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Thud on the Paris Stock Exchange. L’Oreal in heavy decline after the disappointing 2023 accounts, linked in particular to the performance in China. The stock of the world‘s number one cosmetics company has fallen by more than 7% and is the ‘black jersey’ of the Cac 40 index, as well as being at the bottom of the Stoxx Europe 600.
The bills
Yesterday, after the close of the session, the group that owns Lancome, L’Oréal Paris, Garnier, Maybelline, La Roche-Posay and Vichy announced that revenues totaled 10.61 billion euros in the fourth quarter, up by 2 .8% compared to the same period in 2022. Net of currency and scope effects, growth stood at 6.9%, a marked slowdown compared to the 11.1% of the previous quarter. The figure is also below the expectations of analysts who on average were aiming for a turnover of 11 billion in the last quarter of 2023.
New rules on Travel Retail
Operating profit for the quarter amounted to 7.45 billion, with a margin of 19.5%. In 2023, L’Oréal’s revenue reached €41.2 billion, an increase of 11% at constant exchange rates and scope and 7.6% on a reported basis. At a geographical level, while Europe grew by 11.6% to 3.3 billion in the quarter and by 16% to 13 billion in the year, the USA by 9.4% to 2.8 billion and by 11, 8% to 11.5 billion respectively, North Asia recorded a decline of 6.2% to 2.96 billion in the quarter and 5.8% to 10.7 billion in the financial year. L’Oréal explained that the region “has been affected by the new rules on Travel Retail, following the change in legislation regarding Daigous”, or the parallel resale market. These are restrictions introduced by China against the resale of products purchased abroad, particularly in duty-free shops. Furthermore, in China itself, which is the largest national market for L’Oréal after the United States, the beauty market remained “flat”. Operating profit stood at 8.1 billion in 2023, compared to 7.46 billion euros in 2022, showing a margin on turnover of 19.8%, which represents a “record” level, underlined L’ Oreal. The group’s net profit increased by 8.4% compared to the previous year, to 6.18 billion euros. Analysts on average expected net profit of 6.49 billion, operating profit of 8.2 billion and revenue of 41.5 billion. “In a context of geopolitical tensions, inflationary pressures and stagnation in the beauty market in China, we achieved our best comparable growth in over 20 years, excluding 2021,” commented the group’s CEO, Nicolas Hieronimus, quoted in a statement press. “As we move forward into 2024, we remain optimistic about the outlook for the beauty market and confident in our ability to continue to outperform and deliver another year of revenue and profit growth,” the CEO added. The group will propose at the next general meeting the payment of a dividend of 6.6 euros per share for the 2023 financial year, compared to 6 euros for the 2022 financial year. “North Asia and the luxury segment performed well above below expectations and we believe headwinds in China are structural and not just cyclical,” Deutsche Bank analysts wrote in a note. Jefferies experts note that L’Oréal’s performance in 2023 is disappointing. Furthermore, the numbers of the Luxury division are also below expectations, given that turnover increased by 0.4%, to 4.14 billion euros, while the consensus expected growth of 3.8%. Jefferies considers these figures a “bad surprise for the market”.