L’Oreal Shares Decline as Sales Growth Disappoints

L’Oreal SA, the world’s largest cosmetics maker, fell in Paris trading after second-quarter sales growth missed estimates amid the weakest performance in North America for two years.

The shares slid as much as 4.2 percent and were down 3.4 percent at 124.45 euros as of 11:53 a.m., the steepest drop in France’s benchmark CAC 40 Index.

Sales rose 5.2 percent excluding acquisitions, disposals and currency shifts, Paris-based L’Oreal said yesterday after markets closed. That compared with the prior quarter’s 5.5 percent advance and the 5.4 percent median estimate of 13 analysts surveyed by Bloomberg.

Comparable revenue growth in North America slackened for a second straight quarter to 4.5 percent, the slowest gain since the second quarter of 2011. Chief Executive Officer Jean-Paul Agon said the U.S. luxury and consumer markets decelerated amid increased levels of promotional activity. Brands such as L’Oreal Paris, Garnier and Maybelline are gaining share, he said.

The performance in North America was “underwhelming” and a negative “surprise given the stronger economic consumer backdrop,” Alex Howson, an analyst at Jefferies International Ltd., said by phone. “There is clearly a bit less spend on the category and competition and promotion has been a bit harder.”

The deceleration in U.S. growth “is no reason to worry,” Agon said on a conference call with analysts yesterday. “Overall, we are very confident about our U.S. market.”

Body Shop

By division, the Body Shop and L’Oreal’s dermatology and luxury units “disappointed most relative to our expectations,” Eamonn Ferry, an analyst at Exane BNP Paribas, said by e-mail.

A 0.8 percent decline in like-for-like revenue at the Body Shop and the luxury division’s 5.5 percent gain were the worst quarterly performances since the last three months of 2010, according to Andrew Wood, an analyst at Sanford C. Bernstein.

Total revenue for the quarter rose 4.2 percent to 5.81 billion euros ($7.6 billion), L’Oreal said. The average estimate of 11 analysts surveyed by Bloomberg was 5.77 billion euros.

L’Oreal is scheduled to report first-half earnings Aug. 29.