H1 2024: L’Oréal stellar despite China blemishes

French cosmetics giant L’Oréal said in late July that its sales and profits rose in the first half of the year despite a decline in the Chinese market. Overall, L’Oréal, which owns the Maybelline New York and Garnier brands, saw sales rise 7.5% to 22.1 billion euros, and net profit rose 8.8% to 3.65 billion euros.

“We continue to have strong momentum in emerging markets, Europe and North America, which more than offset the downturn in the beauty market in mainland China,” Chief Executive Nicolas Hieronimus said in a statement.

For years, China has been a major source of sales growth for luxury companies, and the sluggish performance of the world’s second-largest economy has hit their earnings. Growth in the luxury goods division, L’Oréal’s second-largest division, was just 4.0%, lagging behind the 8.3% growth in the larger consumer products division.

Hieronimus said L’Oréal had hoped that the Chinese market would rebound this year, but it shrank in the second quarter. "Our forecast for the rest of the year is that China will still decline slightly, as Chinese consumers lack confidence and are more focused on spending." However, the group's CEO said he remains optimistic and ambitious about the Chinese market. "There are 400 million consumers in China who can buy our products, and we only sell our products to 100 million people." He said.

To achieve this goal, "L'Oréal needs to improve its competitiveness," Hieronimus added, noting that the group's luxury cosmetics brand Saint Laurent achieved double-digit growth in China and its Aesop cosmetics stores in China also performed well.

Sales in North Asia fell 3.1% to 5.47 billion euros in the first half of the year, with North America surpassing North Asia with an 8.7% growth rate to become L'Oréal's largest sales region. Sales in Europe, Latin America and South Asia all achieved double-digit growth. The company is confident about its performance for the rest of the year and said it expects both sales and profits to grow this year.

“I am satisfied with the performance. Despite the slowdown in the beauty market, the growth momentum was still strong at around 5.5% in the first half of the year,” Hieronimus said.