Luxury items 

L’Oreal Shares Fall as Luxury Goods Unit Misses Q3 Sales Estimates By

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By Scott Kanowski — Shares of L’Oréal SA (EPA:) fell on Friday after the French cosmetics group reported that COVID-19 lockdowns in China had impacted the performance of its main products division luxury in the third quarter.

Sales of L’Oréal Luxe, which includes well-known brands such as Lancôme fragrances and Kiehl’s skincare, rose 4.6% like-for-like over the period to 3.61 billion euros, below estimates consensus of 9%.

The Clichy-based company said returns to the business were hit by repeated COVID restrictions in China and its province of Hainan over the summer. The relocation of L’Oréal’s travel retail activity to Asia and the difficulties in supplying perfume bottles also weighed on returns.

However, Luxe still managed to achieve record market share in mainland China, helping it retain its place as L’Oreal’s largest division by sales.

Group-wide, like-for-like increase of 9.1% to €9.58 billion, above estimates of 8.3% organic sales growth, thanks in particular to the good results of active cosmetics activities and consumer products from L’Oréal. The demand for beauty products has also increased, particularly in Germany, Spain and Great Britain.

But Jefferies analysts noted the broker understands the hike includes a benefit from a €94.7 million insurance settlement following a natural disaster that severely disrupted operations at a factory. L’Oreal in Vichy. They added that by removing this payment, the third quarter results are “no more than in line”.

Meanwhile, Morgan Stanley analysts wrote in a note that concerns are growing over a potential slowdown in hair salons, particularly in the United States, as high inflation leads consumers to space out haircuts and treatments.

L’Oreal remains “confident” in its outlook for the global beauty market, adding that it expects to post sales and profit growth in 2022.

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