L'Oreal Achieves Sales of €20.574 Bn in H1 Hitting 5-year High

In particular, L'Oréal Group noted that growth in Hong Kong, China remained strong, thanks to an increase in mainland Chinese tourists in the region.

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In the early morning of today (July 28), L'Oreal Group released its first-half 2023 performance report as scheduled. In the first half of the year, L'Oreal realized sales of 20.574 billion euros, up 13.3% like-for-like. Its operating profit of about 4.259 billion euros, an increase of 13.7%.

It is worth mentioning that, according to the financial report, L'Oréal Group's overall performance in the first half of the year hit a record high for the same period in the past five years. All of its divisions, regions, categories and channels have grown. L'Oréal also highlighted that the recovery of the Chinese mainland market brought an outstanding contribution to its performance.

Sales hit a five-year high

According to the financial report, L'Oréal Group achieved double-digit growth in the first half of the year, both in terms of sales and operating profit, with second-quarter sales of 10.194 billion euros, up 13.7% like-for-like.

Comparison of L'Oreal Group financial report for the first half of the last five years, in addition to the decline in 2020, since then all the way up. It has grown from 13.077 billion euros in 2020 to 20.574 billion euros in the H1 of this year. During the same period, operating profit has also continued to increase, maintaining a double-digit growth.

It is obvious that in the first half of 2023, L'Oreal Group not only exceeded the 20 billion euro mark in sales, but also hit a record high performance in five years. However, it can also be seen that the growth rate of both sales and operating profit has slowed down in the last three years.

From the point of view of operating costs, in the first half of 2023, L'Oreal Group cost of sales accounted for a decline compared to the same period last year, while R&I expenses accounted for an increase from 2.9% in the last year to 3% this year. The gross profit of 15.283 billion euros, accounting for the proportion of sales increased by 120 basis points compared to last year, reaching 74.3%.

While advertising and promotional expenses, selling, general and administrative expenses accounted for the same of the total sales as the same period of last year. It is worth mentioning that L'Oreal Group advertising and promotional expenses amounted to 6.683 billion euro in H1 of 2023, accounting for 32.5% of total sales, slightly lower than the level of about 40% of the domestic beauty listed companies.

Given L'Oréal Group's outstanding performance in the first half of the year, the group's CEO Nicolas Hieronimus also expressed optimism for the full year of 2023. He said in the financial report that "L’Oréal delivered a remarkable performance and further strengthened its global leadership in the first half."

Mass Cosmetics Division Jumps to No. 1

Lack of growth in Luxe

By division, in the first half of 2023, L'Oréal Group's Luxe, Consumer Products, Professional Products and Dermatological Beauty divisions all posted significant growth.

In terms of the sales, Consumer Products Division, driven by both volume and value, increased sales by around €1 billion in the first half of the year, achieving a record performance of €7,687 million, up 15% year-on-year, its best-ever half-year performance.

The Consumer Products division jumped to become the No. 1 division in the L'Oréal Group, and was the only division other than Dermatological Beauty to achieve double-digit growth. L'Oréal Group said that all the big brands in the division grew at double-digit rates, with Maybelline, L'Oréal Paris, NYX and Elvive brands making more significant contributions.

In terms of growth, Dermatological Beauty division led the way with a 29% increase, achieving sales of 3.285 billion euros. L'Oréal Group said the division's excellent performance was due to its highly complementary brand portfolio and its continued pursuit of medical and prescription leadership. The division made significant progress in all regions, with a particularly strong performance in Emerging Markets and Europe. It significantly outperformed the broader market in Mainland China, where the market continues its gradual recovery.

In addition, it is worth mentioning that L'Oréal's Luxe division and Professional division achieved a year-on-year growth rate of 7.6%, the lowest among the four divisions. And the Luxe division only achieved sales of 2.314 billion euros, the bottom of the four divisions.

However, L'Oréal Group said, "The Premium Cosmetics division outperformed the market with growth in mainland China, India and the UK, and enjoyed sustained growth across all distribution channels."

North Asia at the bottom of the growth rate

Strong performance in China

By region, Europe became the biggest contributor to the Group’s sales with 6.491 billion euros, followed by North Asia and North America, while SAPMENA-SSA (South Asia-Pacific, the Middle East, North Africa, Sub-Saharan Africa) and Latin America. Although their sales contribution was relatively small, both regions led the way with a 23.6% year-on-year growth rate to lead the way.

It is worth mentioning that North Asia was at the bottom of the list with a growth rate of 3.9%, making it the only single-digit growth region among all L'Oréal Group regions. In response, L'Oréal Group said, "The Travel Retail business in the Region was affected by the base effect of last year’s anticipated invoicing7. In addition, sell-out was adversely impacted by Travel Retail operators’ wide-ranging refocus on a model with the individual traveller at its core."

While overall growth in North Asia was not outstanding, L'Oréal Group's performance in China was notable.

L'Oréal Group said the mainland Chinese market continued to recover in the second quarter, against a backdrop in which the group significantly outperformed the market, delivering strong growth across all channels and divisions in the second quarter. This was driven by the introduction of new brands such as Valentino, Prada and Takami, as well as channel innovation and gradual expansion into new cities. 8 of L'Oréal Group's 4 major divisions were in the top 20 during the 6.18 shopping festival. L'Oréal Paris and Lancôme ranked first and second respectively across all platforms and categories.

In addition, L'Oréal Group highlighted that growth in Hong Kong, China remained strong, thanks to the increase in mainland Chinese tourists in the region.

The strong performance of the Chinese market is closely related to L'Oréal Group's constant reinforcement and continuous cultivation. In February this year, L'Oreal China invested 130 million yuan to set up a wholly-owned subsidiary - Nantong L'Oreal Supply Chain Management Co., Ltd. to further deepen the localization of China. In the following month, L'Oreal China and Chongchuan Economic Development Zone Management Committee of Nantong City, Jiangsu Province signed a memorandum of cooperation in Shanghai, where the L'Oreal China Premium Cosmetics Intelligent Operation Center will be located in Chongchuan Economic Development Zone, which will help L'Oreal China's Luxe division to achieve online and offline sales synchronization in China market.

In April, L'Oréal and Alibaba announced that they would jointly create the industry's first "Beauty Digital Circular Economy Model". In the same month, SkinCeuticals store in Shanghai IFC obtained the "on-site personalized service" cosmetic production license, which is the first license in China.

In addition, L'ORÉAL's international investments, acquisitions, R&D and other initiatives will also empower the Chinese market. For example, shortly after L'Oreal acquired Aesop, the brand's Jingdong flagship store was officially launched.

All of the above can be seen in the importance and confidence of L'Oréal Group in the Chinese region. For the whole year, in April this year, held in L'Oreal China 2023 development strategy communication meeting, L'Oreal Chief Executive Officer at L'Oréal China, Fabrice Megarbane, has said that the next stage of the business focus will be on beauty science and technology, expanding the brand matrix, adhere to the "global localization" and other aspects. At the same time, Fabergé also mentioned that by 2030, the group hopes to reach 200 million consumers in China.

In an interview with the media shortly after the meeting, Fabrice made it clear that the Chinese beauty market is recovering, and Chinese consumers have become more rational after the epidemic, but they are still willing to pay for higher quality products. L'Oreal is eyeing expansion in the Chinese market through the launch of new brands, acquisitions and investments in the supply chain.

From the first half of the year, L'Oréal China has also been practicing its commitment step by step, moving forward in the set direction to make beauty a lighthouse industry for consumption, and to make China a trend-setter and a source of inspiration for the global beauty market.

Also as Nicolas Hieronimus said, "In an economic context that is still uncertain, we remain ambitious for the future, optimistic about the outlook for the beauty market, and confident in our ability to keep outperforming the market and achieve in 2023 another year of growth in sales and profits."