L’Oreal Rises in Paris as Europe Vitality Helps Offset Weak U.S.

Apr 15, 2014 3:56 am ET

April 15 (Bloomberg) -- L’Oreal SA rose in Paris trading after accelerating revenue growth in western Europe helped offset weak sales of Garnier shampoo and Maybelline mascara in North America.

First-quarter revenue gained 2.8 percent in western Europe, excluding currency shifts and acquisitions, while southern European sales grew for the first time in six years, Paris-based L’Oreal said yesterday after markets closed. The performance confirms the region’s “renewed vitality” and bodes well for annual profit, the company said. Western Europe is the company’s most profitable region. The stock rose as much as 2.1 percent.

“There is a credible growth acceleration story here for the rest of the year,” said Eamonn Ferry, an analyst at Exane BNP Paribas.

Revenue for the entire business increased 3.5 percent, excluding exchange-rate fluctuations and acquisitions, L’Oreal said, the smallest gain since the final quarter of 2009. Total sales fell 2.2 percent from a year earlier to 5.64 billion euros ($7.8 billion), hurt by adverse currency movements and missing the 5.71 billion-euro average of seven analyst estimates compiled by Bloomberg.

The shares were up 2 percent at 123.05 euros as of 9:50 a.m. in Paris.

‘Pretty Confident’

“We are pretty confident for the rest of the year and we expect our growth to get back on a solid base as soon as the next quarter,” Chief Executive Officer Jean-Paul Agon said, repeating his expectation that L’Oreal will outperform the global cosmetics market’s 3.5 percent to 4 percent growth in 2014.

L’Oreal’s consumer-products division, which includes the Garnier and Maybelline brands, is experiencing a “sluggish trend” in North America, the company said in a statement. Revenue at the unit fell by a “mid-single-digit” percentage in the region, held back by weak demand, poor weather conditions and a tough basis of comparison following last year’s launch of Advanced Hair Care, Agon said yesterday on a conference call.

The slowdowns in North America and the consumer-products division led to the “lowest quarterly growth since the depths of the global recession,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note.

Like-for-like sales in North America fell 0.6 percent in the quarter, the first decline since the fourth quarter of 2009. A 1.2 percent rise in consumer-products revenue on that basis was the weakest since the second quarter of that year. L’Oreal doesn’t report earnings for the first quarter.

North America

Sales of the L’Oreal Paris brand rose slightly faster than the consumer-products division’s average, while Garnier and Maybelline trailed it, the cosmetics maker said.

L’Oreal’s consumer-product sales in North America will return to growth in the second quarter and accelerate through 2014, Agon said yesterday on a conference call. The Body Shop, whose sales fell 3.4 percent in the quarter, should reverse the trend this year, the CEO also said.

L’Oreal shares have fallen 4.6 percent since Feb. 10, the day before the company said it would buy back 8 percent of its stock from Nestle, reducing the Swiss foodmaker’s stake to 23.3 percent.