(BFM Bourse) – The cosmetics group has been falling for two sessions after its general director reduced his growth forecast for the beauty market this year, according to Bloomberg.
L’Oréal has been suffering for two sessions on the stock market. The cosmetics group fell by almost 3% this Friday at the start of the afternoon, after having already lost 3.4% the day before.
The movement appears to be linked to indications given the day before by the group’s general director, Nicolas Hieronimus.
The executive said at a JPMorgan conference in Paris that the company is now only expecting the beauty market to grow by 4.5% to 5% in 2024, down from 5% previously, according to a company spokesman who told Bloomberg. The source said the downward revision is due to a stable Chinese market.
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A tough Chinese market
China has long driven L’Oréal’s growth. But for several quarters, the group has had to deal with a complicated market, particularly in terms of “travel retail”, that is to say sales in train stations and airports. This segment is suffering from the Chinese government’s offensive against the gray market, the “daigou”, launched in spring 2023.
These are resellers who use illegal means to sell their merchandise to Chinese customers. They source their supplies from “duty free” foreign countries, such as South Korea, and also obtain discounts linked to their volumes. Benefiting from a very low price, the “daigou” then resell at higher prices in China. These daigou are very present on the island of Hainan, a favorite vacation spot for Chinese consumers and where duty free purchases have exploded in recent years due to the pandemic.
L’Oréal’s sales in the North Asia region, which includes China, fell 1.1% on a comparable basis in the first quarter.
See you at the end of July
“There is no debate about the beauty market growth slowing down. … The real debate is about the magnitude and duration of this slowdown,” Jefferies wrote in a note published Thursday evening. The bank believes the slowdown is not temporary and that the beauty market should return to growth of 4% to 4.5% per year.
However, “until today”, L’Oréal was one of the most optimistic players with its forecast of 5%, she adds.
L’Oréal, thanks to its diversification, “can outperform but not outperform a slowing beauty market,” Jefferies warns. If the market revises downward its long-term growth forecast for the beauty sector, the consensus may have to adjust downward its forecast for L’Oréal, the bank continues.
L’Oréal will publish its first-half results on July 30.
Julien Marion – ©2024 BFM Bourse
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