L'Oreal has reported that despite a troubled outlook for luxury apparel and accessories, the makeup market is booming. The cosmetics giant posted stronger-than-expected sales growth in the third quarter, driven by a "substantial acceleration" in North America and market share gains.
Chief Executive Jean-Paul Agon said many of the group's make-up brands, such as Yves Saint Laurent, Urban Decay and Armani, were enjoying a surge in sales. "The make-up market, whether mass or luxury, is really booming," Agon told investors in a conference call, adding brands such as Yves Saint Laurent saw sales growth of 40 percent during the period. "There is a momentum effect on all make-up brands."
Agon has said in the past the need to look good on social networks such as Facebook and Instagram has helped drive make-up demand. He said the group's luxury unit was also winning market share in China and the United States.
"In North America, L'Oreal is accelerating substantially and is outperforming its market more strongly," he said in a statement.
While its sales in Europe outpaced the market, L'Oreal said France remained a dark spot, hit by lower spending and tourist traffic. "France has been a hard and disappointing market this year," Agon said, adding that trends had been "seriously negative" in both mass and luxury segments.
L'Oreal posted a 5.6 percent rise in like-for-like sales to 6.15 billion euros ($6.82 billion) in the three months to Sept. 30, beating forecasts for 4.5 percent growth.
"Q3 was the best quarter for L'Oreal for over 4 years, since Q2 2012," said Andrew Wood at Bernstein. "Standout performances were in North America (+7.5%) and Luxe (+9.3%) ... in sharp contrast to the recent disappointing performance of Estée Lauder."
Rival Estee Lauder reported lower-than-expected quarterly sales on Wednesday as fewer shoppers visited department stores in the United States, sending its shares to their lowest in nine months.
L'Oreal's luxury division, which sells Lancome creams and Viktor & Rolf fragrances, enjoyed the strongest growth during the period, with sales up 9.3 percent on a comparable basis, above market expectations of around 6.5 percent growth. The group's active cosmetics unit that manages La Roche-Posay and Roger&Gallet brands, and its consumer products division, which includes Garnier shampoo and Maybelline make-up, also beat forecasts.
Active cosmetics' growth came at 6.5 percent, above forecasts of 6 percent, and its consumer products unit posted sales growth of 4.7 percent, while the market expected around 4 percent.