July 26, 2018 / 5:01 PM / 10 months ago

Cosmetics giant L'Oreal leans on luxury arm as profits rise

The logo of French cosmetics group L'Oreal is seen in front of the Arc de Triomphe during a public event in Paris, France, October 1, 2017. REUTERS/Charles Platiau

PARIS (Reuters) - L’Oreal (OREP.PA) posted higher underlying profits in the first half of the year thanks to strong sales in Asia and at its luxury brands like Lancome, countering a sluggish performance in its mass market unit.

Resilient demand from Chinese shoppers in the face of a trade spat with the United States has sustained sales at luxury goods firms in recent months, and the beauty sector is no exception with L’Oreal’s premium labels riding high.

The French company said operating income grew 1.8 percent from a year ago to 2.58 billion euros ($3 billion), in line with forecasts by analysts in an Inquiry Financial poll for Reuters, while margins reached 19.2 percent.

In the second quarter alone, like-for-like sales rose by a slightly higher-than-expected 6.3 percent, compared to the 6.8 percent revenue growth notched up in the first quarter, with the luxury division outperforming others.

The mass market unit, home to Maybelline make-up and Garnier shampoo, was more of a sore point, however.

Like-for-like sales growth slowed to 2.3 percent in the April to June period from 2.6 percent in the first, when analysts had forecast a slight improvement.

L’Oreal, which rivals companies like U.S.-based Estee Lauder, has been investing heavily in online sales as cosmetic groups look to capture younger shoppers. Web sales accounted for 9.5 percent of all revenues in the first half.

Reporting by Sarah White; Editing by Kirsten Donovan

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