France's L'Oreal SA (LRLCY) , the world's biggest beauty products maker, narrowly beat expectations for third quarter sales on strong demand for its luxury skincare brands particularly among younger clients and Chinese consumers.
The Paris-based group posted third quarter sales of €6.1 billion, up 5.1% year-on-year on a like-for-like basis, but down 0.9% on a reported basis following the group's disposal of the Body Shop. The result was ahead of analyst average expectations of a 4.7% growth in sales on a like-for-like basis, which strips out currency movements and asset acquisitions and disposals.
L'Oreal shares were down Friday at €191.60, falling 0.49% on their Thursday close, taking their 12-month performance to just over 20%.
"Overall, the Group outperformed the market and strengthened its position," said Chairman and CEO Jean-Paul Agon in a statement "The highlight of the quarter is the acceleration of our sales in the New Markets, which posted double-digit growth, with strong performances in Asia Pacific, particularly in China."
L'Oreal's performance will be keenly watched by not only its own shareholders but those of Nestle SA (NSRGY) , which owns 23% of the make-up giant, and by activist investor Third Point LLC, which has built a stake in Nestle and is pushing for a sale of the L'Oreal holding. Nestle's stake was worth almost €25 billion based on L'Oreal's valuation on Friday.
L'Oreal's luxury products division posted an 11.2% increase in like-for-like, third-quarter sales compared to a year earlier. The results confirmed a boom in high-end cosmetics that was suggested by the U.S. rival Estee Lauder Co. Inc's (EL - Get Report) third quarter growth of 10% and by a more than 17% gain in third quarter sales at the perfume and cosmetics division of French luxury conglomerate LVMH Moët Hennessy Louis Vuitton SE.
L'Oreal's high-end make up sales were boosted by the success of its Lancome and Yves Saint Laurent brands, which particularly benefited from strong demand out of China and from Chinese tourists.
The French group's consumer products division posted a 2.3% increase in third quarter sales, missing analyst expectations of about 3% growth. Agon blamed the unit's sluggish growth on difficult markets in the U.S. and France.
L'Oreal's online sales, which are favored by younger buyers, grew almost 32% over the third quarter. Sales to younger markets are being boosted by a flurry of digital make-up promotions, notably on You Tube, where instructional make up channels are driving demand, and by social media where photo sharing is driving make-up demand.
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