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L'Oreal to see growth in profit this year

By Shi Jing in Shanghai | China Daily | Updated: 2019-08-06 09:12
A logo of L'Oreal. [Photo/VCG]

The continued robust growth in China, especially of e-commerce platforms, helped French cosmetics group L'Oreal to post impressive results during the first six months of this year, according to company officials.

The group's like-for-like revenue increased 7.3 percent year-on-year during the first half of 2019 to 4.81 billion euros ($5.36 billion), which was the highest half-year growth in a decade. The first half-year growth rate is calculated at 10.6 percent, excluding all other factors such as exchange rate. Operating profit increased 12.1 percent to 2.9 billion euros, while operating margin hit a record high of 19.5 percent.

"In a volatile and contrasting environment, the good first half gives us confidence in our capacity to outperform the market in 2019 and achieve another year of growth in sales and profits," said Jean-Paul Agon, chairman and chief executive officer of L'Oreal group.

Sales revenue surged 30.4 percent to 4.6 billion euros in the Asia-Pacific region, outperforming all other zones. The strong growth in the Asia-Pacific region has been driven by Chinese consumers, the company said in its earnings report. Consumer products and luxury brands such as Lancome performed especially well in China, it said.

Global market consultancy Bain and Co found in its China consumer report released earlier this year, a large number of personal care and cosmetics brands have started to roll out more high-end products in the country, as the penetration rate of these products has almost peaked and competition is becoming increasingly intense. Among all the 26 product categories monitored by the consultancy, personal care products benefited the most in terms of profits after the introduction of high-end and premium products from 2016 to 2018.

L'Oreal's stellar performance in the past six months was aided by the increasing success of e-commerce in China and across the entire Asia-Pacific region, as the company explained in the fiscal report. During the first six months of this year, L'Oreal group's e-commerce revenue surged by 48.5 percent, accounting for 13.2 percent of the group's total turnover.

Latest data from the National Bureau of Statistics showed that China's total retail sales revenue of consumer goods reached over 19.5 trillion yuan ($2.8 trillion) during the first half of 2019, with the nominal year-on-year growth rate registered at 8.7 percent. The country's total online sales revenue surged 17.8 percent to 4.8 trillion yuan.

Fabrice Megarbane, the newly appointed CEO of L'Oreal in China, said the company will continue to invest in the Chinese market, with technology-applied cosmetics products becoming one of the development focuses.

Megarbane is the fourth CEO for L'Oreal China. His predecessor Stephane Rinderknech worked with L'Oreal China for eight years. During his tenure, L'Oreal China registered 33 percent annual growth rate in 2018, which was the fastest in the past 14 years.

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