L’Oreal CEO Sees Weak Year as Quarterly Sales Miss EstimatesAndrew Roberts
L’Oreal SA Chairman Jean-Paul Agon said he expects this year to be the weakest since 2009 after the world’s largest cosmetics maker reported third-quarter sales that trailed estimates.
Growth in the global cosmetics market will be closer to 3 percent than 3.5 percent, Agon said on a conference call after European markets closed yesterday, less than two months after cutting the forecast from a range of 3.5 percent to 4 percent. L’Oreal said third-quarter sales climbed 2.3 percent on a like-for-like basis, compared with the average of 18 analyst estimates for a 3.8 percent gain. The stock dropped as much as 3 percent.
“We would expect our sales and earnings per share estimates to fall some way” for L’Oreal, Andrew Wood, an analyst at Sanford C. Bernstein, said in a note.
L’Oreal joins consumer-goods companies including Unilever in reporting slowing sales as demand deteriorates from Europe to Asia. Like-for-like sales of consumer products such as Garnier shampoo fell 0.4 percent in the quarter, L’Oreal said, trailing analysts’ estimates for 2.4 percent growth.
The shares fell as much as 3.70 euros to 120.40 euros and traded at 120.90 euros at 9:01 a.m. in Amsterdam. They are down 5.6 percent this year, on track for the first annual decline since 2011.
L’Oreal still expects to outperform the broader cosmetics industry in 2014 and is confident the consumer unit will return to growth in the fourth quarter, according to Agon.
Total sales climbed 2 percent to 5.39 billion euros ($6.73 billion), L’Oreal said. Analysts predicted 5.47 billion euros.
“The market is slowing down, held back in particular by poor summer weather in Western Europe,” L’Oreal said, referring to the consumer-products unit, its largest. L’Oreal’s growth should accelerate from the fourth quarter, Agon said.
Sales at L’Oreal’s luxury division, which includes Giorgio Armani scents and Lancome skincare, also missed estimates.
Operating profitability and net earnings per share should improve this year, buoyed by the buying back of L’Oreal shares from Nestle SA, Agon said. L’Oreal will make a capital gain of about 2 billion euros on the transaction, he said.