L’Oréal (Financials)
Financial overview
- Record group sales climbing 7.6% to €41.2bn (£35.8bn) in FY2023
- Like-for-like sales jumped 11.0% on the previous year
- Ecommerce rose 9.5% to around 27% of group sales
- Operating margins grew from 19.5% to 19.8%
- Pre-tax profits excluding non-recurring items rose from €7.6bn (£6.5bn) to €8.0bn (£6.96bn)
- For most recent financial update, click here
L’Oréal splits its group revenue into four divisions: L’Oréal Luxe, consumer products, dermatological beauty and professional products.
Its geographical zones are divided as follows: Europe, North America, North Asia, SAPMENA – SSA (South Asia Pacific, Middle East, North Africa, Sub-Saharan Africa) and Latin America.
L’Oréal’s group sales rose for the third consecutive year to a record €41.2bn (£35.8bn) for the year ending 31 December 2023 (FY2023). Group revenues climbed 7.6% in reported currency with like-for-like sales surging 11.0%. The group also delivered volume growth of 4% year-on-year.
L’Oréal chief executive Nicholas Hieronimus said: “2023 was a very successful year for the group. I am immensely grateful to our teams. Their creativity, entrepreneurship and passion enabled us to report a third consecutive year of double-digit like-for-like growth, once again outperforming a dynamic beauty market. We set a new operating margin record and delivered +7.3% EPS3 growth. In a challenging environment of geopolitical tensions, inflationary pressures, and a stagnating beauty market in China, we delivered our best like-for-like growth in more than 20 years (excluding 2021). This is a clear vindication of the power of our multi-polar model, and I am particularly pleased with the strong acceleration in emerging markets.”
In FY2022, group revenues had leapt 18.5% to €38.3bn (£32.6bn), on the back of 15.3% sales rise in FY2021.
The group heralded record operating margins in the latest financial year, rising from 19.5% to 19.8% with an operating profit of €8.1bn (£7.1bn).
L’Oréal continued to see strong gains within its consumer product division in FY2023, with the best like-for-like growth in 30 years.
Sales climbed 8.2% in reported currency to €15.2bn (£13.2bn). Makeup was the leading contributor, propelled by new launches from Maybelline New York, L’Oréal Paris and NYX Professional Makeup. By region, Europe delivered “a truly spectacular acceleration, making it a key growth contributor”, and emerging markets, (particularly Mexico, Brazil, and India. North America) delivered robust growth.
Within its luxe division, newly acquired Aēsop got off to “a promising start”, integrated into group results from 30 August 2023. Luxe sales rose 2% to €14.9bn (£12.99bn) with trade impacted by the reset of Travel Retail and “market softness” in mainland China. Excluding North Asia, the division grew “double digit” on the previous year.
The group saw all its regions apart from North Asia deliver strong year-on-year growth in FY2023, with North America rising 9.7%, SAPMENA – SSA up 16.4% and Latin America up 22.8%.
Sales within Europe jumped 13.7% to €13.0bn (£11.3bn), with like-for-like sales delivering the first double-digit growth in 20 years, rising 16%. All categories delivered double-digit growth, led by skincare and makeup.
Revenues in North Asia declined 5.8% with the beauty market in mainland China remaining flat and continued disruption in travel retail.
In FY2022, all L’Oréal’s regions grew double-digit year on year with strong like-for-like comparatives. Its European region achieved like-for-like growth of 11.6%, with revenues jumping 12.3% to €11.4bn (£9.75bn). Sales in Europe were driven by fragrance, makeup and sun protection.
Within North Asia, sales climbed 6.6% on a like-for-like basis to €11.3bn (£9.65bn) where it saw “double-digit growth” in Japan and Korea, which bounced back strongly in 2022. It described sales in mainland China as “clearly affected by the public health restrictions”.
Profit performance
Gross margins increased 150 bps in FY2023 to 73.4% due to tight control of SG&A expenses. L’Oréal saw its operating margins grow 30bps to 19.8% with an operating profit of €8.1bn (£7.1bn).
It spent €1.29bn (£1.1bn) on research and innovation in the latest financial year, having increased investment by over 10% to €1.14bn (£0.97bn) in FY2022.
Operating profits at L’Oréal have been on an upward trajectory, rising from some 18.3% in FY2018 to 19.5% by FY2022.
Pre-tax profits excluding non-recurring items grew from €7.6bn (£6.5bn) to €8.0bn (£6.96bn) in FY2023.
UK financial analysis
L’Oréal reported a 13.2% rise in UK sales to £1.43bn in FY2023, rising faster than the group. It said the shift to ecommerce witnessed during the pandemic remains but is well balanced with “brick and mortar” shopping as “both channels are growing well”.
UK sales had risen 8.4% to £1.27bn in FY2022, which L’Oréal said was driven by “strong gains” in skincare and fragrance. While ecommerce declined “slightly” on FY2021, bricks and mortar continued its growth from the previous year.
Pre-tax margin tends to lag behind the group, although UK pre-tax margin rose to 15.3% in FY2023, having climbed to a healthy 14.9% in FY2022.
Employees
Although L’Oréal does not disclose its employee costs at group level, UK filings show employee costs have been on a downward trajectory since FY2018, recorded at 14.3% in FY2022 and rising marginally to 14.4% in the latest financial year.
It had 3,175 UK employees in the latest financial year, with employee numbers having declined to FY2022.
Group sales per employee stood at around £378,800 in FY2023, with UK sales per employee slightly higher at £451,875.
Ecommerce
Whilst L’Oréal does not generally disclose its overall ecommerce sales, this arm of the business has grown significantly in the last five years. In its full-year earnings call in February 2024, Hieronimus said ecommerce grew by 9.5% to 27% of sales. Retail Navigator estimates this to be about £9.8bn of sales.
With a return to stores in FY2022, ecommerce share had stepped back slightly to account for 28% of group sales.
Prior to the pandemic (FY2019), ecommerce was around 15.6% of sales before climbing 62% for the group in FY2020 (26.66% share), then rising 25.7% in FY2021 to around €9.3bn (£8.0bn), accounting for 28.9% of group sales.
Current year
Q3
Sales at L’Oréal climbed 2.8% on a reported basis to €10.28bn (£8.74bn) in its third quarter ended 30 September 2024 (Q3 FY2024). Sales for the nine-month period to end September grew 6.0% on a reported basis to €32.41bn (£27.57bn), with all divisions in growth.
L’Oréal chief executive, Nicolas Hieronimus commented “We delivered solid growth of +6% in the first nine months, well-balanced between value and volume, despite multiple turbulences that have negatively impacted our third quarter.
As anticipated, global beauty market growth has been normalising throughout the year. In the developed markets, this has been driven by a gradual easing in pricing after two years of strong inflation; despite that, underlying market trends remain robust in Europe, and North America – as well as in emerging markets. The situation in the Chinese ecosystem has become even more challenging, but we believe in the future of this market and hope that the governmental stimulus will help improve consumer confidence.
Overall, the beauty category continues to grow, including in units, demonstrating once again its resilience and long-term potential. L’Oréal continues to outperform thanks to our innovation power, the agility of our teams and our capacity to reallocate our resources towards new growth engines.
In a context that continues to be marked by economic and geopolitical uncertainties, we remain confident to achieve another year of growth in sales and operating profit and are preparing our own beauty stimulus plan for 2025.”
All regions experienced robust sales growth apart from North Asia, where revenue fell 3.5% on a reported basis over the nine-month period, falling 4.4% in the third quarter. European sales rose 9.9% during the nine-months while North America climbed 7.1%.
The beauty giant said online grew faster than online, “notably in emerging markets” such as Latin America.
H1
Sales at L’Oréal climbed 7.5% to €22.1bn (£18.91bn) in the six months to end June 2024 (FY2024).
Hieronimus commented “In the first half, we delivered strong growth of +7.3%, well-balanced between value and volume and strengthened our global leadership in a beauty market that remains dynamic.
Consumer Products remained its largest division with sales surging 8.3% to €8.32bn (£7.11bn) while Dermatological Beauty climbed 15.5% to €3.79bn (£3.24bn).
Within its regions, Europe saw double-digit growth (+12.2%) with sales of €7.28bn (£6.23bn), and North America growing 8.7%. Sales in North Asia fell 3.1% to €5.47bn (£4.68bn).
Gross profit margin climbed from 74.3% to 74.8% in the half while operating profit margin nudged up from 20.7% to 20.8%. Net profit rose to €3.66bn (£3.12bn) with a net profit margin of 16.5%.
Of the six months ahead, Hieronimus commented “In an environment that continues to be marked by economic and geopolitical tensions, we remain optimistic about the outlook for the beauty market and confident that our innovation power and the robustness of our multi-polar model will allow us to keep outperforming it and to achieve another year of growth in sales and profit.”
Q1
L’Oréal posted an 8.3% jump in sales to €11.24bn (£8.89bn) in its first quarter to end March 2024 (Q1 FY2024). Like-for-like sales climbed 9.4% while total revenues rose 11.8% in constant currency.
A “stellar performance” in both its Consumer Products and Dermatological Beauty divisions saw sales grow 9.2% and 19.6% respectively.
Hieronimus commented “We are a pure player in beauty, a category that has once again proven its relentless growth capacity. Our multipolar approach to beauty - from luxury to mass, professional to dermatological, in all channels, all price points, and all geographies - allows us to seize all growth opportunities and offset temporary points of softness.”
Within its regions, sales in Europe surged 12.6% with “particularly remarkable performance” in its Germany-Austria-Switzerland, Spain-Portugal, and UK-Ireland hubs.
Revenues in North Asia continued to be challenged, falling 3.9% in the quarter with Travel Retail continuing to “weigh on growth” in the region. All other regions delivered double-digit growth in the period.
The beauty retailer remains “optimistic” in its outlook for the year ahead, “confident in our ability to keep outperforming it and to achieve another year of growth in sales and profit.”
Forecast
As it heads into 2024, L’Oréal remains “optimistic about the outlook for the beauty market, and confident in our ability to keep outperforming it and to achieve another year of growth in sales and profits”. It predicts the beauty market to grow around 4% to 5% in FY2024.
Retail Navigator estimates that group revenues will surpass £47bn by FY2028.
