L'Oréal sales fall is worse than expected, travel retail suffers

Sales at Maybelline maker L’Oréal fell more sharply than expected in the second quarter, though the French beauty giant managed to contain any major profit erosion as the COVID-19 pandemic forced stores to close.

The company, which also makes luxury brand Lancôme and make-up and perfumes for labels like Armani, sounded a more optimistic note for the second half of the year, saying it was planning product launches and was determined to “find again the path to growth”.

In China, its biggest market, and where lockdown measures were eased several months ago, comparable revenue was up 30% in the April to June period, it added.

Coronavirus lockdowns hit retailers and luxury manufacturers hard as the outbreak spread from Asia to Europe and the United States. L’Oréal sells many of its products in airports, which were also paralysed as tourist numbers dried up and travel retail plunged.

The group was hurt by the closure of hairdressing salons too, and sales of professional products tumbled more than those of other divisions.

However, online sales surged, L’Oréal added, with demand for hair colorants for home use soaring, for example.

But overall revenue came in at €5.85 billion ($6.90 billion) in April-June, down 18.8% on a like-for-like basis, which strips out currency effects and acquisitions. Analysts had on average expected a 13.1% like-for-like sales drop, according to a consensus forecast cited by Berenberg.

The firm's operating margins stood at 18% at the end of the first half of the year, only slightly down from 18.6% at the end of 2019, and it cut expenses in areas such as advertising.

The group posted a net profit of €2.14 billion for the January to June period, down from €2.47 billion a year earlier.