Fresh off its Kering Beauté acquisition announcement this weekend, L’Oréal Group reported a 3.4% like-for-like sales jump on Tuesday during its latest earrings meeting.
This encapsulated the first nine months of the year, with Q3 driving significant lift for the company thanks to 4.9% like-for-like sales growth. As reported by Glossy in July, the company reported 2.6% and 3.7% like-for-like sales growth in Q1 and Q2, respectively.
“[The past three quarters have shown] a real acceleration of the market,” said L’Oréal Group CEO Nicolas Hieronimus during the call. “The first and most important thing to say is that we’ve seen a real acceleration in North America, particularly the U.S. market.”
Hieronimus credited overall Q3 growth to hair-care and fragrance sales, as well as early rebounding of color cosmetics and an uplift in sales in China. Travel retail, however, continues to struggle. He also called out skin-care sales winners including La Roche-Posay, CeraVe and SkinCeuticals. The company reached $38.08 billion in sales in the first nine months of the year.
L’Oréal’s acquisition of Kering is heavily reliant on the continued growth of the fragrance category, which some analysts believe is beginning to soften, while others have told Glossy it looks like a bubble that may burst. Hieronimus acknowledged these concerns on Tuesday during the call.
“We remain very confident in fragrance, and we see it continuing to grow,” he said. “Of course, [its] growth rate is slowing down a bit, but there are still more people using fragrances, [including] more young people having what I would call the ‘wardrobe strategy’ in fragrances [where you are] having several fragrances, depending on occasion.”
His confidence in fragrance rests on buzzy new releases tied to the Kering deal, the rise of the men’s fragrance category and the overall feel-good escapism that comes with fragrance.
“We all see the world we live in and people want things that make them [feel better with the] bliss of something that smells good,” he said. “What’s interesting is that men’s fragrances are growing faster right now than [women’s], which reflects the entry into the market of multiple young men and boys that are very excited [about fragrance].”
Hieronimus noted that Creed fills white space in its assortment and allows for access to some of the wealthiest fragrance shoppers today who are already steeped in the Creed brand and community.
“House of Creed is a beautiful brand, [and] it’s in the top three [top sellers] of the niche fragrances markets, which happens to be the fastest growing part of the fragrance market itself,” he said. “Kering will bring expertise in luxury [and] their clientele, [because] they are used to focusing on high-net-worth individuals who are the primary target of this type of [luxury] business [growth for L’Oréal].”
Kering group COO Jean-Marc Duplaix anticipates a long runway for Creed’s growth. “As part of the alliance [between L’Oréal and Kering], Creed also gets to integrate into a bigger portfolio, demonstrating the unique attributes of this house and ensuring its next stages of growth,” he said during Kering’s earnings on Wednesday.
“All the brands, relative to their respective size, have the potential to grow quite massively with, of course, an incremental level of royalty for us,” added Armel Pollet, group CFO for Kering.
Growing wealth in the Middle East market is likely to fuel part of the growth the companies are after. Hieronimus just returned from several weeks in Saudi Arabia, he said, which continues to be a focus for the conglomerate.
The SAPMENA–SSA market, which represents South Asia Pacific, Middle East, North Africa and Sub-Saharan Africa, have dominated L’Oréal’s sales all year, with a 9.2% sales jump during the first half and an 11% YoY jump during Q3.
“Saudi [Arabia] is a fast-rising market which, like the rest of the Gulf, has an absolute love for fragrances,” he said. “And not just for blockbusters, but really for expensive, niche fragrances that they layer, and we see the same in other emerging markets.”
