L'Oreal Sales Beat Estimates as Consumer Unit Accelerates

  • North American region propels first-quarter revenue growth
  • Full-year sales to rise faster than three-month gain, CEO says

L’Oreal SA reported first-quarter revenue that beat analysts’ estimates as strong demand for NYX makeup helped speed up growth in North America, compensating for a slowdown in parts of Asia and Latin America.

Sales rose 1.8 percent from a year earlier to 6.55 billion euros ($7.42 billion), the world’s largest cosmetics maker said in a statement after markets closed Monday. Analysts predicted 6.49 billion euros. On a like-for-like basis, which excludes acquisitions, disposals and currency effects, revenue advanced 4.2 percent, compared with the 3.5 percent gain estimated by analysts.

L’Oreal’s consumer unit, which sells products such as Garnier shampoo and Maybelline New York mascara, was the main beneficiary of what L’Oreal called North America’s “dynamism.” Like-on-like revenue at the unit, the company’s biggest, jumped 3.9 percent, the fastest quarterly increase in almost three years. That helped compensate for slowing sales of luxury cosmetics in Hong Kong, where fewer Chinese shoppers are traveling, and weakness in Brazil, where demand surged last year before a tax increase took effect.

“The biggest positive surprise was the performance of consumer,” said Andrew Wood, an analyst at Sanford C. Bernstein who predicts the stock will rise on Tuesday. Though the active-cosmetics and professional-products units trailed estimates, “consumer is much more important, and so this drove total company outperformance.”

L’Oreal reiterated a forecast for sales and profit growth in 2016, even “in an economic and monetary environment that remains volatile,” and said it’s confident of outperforming the cosmetics market’s expected expansion of about 3.5 percent. Full-year revenue will increase faster than in the first quarter, Chief Executive Officer Jean-Paul Agon said on a conference call. The operating margin will probably also widen, said Chief Financial Officer Christian Mulliez.

In a separate statement, L’Oreal said Asia chief Alexis Perakis-Valat will succeed Marc Menesguen as head of the consumer division in September. Menesguen, who has worked for the company for three decades, will retire at the end of this year, Agon said.

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