L’Oreal sales hit by slowdown in US and Eastern Europe

French cosmetics giant L’OREAL has released its second quarter sales revealing that trading was down in Eastern Europe and North America due to less consumer demand.

Sales between April and June reached €4.64bn showing a 4.6 per cent increase on last year, but under the expected growth rate, particularly after a strong first quarter. The biggest slowdown came in Eastern Europe, having recorded a slight growth in this region in the first quarter, reported sales tumbled 8.2 per cent.

“After several years of growth, the sales trend in Eastern Europe is disappointing in all the countries of this zone, particularly in Russia and Ukraine,” commented CEO Jean-Paul Agon. The zone took another hit this quarter adding to what has been a slow start to the year in what L’Oreal call ‘a dismal economic environment’.

This has been attributed to the fact that consumer confidence and market dynamism have proved more difficult than expected, particularly in mass-market and the pharmacy channel. Furthermore, in this zone, the cosmetics giant claims the launch phasing tends to be focused on the final months of the year.

Having seen revenue in the US grow above market expectation in the first quarter, L’Oreal saw reported figures fall 4.9 per cent in the last three months.

The Luxury Products Division made a good start to the year, thanks in particular to the rebound at Lancôme and another period of strong growth for Kiehl’s and for fragrances. On a reported basis, L’Oreal’s luxury division was the only one to generate growth in the second quarter, with sales up 3.8 per cent.

By comparison, during the previous quarter, L’Oreal’s luxury sales were up 10.3 per cent, revenue from professional products was up 9.6 per cent and from consumer products, it was up 9.4 per cent.

Despite sales stagnating over this period, Agon remained hopeful that the company will increase growth again and remain above market expectations by the end of the year. “With an overall favourable global market trend, and with a rich programme of initiatives in the second half across all divisions, we are tackling the second half of the year with confidence,” he said, adding “We can confirm our goal of outperforming the market in 2011, and achieving another year of growth in both sales and profits.”