L’Oreal SA (EPA: OR) seems to have had enough disappointments out of China.
For future growth, the beauty giant now plans on turning to the United States which it called a “land of opportunity” on its earnings call last night.
The company’s plans to change focus arrive after several quarters of weakness in China.
In Q4, L’Oreal saw a 3.6% decline in its comparable sales in North Asia – much worse than the 2.4% that experts had forecast.
On the other hand, its US sales were up 1.4% in the fourth quarter on a like-for-like basis.
China now makes up significantly less of L’Oreal’s sales
L’Oreal chief executive Nicolas Hieronimus dubbed China the “big unknown” on the earnings call, adding the company’s market growth in the largest Asian economy declined about 4% last year.
Beijing now makes up only 17% of its total sales – remarkably below historical levels.
The world’s largest beauty group has decided in favor of trimming its reliance on China as it does not expect a near-term rebound in travel retail.
L’Oreal expects China to remain flattish in 2025.
Note that shares of the Maybelline, Lancome, and Kiehl’s owners are down more than 4% at the time of writing after China’s weakness made it come below sales estimates in its fiscal fourth quarter.
Why L’Oreal is super bullish on the United States
L’Oreal particularly sees a massive opportunity in the Latino and multiracial population of the United States.
That segment, its chief executive noted, could create a “variety of new beauty needs.”
Nicolas Hieronimus is bullish on the US also because it has affluent consumers that would especially help “drive the growth of our luxury division.”
L’Oreal’s chief executive, however, refrained from specifically commenting on what raised tariffs and any change to the immigration policy under the Trump administration could mean for the beauty group.
He did, however, agree that there were several “unknowns” in the macro environment currently.
What helped drive sales for L’Oreal in Q4?
Investors should know that L’Oreal took a bullish tone on the emerging markets as well as the company’s “stronghold in Europe”.
The only market that’s been consistently disappointing for the company is China, which has been challenging for peers like Estee Lauder in recent years as well.
In its Q4, the French giant saw €11.08 billion ($11.49 billion) in overall sales – roughly in line with €11.1 billion that experts had forecast.
A 5.1% increase in its full-year sales to €43.48 billion, however, topped consensus estimates.
The company attributed strength in its quarterly sales primarily to increased demand for dermatological beauty and professional products.
L’Oreal also pointed to normalizing trends after a period of macro challenges in its earnings release last night.
L’Oreal stock has slipped more than 25% in the trailing 12 months.
The post L’Oréal shifts focus from China to a ‘land of opportunity’: here’s why appeared first on Invezz