Margin concerns dampen L'Oreal shares after solid sales report

FILE PHOTO: A cosmetic display of French cosmetics group L'Oreal is seen at a duty free shop at the Nice International Airport, in Nice, France, October 10, 2018. REUTERS/Eric Gaillard/File Photo

PARIS (Reuters) - Disappointment about margins dampened enthusiasm for L’Oreal’s shares on Friday even after the world’s biggest beauty company reported forecast-beating sales figures for the fourth quarter.

Shares in L’Oreal, which reported its sales figures late on Thursday, initially rose 1 percent but were just 0.1 percent higher by 0848 GMT. The stock is still near a record high and 7 percent up on the start of 2019.

“Overall, the results were ahead of expectations on fourth quarter top-line, but below on second half margins and earnings per share growth,” wrote Andrew Wood, an analyst at brokerage Bernstein.

The owner of Lancome said strong Chinese demand for luxury skin creams had helped it beat sales forecasts in the last three months of 2018.

Sales rose 2.8 percent for the quarter in that division on a like-for-like basis, which strips out currency effects and acquisitions, up from 2.3 percent a quarter earlier.

For 2018 as a whole, operating profit rose 5.3 percent to 4.7 billion euros ($5.3 billion), giving a margin of 18.3 percent of sales, up from 18 percent at the end of 2017.

Earnings per share rose 6.5 percent to 7.08 euros.

Analysts at JP Morgan said the stock was vulnerable after hitting its record high this week.

“L’Oreal’s share price has had a strong run ahead of results and could be prey to profit taking in the face of a likely muted increase in full year consensus 2019 figures,” wrote JP Morgan.

Reporting by Sudip Kar-Gupta and Sarah White; Additional reporting by Helen Reid and Josephine Mason; Editing by Leigh Thomas