L'Oreal shares slide as make-up slowdown weighs on sales

PARIS (Reuters) - L'Oreal OREP.PA shares fell on Wednesday after second-quarter sales growth missed forecasts and the cosmetics maker said it expected little improvement this year in the United States where demand for make-up is slowing.

FILE PHOTO: A tube of L'Oreal's ammonia-free Inoa hair colouring dye juts out from the shelves at Cuttour hair salon in Jewel Changi Airport in Singapore, May 24, 2019. REUTERS/Loriene Perera/File Photo

The French beauty group, which makes high-end mascaras under labels such as Lancome as well as the budget Maybelline range, is still thriving in markets including China and across Asia, and reported booming demand for skincare treatments.

But a recent make-up craze - driven in part by the rise of social media platforms, which pushed consumers to want to look their best online and fuelled cosmetics sales - is losing momentum, penalising L’Oreal in the United States especially.

North American like-for-like revenues, which strip out currency swings and acquisitions, fell 1.1% in the April to June period, the group reported on Tuesday evening.

L'Oreal shares were down 4.1% at 0807 GMT, and were among the worst performers on Paris' SBF 120 index of French companies .SBF120.

“The United States was clearly the weak point of this first semester,” Chairman and Chief Executive Jean-Paul Agon told an analyst conference call on Wednesday.

U.S. demand faltered for both L'Oreal's mass market make-up ranges and luxury items - where it competes with the likes of MAC maker Estee Lauder EL.N - and the company had lost some market share, Agon said.

Product launches, including Valentino and Yves Saint Laurent perfumes, might help in the second half of 2019, but the market would remain soft, he added.

“We are very clearly strengthening our plans for the second half, for next year, we really intend to bounce back in the United States but it may take some time,” Agon said. “It probably will not happen before the end of the year.”

Overall in the second quarter, L’Oreal posted a 6.8% rise in like-for-like sales across all regions in the period, missing expectations for growth of 7.4%.

“L’Oreal trades on its top-line growth,” analysts at Bernstein said in a note, adding that revenue growth was still strong but had dipped below a quarterly pace of 7% for the first time in a year. “The worry is whether we are past the peak and if growth will ‘normalise’ from here.”

The cosmetics firm has also been trying to turn around its mass market division, home to brands sold in supermarkets such as Garnier shampoo.

Sales in this area were sluggish in the second quarter, growing 2.8% on a like-for-like basis, and missed analyst forecasts.

Agon said he expected improvements here in the second half of 2019, however, thanks in part to a focus on developing ranges with more natural ingredients, tapping into demand for greener cosmetics.

Reporting by Sarah White; Editing by Sudip Kar-Gupta and Louise Heavens