L'Oreal sales rise on haircare boom and 'lipstick effect'

By Dominique Patton

PARIS, July 29 (Reuters) - The world's largest cosmetics company L'Oreal reported better-than-expected quarterly sales on Wednesday, boosted by strong demand for new hair products and mascaras.

The Paris-based maker of CeraVe skincare, Maybelline make-up and Valentino perfume said sales for the three months to end-June came to €11.6 billion ($13.21 billion), up 6.3% on a like-for-like basis after adjustment for the phasing in of its new IT system.

That was slightly above expectations of 5.7% growth in a consensus of analysts provided by Visible Alpha.

"This is a strong performance, especially in the context of peers struggling with demand," said analysts at Jefferies in a note, adding that they expected shares to outperform on Thursday. 

The €200 billion company typically outpaces the global beauty market, with a portfolio ranging from mass-market L'Oreal Paris brand makeup and creams to high-end designer perfume and shampoos used in hair salons.

While growth slowed from 6.7% in the first quarter based on tougher comparisons, sales in the company's largest business unit, comprising mass-market products, increased more than expected, helped in Europe by growth in hair products and "a remarkable outperformance online".

CEO Nicolas Hieronimus in April referred to the "lipstick effect", or buying cosmetics to feel better in stressful times.

That helped L'Oreal's sales in Europe, its largest region, where the cost-of-living crisis is biting, to rise 6.7% on an adjusted like-for-like basis, while sales in North America, its second-largest region, rose 5.9%.

Luxury groups LVMH and Hermes both reported a decline in growth in their perfume and cosmetics businesses this week, although Unilever reported underlying sales growth of 8% in its beauty and wellbeing unit for the quarter.

In L'Oreal's Luxe division, representing a third of its sales, growth lagged forecasts at 4.7%, despite posting double-digit growth in China.

Problems in China's travel retail sector continue to curtail growth, it added.

Shares in L'Oreal are up 4% year to date. 

(Reporting by Dominique Patton; editing by Barbara Lewis)