The shares opened down 3.3% after the French group, which owns labels ranging from Maybelline to Lancome, reported third-quarter sales late on Thursday. The shares later recovered some ground and were only down 0.8% by mid morning trading.
L'Oreal sales in North Asia dropped 4.8% in the third quarter, largely missing expectations for a 14.4% rise.
Analysts pointed to a sharper-than-expected hit to business from tighter controls by the Chinese government of "daigou" resellers, who buy products at lower prices abroad and resell them at a discount in China.
Although weakness in North Asia because of travel retail issues and the luxury division was expected by investors, the scale of the miss "took us by surprise," analysts at Barclays said.
The slowdown in the luxury division was most likely expected after LVMH’s perfume and cosmetics division slightly missed expectations last week, but 3.2% growth versus consensus expectations of 12.2% was likely a negative surprise to the market, Jefferies analysts said.
"The bottom line to us is that L'Oréal’s strong and diversified beauty portfolio enabled the group to offset pockets of temporary weakness in North Asia in Q3 and still deliver another strong quarter of double-digit Like for like growth," said Stifel analyst Rogerio Fujimori.
