APAC will be the most important future source of growth for L’Oreal, says GlobalData

Following L’Oréal’s announcement of its best quarter results in ten years on 7 February 2019, mostly supported by Asian growth,

Aleksandrina Yotova, Consumer Analyst at GlobalData, offers her view on the future of the company:

“The trend for L’Oreal’s Asian growth has continued in the fourth quarter (Q4) of 2018 and has contributed to an annual revenue growth of 24.1% or €7,405.6m. This comes in contrast with a slight decline of 0.3% in Western Europe, which has historically been the company’s stronghold.

“China, in particular, has been driving growth, especially via the e-commerce channel. L’Oréal Luxe was reported to have achieved double-digit growth in the country but the consumer division has also shown outstanding performance thanks to notably China and India. High sales during China’s 11/11 Singles Festival have boosted the €7.4bn revenue in Asia-Pacific (APAC).

“High-end beauty and skincare demand in China has helped both L’Oreal and its rivals Estée Lauder and Sephora, all of which have been using the strategy of buying successful independent brands to stay competitive in a fast-changing market.

“The acquisition of South Korean beauty and fashion company, Stylenanda, in June 2018 showcases L’Oreal’s ambition to address the millennial market in APAC. Stylenada started as an online retailer targeting affluent young Asian consumers, later spreading across beauty, fashion, café and boutique ventures.

“L’Oreal’s strong e-commerce channel, representing 11% of the group’s sales, has been supported by Eastern Europe, alongside APAC. An online growth of more than 50% has been reported in this market, which is smaller in terms of sales than APAC and the developed markets, but growing quickly. Active Cosmetics products are especially popular in Turkey, Ukraine, Romania and the Czech Republic, where there is a growing desire for ‘clean’ beauty and skincare. The region’s overall sales growth in 2018 was 9.1%, or second fastest after APAC.

“L’Oreal Luxury is set to catch up with the Consumer Products in terms of profitability, with an operating income surmounting the two billion threshold in 2018. The former was the fastest growing division in 2018, registering a 14.4% growth compared to 2017.”

More Media