L’Oreal, the renowned French cosmetics group, faced a setback in its shares on Friday, causing concern among analysts regarding the performance of its consumer products division. Despite delivering strong overall results, L’Oreal experienced a 1.5% drop in shares during early trading, making it the worst-performing stock on the SBF-120 index in Paris.

In the first quarter of 2021, L’Oreal announced sales of 7.6 billion euros ($9.10 billion), reflecting a 10.2% rise on a like-for-like basis that excludes the impact of acquisitions and currency fluctuations. However, it was the consumer products division, encompassing popular brands like Maybelline, that disappointed analysts. This particular division heavily relies on makeup, an area that has experienced slower demand compared to skincare and other product categories.

Jefferies, an investment bank, highlighted the persistent challenges faced by L’Oreal’s consumer products division, especially in Western Europe, where performance remains negative on a like-for-like basis. Nonetheless, Jefferies recognized an overall positive start for the company.

L’Oreal’s performance in the consumer products segment mirrors wider trends in the cosmetics industry, where makeup sales have been affected by the COVID-19 pandemic. The increase in remote work and mandatory mask-wearing has resulted in reduced demand for makeup products. Alternatively, skincare has gained popularity as consumers prioritize self-care and maintaining healthy skin.

On the other hand, L’Oreal’s other divisions, such as luxury products and professional products, have displayed stronger performance. These segments have benefited from shifting consumer preferences towards premium and salon-quality items. The luxury products division, housing renowned brands like Lancôme and Giorgio Armani Beauty, has particularly thrived as consumers indulge in luxurious purchases even during uncertain economic times.

Despite the challenges faced by the consumer products division, L’Oreal remains a dominant force in the global cosmetics industry. The company’s robust portfolio of brands, extensive distribution network, and commitment to innovation have ensured its competitive advantage. Additionally, L’Oreal has actively expanded its online presence and explored opportunities in emerging markets.

In conclusion, although L’Oreal encountered a decline in shares due to underwhelming performance in its consumer products division, the company’s overall results remain strong. L’Oreal continues to adapt to evolving consumer preferences and market dynamics, positioning itself for future growth and success in the cosmetics industry.

Useful links:
1. L’Oreal says COVID-19 crisis has transformed consumer behavior
2. L’Oreal salons rebound as shoppers pay for luxury hair care