L’Oréal (OREP.PA) has good foundations to resist the Chinese market’s weakness. The 230 billion euro French cosmetics company said on Feb. 8 that year-on-year sales in the last quarter of 2023 rose 2.8%. Growth was slower than in the previous quarter, due in part to a near 10% drop in North Asia sales, which includes China and Korea. Shares fell by as much as 7% on Friday morning.
The China weakness echoes the sentiment flagged by US and Japanese rivals Estée Lauder (EL.N) and Shiseido (4911.T). But the French firm led by CEO Nicolas Hieronimus seems to have a stronger base than its global rivals. L’Oréal’s annual sales may have slowed, but Estée Lauder, which announced layoffs this week, and Shiseido saw their 2023 revenue drop 7% and 8%, respectively. The French group also has a comfortable EBIT margin of 19%, relative to the below-10% of the other two. That explains why shares of L’Oréal are up 14% over the past year, versus a 45% and 35% drop for the US and Japanese groups. Hieronimus said he remains confident about the Chinese market in the second half of 2024. To keep the momentum going, he had better be right. (By Karen Kwok)
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