands, the CEO said. Sales in China exceeded France for the first time in January, Agon said. While this can’t be extrapolated over the full year, “it’s a sign,” he said.

L’Oreal is on the lookout for potential acquisitions that can accelerate market-share gains, though the company will continue to prioritize so-called organic growth, Agon said.

Yesterday’s announcement that Liliane Bettencourt will be replaced by her grandson Jean-Victor Meyers on L’Oreal’s board “changes absolutely nothing,” Agon said. “This piece of news is very reassuring for the stability of the company.”

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