L’Oreal global flagship store is seen on Nanjing Road on May 8, 2021 in Shanghai, China.
Vcg | Visual China Group | Getty Images
The world’s largest beauty group L’Oreal said Friday that it plans to become less dependent on the Chinese consumer for growth, instead targeting burgeoning opportunities in the U.S. market.
“We see the U.S. as the land of opportunity,” said CEO Nicolas Hieronimus during an earnings presentation following the release of the company’s fourth-quarter results Thursday.
Speaking during a Q&A session, Hieronimus described China as “the big unknown” after the company reported a continuous decline in quarterly North Asia sales amid a “challenging” Chinese ecosystem.
North Asia sales were down 3.6% on a like-for-like basis in the fourth quarter, a steeper decline than the 2.4% contraction forecast in a consensus estimate cited by Citi bank.
Through 2024, L’Oreal’s market growth in mainland China declined around 4%, while travel retail in Asia fell roughly 10%, according to data the company shared Friday. The beauty group added that China now accounts for 17% of total sales, a notable reduction on recent years.
“The big unknown is China,” Hieronimus continued. “We have accounted in our own calculations for a flattish market for China. We think that travel retail will remain difficult and only good surprises can come from there.”
The company, whose brands include Lancôme, Maybelline and Kiehl’s, has been struggling with weaker consumer demand over recent quarters, particularly in the key Chinese market — a trend that has also beset high-end luxury firms.
It comes as fourth-quarter sales rose across all regions to 11.08 billion euros ($11.49 billion), up 2.5% on a like-for-like basis and just shy of the 11.1 billion euros estimated by analysts in an LSEG poll.
U.S. sales rose 1.4% on a like-for-like basis, down from 5.2% growth in the prior quarter and the weakest among all other regions.
Nevertheless, Hieronimus said he was optimistic about the opportunities in the U.S. market, particularly in its young and growing Latino and multiracial populations, which he said would lead to “a variety of new beauty needs.”
He also pointed to the affluence of the U.S. consumer, which he said would “continue to drive the growth of our luxury division.”
L’Oreal.
“Today, we are pretty bullish in the U.S., confident in emerging markets, steady on our stronghold in Europe and a big question mark in China,” he said.
Hieronimus did not weigh in on the implications of any new U.S. policies around trade and immigration under President Donald Trump’s administration.
Responding to a separate question on the potential impact of U.S. tariffs — which economist warn could flame inflation and suppress consumer spending both in the U.S. and targeted markets like China — Hieronimus said there were “many unknowns” in the macroeconomic environment.
L’Oreal’s full-year sales rose 5.1% to 43.48 billion euros versus the 43.33 billion euros forecast, the company reported Thursday.
Shares closed down 3.5% Friday as investors digested the results, extending a more than 20% decline last year.