L'Oreal revenue falls, hit by North America weakness

PARIS Mon Apr 14, 2014 2:16pm EDT

The logo of French cosmetics group L'Oreal is seen on the company's building in Clichy, near Paris February 11, 2014. REUTERS/Benoit Tessier

The logo of French cosmetics group L'Oreal is seen on the company's building in Clichy, near Paris February 11, 2014.

Credit: Reuters/Benoit Tessier

PARIS (Reuters) - L'Oreal (OREP.PA) posted a drop in revenue for the first three months of the year, hit by slower demand in North America, but pledged it would return to growth in the second quarter.

The French cosmetics group said on Monday the market for its consumer products, including Garnier shampoo and Maybelline make-up, saw no growth in the United States, due in part to poor weather, but it had seen signs of recovery in southern Europe.

"The U.S. market was flat, I do not remember seeing a flat market in the U.S. for our consumer division," Agon said during a conference call with analysts.

"It was an encouraging and contrasted quarter. We expect to get back on a solid growth basis as early as the next quarter," he said of the group's expected consolidated sales growth.

L'Oreal posted a 2.2 percent drop in first-quarter revenue to 5.64 billion euros ($7.79 billion), which translated into a 3.5 percent rise on a like-for-like basis and undershot market expectations of over 4 percent.

"It is tough to see how 3.5 percent like-for-like growth, the lowest quarterly growth since the depths of the global recession in 2009, can be described as "encouraging"," Bernstein analysts said in a note, adding they would reassess their expectations for the group.

L'Oreal said mass market consumer goods sales in North America had fallen by a mid-single-digit percentage, but it hoped the business would be back on track for growth in the second quarter and return to "steady growth" in the last quarter of the year.

Agon also said he expected sales growth in China to accelerate in the coming quarters.

He said growth in the global cosmetics market in 2014 was expected to be similar to that of the previous year, or 3.5-4 percent.

However, he said the picture would differ across regions compared with last year, with North America being particularly slow, and help coming from southern Europe where the group had seen "renewed vitality."

L'Oreal said southern European markets were showing growth for the first time in six years, and that it had notably enjoyed strong market share gains in Spain.

Revenue at L'Oreal's mass market consumer goods business, its biggest contributor in terms of sales, fell 5.5 percent in the first quarter and the group said it was "feeling the impact of a slowdown in Russia and the situation in Ukraine".

L'Oreal's strongest growth came from its active cosmetics unit, which benefited from the relaunch of its Vichy cream brand, particularly in Western Europe, while La Roche-Posay made a "very good start to the year" with strong growth in Europe and Asia.

The active cosmetics division posted like-for-like sales growth of 8.7 percent in the first quarter, up from 8.4 percent in the preceding three months.

L'Oreal's luxury products unit, behind Yves Saint Laurent perfumes and Biotherm creams, continued to enjoy solid growth, up 7.2 percent on a comparable basis but below the 8.4 percent rise recorded in the fourth quarter.

As usual, the group did not give specific guidance other than to say it expected another year of sales and profit growth.

(Editing by James Regan and Mark Potter)

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