L’Oreal shares fall after Asian sales disappoint

By Mimosa Spencer

PARIS (Reuters) -Shares in L’Oreal fell 7.5% in early trading on Friday after the French cosmetics company reported fourth quarter sales growth that fell short of market expectations, reflecting a disappointing performance in Asia.

L’Oreal reported a 6.9% rise in fourth quarter sales after the market closed on Thursday, slower growth than in the previous quarter. Sales totalled 10.6 billion euros ($11.4 billion), shy of expectations for 10.9 billion euros, according to consensus estimates cited by Barclays

L’Oreal’s travel retail business suffered from tighter control by the Chinese government of resellers known as “daigou”. The resellers purchase inventory at lower prices in other markets and resell them at a discount in the mainland.

Analysts at Barclays said that they had expected Asia travel retail issues to take longer to be resolved than the market expected. They added that L’Oreal’s top-line sales performance represented a “rare headline miss”.

Analysts at Deutsche Bank said L’Oreal’s performance in North Asia was “well below expectations.”

“We are of the view that headwinds in China are structural not just cyclical,” they said in a note.

L’Oreal nevertheless outperformed its main rival Estee Lauder. Sales at Estee Lauder declined 8% overall in the same quarter.

The company also said on Friday it had signed a licensing agreement with high end fashion label Miu Miu for beauty products.

L’Oreal expects to launch the first fragrances in 2025 under the agreement, which encompasses the creation, development, and distribution of beauty products.

(Additional Reporting by Piotr Lipinski; editing by David Evans, Jason Neely, Matt Scuffham and Barbara Lewis)

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