L'Oreal's 2Q Slowdown Overshadows Strong 1st Half -- Earnings Review

By Anthony Shevlin

L'Oreal SA (OR.FR) posted its first-half results after market close on Tuesday and recorded its strongest first-half like-for-like growth in more than a decade, but its first-half net profit came in slightly below analyst expectations.

Shares in the cosmetics and consumer-goods company are down in trading on Wednesday as investors react to a slowdown in growth in the second quarter, missing analyst forecasts.

SALES: L'Oreal posted first-half sales of 14.81 billion euros ($16.51 billion) compared with EUR13.39 billion the year prior--and in line with a forecast provided by FactSet.

NET INCOME: The French company's first-half net profit came in slightly below analyst expectations. Net profit for the six months ended June 30 rose 2.3% to EUR2.33 billion, but it missed a FactSet forecast of EUR2.46 billion.

WHAT WE WATCHED:

-Eyes were on L'Oreal's luxe division which posted sales of EUR5.15 billion in the first half, a rise of over 13% on a like-for-like basis.

-Analysts expected L'Oreal's organic growth to continue its strong momentum, with Bernstein forecasting growth of 7.6% in the second quarter. However, L'Oreal disappointed with growth of 6.8%. "When 2Q sales are strong, but miss expectations... this is more important than meeting margin/EPS expectations," Bernstein said.

-The company's performance in Asia Pacific remained strong, implying continued strength in the crucial China market. L'Oreal's performance in other markets was subdued, however, notably in North America. Bryan Garnier said the company's consumer products division was penalized by the U.S. makeup market.

Write to Anthony Shevlin at [e-mail]; @anthony_shevlin

(END) Dow Jones Newswires

July 31, 2019 07:13 ET (11:13 GMT)

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