Premium skin and personal care lines are helping both luxury goods makers and traditional consumer goods conglomerates boost sales as shoppers ditch traditional brands for more upmarket options.
And there is no doubt why: the global skin care market is expected to be worth $121 billion in 2016, according to market research firm Statista and cosmetics and personal care revenues in Europe are expected to approach $80 billion. Statista estimates skin care is the largest segment of that cash pile with a market volume of $18.5 billion.
L'Oreal (LRLCY) is the most recent company to report exceptional growth in the space, with the Paris-based luxury group seeing 9.3% growth in its top-performing 'L'Oreal Luxe' division, whose brands include Kiehl's, Urban Decay and Lancome, in the third quarter. The company also saw growth in the 'Active Cosmetics' division, with brands including La Roche-Posay pushing like-for-like sales up 6.5%.
L'Oreal shares gained more than 5% in early trading, but pared gains to €164.35 amid a wider European sell-off later in the session.
"L'Oreal Luxe has a particularly strong 3Q'16 ... driven by strong market share gains in the U.S. and in China where the company is outperforming the high single digit market growth," Liberum analysts said in a note to clients Friday, noting that the growth was not due to any one-off impact from new launches.
French luxury house LVMH (LVMUY) saw its perfume and cosmetics division record a 10% advance in like-for-like sales Q3, making it the highest growing segment the group. Its 8% growth in the nine months to October also outperformed rivals.