Coty Inc., L’Oréal Group and Unilever all reported quarterly earnings this week, with notable sales growth across the board.
Highlights included the substantial rebound for fragrances, as noted by both Coty and L’Oréal, as well as the continued significance of the Chinese market to sales increases for all beauty brands and divisions. Unilever faced a tense earnings call, given the poor public performance that the consumer goods conglomerate has faced over the past year. But company executives also expressed a clear desire to invest in and add more beauty brands to its portfolio, as that is viewed as key to the business’s long-term success.
Glossy rounded up the latest earnings, breaking down the highlights of each.
Coty reported its second-quarter fiscal year 2022 earnings on Tuesday, noting that net revenues increased 12% driven by its prestige and consumer beauty units. This was in line with growth expectations. The Prestige Beauty unit experienced a 12% sales increase year-over-year, while Consumer Beauty sales increased 11% year-over-year. The earnings report noted that travel retail sales doubled for the first half of the fiscal year, compared to the same period in 2021. Prestige fragrance sales increased double-digits in the second quarter, with nearly all brands contributing.
During the earnings call, CoverGirl, Rimmel and Max Factor were cited repeatedly as drivers for the Consumer Beauty unit. CoverGirl notably launched skin care in Nov. 2021 and added actress America Ferrera as a brand ambassador. CoverGirl also took part in an Amazon shopping livestream alongside the Sally Hansen nail brand, driving 1.6 million views and 3 million impressions.
“The idea is not to launch just another mascara or another moisturizer,” said Sue Nabi, CEO of Coty Inc., during the earnings call. “Coty’s vision is to build categories hand-in-hand with retailers. And this is precisely what we have been doing on Consumer Beauty … CoverGirl [regained] market share in the U.S. for 26 weeks out of the last 40 weeks, because we decided that we will [categorize the brand] with clean beauty.”
On the Prestige Beauty side, Gucci Beauty received an extended callout during the earnings call. Nabi said Gucci makeup sales doubled in stores, and that DTC e-commerce accounted for over 50% of the sales. Gucci makeup sales in China tripled year-over-year, and makeup sales in China now exceed Gucci fragrance sales. Both in the second quarter and for the first half of fiscal year 2022, Gucci makeup sales more than doubled year-over-year.
L’Oréal Group reported tremendous growth for its fourth-quarter and full-year 2021 earnings on Wednesday, with sales increasing 15.3% to just over $37 billion. All four beauty divisions grew in 2021, with active cosmetics — including brands like La Roche Posay, SkinCeuticals and CeraVe, among others – leading the pack. They saw a 31.8% year-over-year sales increase compared to 2020 and a 56.6% increase compared to 2019. However, L’Oréal Luxe is now the group’s largest division with over $12.3 billion in sales, eking out the consumer products sector. Fragrances within Luxe saw “remarkable” success, according to the earnings report, with a year-over-year sales increase of 27%.
“There are several reasons for [the success of fragrance]. First, fragrance is linked to new consumer behaviors, which are centered around pleasure and well-being. Secondly, fragrance allows you to get back to social life, just like makeup. All customers worldwide wanted to go back to a more active social life,” said Cyril Chapuy, president and general director of L’Oréal Luxe, during the earnings call. “But there are also fundamentals [behind] the growth of fragrance, [which] is the explosion of the Chinese market.”
Despite the strong sales growth, L’Oréal shares were down on Thursday over investor concerns that higher marketing expenditures were cutting into profitability. Molly Wylenzek, an equity analyst at Jefferies, said in her equity research that she expected the marketing expenses to be overlooked by the public market. L’Oréal increased advertising and promotions in the second half of the year, spending approximately $2.29 billion on marketing in 2021, an increase of 1.9% over 2020. Nicolas Hieronimus, CEO of L’Oréal Group, justified the increase during the earnings call.
“In this year of rebound, we rebalanced a little bit to allow (the consumer products division) to invest more strongly in their brands, and it paid off”, he said.
Unilever reported its fourth-quarter 2021 and full-year 2021 results on Thursday, with the beauty and personal care unit sales increasing 3.8%, including 3.0% from price increases and 0.8% from sales volume increases. All categories grew, with the exception of skin cleansing, which declined following elevated demand in the prior year. The prestige beauty unit, which includes Tatcha, Hourglass Cosmetics and Paula’s Choice, among others, delivered double-digit growth across all brands as channels reopened, with e-commerce serving as a big contributor. Overall, Unilever’s e-commerce growth was 44% and now represents 13% of Unilever’s sales.
Underlying operating margin in beauty and personal care was flat, with high material inflation in palm oil having a particularly high impact on gross margin, despite product price increases. Brand and marketing investments were lower overall due to pullbacks in Europe and South East Asia where Covid-19 restrictions impacted sales and marketing opportunities.
Of course, all of the neutral beauty news was juxtaposed against the backdrop of Unilever’s troubles. Unilever lost a bid for GlaxoSmithKline’s consumer goods unit after the company rejected a $67 billion offer in late January. Following this news, it was revealed that activist investor Nelson Peltz had bought an undisclosed stake in the business and that Unilever would cut 15% of its senior manager jobs resulting in the termination of 1,500 positions.
“After months of careful review, the board concluded that accelerating our shift into consumer health and wellbeing and beauty as two very attractive adjacencies would position Unilever for faster growth for the decades to come,” said Alan Jope, CEO of Unilever, during the earnings call. “That lay behind what were intended to be confidential discussions with GSK and Pfizer.… We are absolutely resolved on moving the portfolio toward these attractive spaces of beauty and consumer health and wellbeing, but we are more patient [now] with how we get there.”