L’Oréal is best-equipped to navigate China risk
09/02/2024 12:00
(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
LONDON, Feb 9 (Reuters Breakingviews) - L’Oréal
OREP.PA has good foundations to resist the Chinese market’s
weakness. The 230 billion euro French cosmetics company said on
Feb. 8 that year-on-year sales in the last quarter of 2023 rose
2.8%. Growth was slower than in the previous quarter, due in
part to a near 10% drop in North Asia sales, which includes
China and Korea. Shares fell by as much as 7% on Friday morning.
The China weakness echoes the sentiment flagged by US and
Japanese rivals Estée Lauder EL.N and Shiseido 4911.T . But
the French firm led by CEO Nicolas Hieronimus seems to have a
stronger base than its global rivals. L’Oréal’s annual sales may
have slowed, but Estée Lauder, which announced layoffs this
week, and Shiseido saw their 2023 revenue drop 7% and 8%,
respectively. The French group also has a comfortable EBIT
margin of 19%, relative to the below-10% of the other two. That
explains why shares of L’Oréal are up 14% over the past year,
versus a 45% and 35% drop for the US and Japanese groups.
Hieronimus said he remains confident about the Chinese market in
the second half of 2024. To keep the momentum going, he had
better be right. (By Karen Kwok)
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(Editing by Pierre Briancon and Streisand Neto)