February 17, 2009 2:00 am
L'Oréal's quarterly sales fell for the first time at the end of last year, underscoring the severity of the downturn in the US and Europe and the size of the challenge facing the world's biggest cosmetics company in its centenary year.
In the worse-than-expected results released after the market closed, L'Oréal's sales fell by 0.6 per cent in the three months to the end of December, like-for-like, compared with the same period in 2007.
Annual profits also suffered, as net profit of €1.9bn ($2.4bn) was 27 per cent down on 2007. Sales were 3.1 per cent higher on a like-for-like basis at €17.5bn.
Jean-Paul Agon, chief executive, abandoned guidance for 2009, having reduced its long-term sales target to 4 per cent in October from 6-8 per cent in February last year. "Maybe I should not have given a figure last year," he told the Financial Times, adding: "I said that when the market grows at about 5 per cent a year, we should do a bit more. That is definitely not valid any more when the market is totally unpredictable."
Luxury products, such as Lancôme creams, which account for one quarter of sales, and hair salon products, were badly affected as customers bought cheaper items or curbed visits to hairdressers. Meanwhile, Sales at Body Shop, the British chain of natural beauty products, fell in each quarter of 2008, compared with the previous year.
Yet mass-market brands, such as Garnier and Maybelline mascara, held up. "It's the biggest [economic] crisis we have ever seen and it will impact our business very differently from one channel to another," said Mr Agon. Foreseeing "probably a very difficult beginning of the year in luxury", he said the split between the group's more resilient mass-market business and a slowdown in luxury brands was likely to continue this year.
Like-for-like sales in North America fell 11.3 per cent and in western Europe 1.9 per cent, as retailers reduced their inventories and cut back on stocks. Sales in the rest of the world, buoyed by Asia, grew by 9 per cent.
Mr Agon said that, in spite of the "tough year", L'Oréal's earnings per share of €3.49 and market share was at a record high.
The group was cutting costs but would maintain spending on innovative products and advertising, Mr Agon said.
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