L'Oréal SA, the world's largest cosmetics group, issued a warning signal for the consumer market: in the third quarter, sales in certain Asian regions, including China and other major economies, continued to decline instead of recovering, dragging down L'Oréal's overall sales growth and further slowing down, marking its worst performance in the first three quarters of this year.

On Tuesday, October 22nd, local time, L'Oréal Group, headquartered in France, announced its financial data for the third quarter and the first nine months of 2024.

1) Main financial data

Sales: In the first nine months of this year, sales reached 32.406 billion euros, a 6% year-on-year increase. The sales in the third quarter were 10.285 billion euros, a 2.8% year-on-year growth, below analysts' expectations of 10.57 billion euros.

Same-store sales: In the first nine months, same-store sales grew by 6% based on comparable structure and constant exchange rates. In the third quarter, same-store sales increased by 3.4%, falling short of analysts' expectation of 5.88% growth.

2) Segmented business data

Mass cosmetics: The sales revenue of the mass cosmetics business unit in the first nine months reached 12.07 billion euros, a 5.3% year-on-year increase. Same-store sales grew by 6.4%. However, in the third quarter, sales revenue was 3.748 billion euros, a 0.6% year-on-year decline, with a 1.4% growth in same-store sales.

High-end cosmetics: The sales revenue of the high-end cosmetics business unit in the first nine months was 11.353 billion euros, a year-on-year growth of 5.3%, with a same-store sales increase of 4.3%. Among them, the sales revenue for the third quarter was 3.775 billion euros, a year-on-year growth of 8%, with a same-store sales increase of 5.8%.

Dermatological and Beauty Science: The sales revenue of the Dermatological and Beauty Science business unit in the first nine months was 5.993 billion euros, a year-on-year growth of 9.8%, with a same-store sales increase of 11.3%. Among them, the sales revenue for the third quarter was 1.6 billion euros, a year-on-year decrease of 1.6%, with a same-store sales increase of 0.8%.

Professional Hair Care Products: The sales revenue of the Professional Hair Care Products business unit in the first nine months was 3.589 billion euros, a year-on-year growth of 4.8%, with a same-store sales increase of 5.8%. Among them, the sales revenue for the third quarter was 1.163 billion euros, a year-on-year growth of 4.8%, with a same-store sales increase of 6.1%.

3) Segmented Regional Market Data

Europe: Sales revenue in Europe in the first nine months was 10.7 billion euros, a year-on-year growth of 9.9%, with a same-store sales increase of 9.3%. Among them, the sales revenue for the third quarter was 3.417 billion euros, a year-on-year growth of 5.2%, with a same-store sales increase of 5.6%.

North America: Sales revenue in North America in the first nine months was 8.905 billion euros, a year-on-year growth of 7.1%, with a same-store sales increase of 6.9%. Among them, the sales revenue for the third quarter was 3.107 billion euros, a year-on-year growth of 4.3%, with a same-store sales increase of 5.2%.

North Asia: Sales revenue in North Asia in the first nine months was 7.43 billion euros, a year-on-year decrease of 3.5%, with a same-store sales decrease of 3%. Among them, the sales revenue for the third quarter was 1.956 billion euros, a year-on-year decrease of 4.4%, with a same-store sales decrease of 6.5%.

SAPMENA-SSA: The sales revenue of the South Asia, Middle East, North Africa, and Sub-Saharan Africa (SAPMENA-SSA) region in the first nine months was 2.839 billion euros, a year-on-year growth of 12.1%, with a same-store sales growth of 12.6%. Among them, the sales revenue for the third quarter was 0.955 billion euros, a year-on-year growth of 7.9%, with a same-store sales growth of 8%.

Latin America: In the first nine months, sales in Latin America reached 2.531 billion euros, a year-on-year increase of 10.3%. Same-store sales increased by 12.3%. In the third quarter, sales were 0.85 billion euros, a year-on-year increase of 0.7%, with same-store sales growing by 8.6%.

Following the financial report announcement, on Tuesday, nearing midday of the U.S. stock market, L'Oreal's U.S. stocks dipped nearly 0.8% from the day's high in the morning to a dive, hitting a fresh daily low at the start of the afternoon trading session. The intraday decrease was about 4.7%, later narrowing to around 3%.

Sales growth in the third quarter was less than half of the second quarter. The largest business, mass-market cosmetics, shifted from positive to negative growth.

The financial report shows that L'Oreal's overall sales growth in the third quarter once again slowed more than expected, with the quarterly growth rate being less than half of the 6.7% growth rate in the second quarter. Same-store sales growth was only 60% of the second quarter's 5.3% growth.

Among L'Oreal's four major businesses, half of the sales in the third quarter declined year-on-year. The largest revenue sources, mass-market cosmetics, and the rapidly growing SkinCeuticals both saw a transition from positive to negative growth in comparison to the first half of this year. All businesses maintained same-store sales growth, but the growth in mass-market cosmetics and SkinCeuticals significantly slowed compared to the second quarter, with the former's growth rate of 1.4% only being 20% of the second quarter, while the latter's growth slowed from 10.8% in the second quarter to 0.8%.

L'Oreal's CEO Nicolas Hieronimus commented that the summer weather conditions this year had a negative impact on the company's sunscreen products. However, the consumption of beauty products remains resilient, with L'Oreal's haircare and fragrance business performing exceptionally well. The former achieved double-digit growth, far surpassing the market average. L'Oreal's cosmetics business is slowly recovering, with most innovations coming from the Maybelline brand. The SkinCeuticals division appears to lack innovation.

In the third quarter, the same-store sales decline in North Asia was nearly three times that of the second quarter, partly driven by Japanese beauty business benefiting from tourists from China and other places.

By region, apart from the North Asia region including China, L'Oreal's sales in the third quarter remained positive in all other global markets. North Asia region became the main driver of L'Oreal's sales slowdown for the season. The sales decline in the region for the season was almost twice the 2.4% decline in the second quarter, with a comparable store sales decline of about 2.7 times the 2.4% decline in the second quarter.

L'Oreal pointed out in their financial report that the company's sales in the mainland China beauty market were already negative in the second quarter, due to the impact of weak consumer confidence. The situation continued to worsen in the third quarter, resulting in a low single-digit decline in sales for the first nine months. However, in the mainland China market, L'Oreal's performance in the skincare and professional hair care products business segments outperformed the market average.

In the travel retail sector, L'Oreal saw a recovery in sales in the third quarter, but sales in Hainan still faced pressure. In Japan, L'Oreal hinted that sales growth in the local market was driven by foreign tourists from countries like China, stating that with the support from domestic consumers and tourists, Japan became L'Oreal's top-performing overseas market in the beauty industry.

L'Oreal's sales grew by 6% year-on-year in the first nine months of this year, and without the impact of the company's travel retail business in China and Asia, sales would have grown by over 8%.

L'Oreal CEO Hieronimus expressed satisfaction with the recent stimulus measures introduced by the Chinese government. While it is still early to determine the impact of these measures, there has been an increase in discussions around beauty and clothing following the announcement of the new policies. Hieronimus emphasized that the company's performance is related to consumer confidence, but also to innovation. He highlighted that in China, sales of L'Oreal's brands such as Yves Saint Laurent (YSL), SkinCeuticals, Prada, and CeraVe have been strong.