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    OR   FR0000120321

L'ORÉAL

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L'Oreal : Chinese hunger for luxury fuels L'Oreal sales growth

10/21/2021 | 12:49pm EST

* Luxury helps sales rise 13% in Q3

* Q3 sales beat analysts' forecasts

* Double-digit growth in China

PARIS, Oct 21 (Reuters) - L'Oreal on Thursday posted better-than-expected revenue growth for the third-quarter, fueled by continued strong demand for its luxury lines and sustained growth in China.

The French group, which owns brands like Lancome and makes Armani cosmetics, saw luxury sales surge over 20%, as it benefited from e-commerce channels it expanded during the pandemic and stores that reopened.

Though mainland China continued to post double-digit growth during the quarter, helped by strong demand for hair and skincare products, growth was tempered by a resurgence of some regional coronavirus curbs.

Chief Executive Nicolas Hieronimus said the restrictions had mostly impacted in-store sales and that the country's e-commerce business continued to flourish.

"China's population and its middle classes are increasing and their appetite for beauty is not satisfied," Hieronimus told analysts in a call.

China last year became the world's second-largest market for beauty and personal care products after the United States, according to market research firm Statista, as a growing middle class and social media influence boosted demand for premium brands.

Calls from the Chinese government for a "common prosperity" - a broad policy drive to narrow the gap between rich and poor - have however stoked investor concerns the state could seek to restrict high-end purchases.

But Hieronimus said that efforts to redistribute wealth would likely increase the middle classes and benefit L'Oreal's business.

He said that premium lines were L'Oreal's fastest growing categories in China, citing cosmetics brands Lancome Absolue and Helena Rubinstein.

The company reported sales up 13.1% from July to September, excluding currency swings and acquisitions, materially beating analysts' forecasts.

Consensus estimates cited by Deutsche Bank had predicted growth at around 8%, fearing that demand would taper off following a post-lockdown boom.

Sales had surged 33.5% in the previous three months, when L'Oreal and fashion labels benefited from booming Chinese and U.S. demand amid easing coronavirus curbs. (Reporting by Mimosa Spencer and Sarah Morland; Editing by Elaine Hardcastle, Jonathan Oatis and Nick Zieminski)


© Reuters 2021
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Analyst Recommendations on L'ORÉAL
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Financials
Sales 2021 31 823 M 35 932 M 35 932 M
Net income 2021 4 528 M 5 113 M 5 113 M
Net cash 2021 5 727 M 6 467 M 6 467 M
P/E ratio 2021 49,2x
Yield 2021 1,13%
Capitalization 224 B 252 B 252 B
EV / Sales 2021 6,85x
EV / Sales 2022 6,22x
Nbr of Employees 85 392
Free-Float 41,8%
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Mean consensus OUTPERFORM
Number of Analysts 27
Last Close Price 400,90 €
Average target price 393,35 €
Spread / Average Target -1,88%
EPS Revisions
Managers and Directors
Nicolas Hieronimus Chief Executive Officer & Director
Christophe Babule Chief Financial Officer
Jean-Paul Agon Chairman
Barbara Lavernos Deputy CEO-Research, Innovation & Technology
Antoine Vanlaeys Chief Operating Officer
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