L’Oreal, the renowned French cosmetics giant, has exceeded expectations by reporting impressive second-quarter sales, largely due to a resurgence in China. The company’s sales for the period of April to June reached 10.1 billion euros ($11.1 billion), representing a remarkable 13.7% growth on a like-for-like basis compared to the previous year. This growth outperformed analyst predictions of 11.9%.

L’Oreal’s triumphant performance in China has helped counterbalance the slower growth experienced in the United States, where consumers have become more cautious due to rising living costs. Regardless, the company still witnessed a commendable 9.7% rise in North American sales during the second quarter.

However, L’Oreal’s sales in North Asia, primarily originating from mainland China, fell slightly below expectations with a 5.9% growth on a like-for-like basis. Analysts had anticipated a growth rate of 9.5% for this region. Nonetheless, L’Oreal’s CEO, Nicolas Hieronimus, remains positive about the Chinese market, stating that it is “really picking up,” even though it has yet to reach the desired pace.

Investors have been closely monitoring China, as disappointing economic indicators and a slower recovery for the luxury goods sector affected the stock prices of companies like Richemont and LVMH. A recent study on online sales in China’s cosmetics market revealed a shift toward the mass market segment, overturning the previous trend where high-end products dominated. Some competitors in the cosmetics industry have resorted to discounts and promotional activities in order to boost sales.

However, L’Oreal has not witnessed the same cautious consumer spending trend. The company offers a diverse range of brands catering to both the mass market and luxury segment. In fact, its luxury division, which holds over 30% market share in China’s high-end cosmetics market, has experienced further growth. This success can be attributed to the increased sales of Lancome and the successful launch of the high-end Japanese skincare brand, Takami.

Overall, L’Oreal has managed to gain market share in mainland China and achieve growth rates in the “high teens,” surpassing the overall growth rate of the beauty market, which stands at around 6.5%. The company’s ability to address various market segments and its focus on expanding its luxury division have played pivotal roles in its triumph within the Chinese market.

Useful links:
CNBC – L’Oreal’s Q2 Sales Exceed Expectations
Reuters – China Sales Impact on Beauty Giants