North American sales have rebounded, but comparable sales growth fell short of expectations; L'Oréal ADR saw its largest intraday drop in nearly six years | Earnings Report Review
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L'Oréal released its financial report on Thursday, showing that the company’s comparable sales growth in the fourth quarter fell short of analysts' expectations, causing its US-listed ADR shares to drop by as much as 8.9%, the biggest intraday decline since March 2020.
Key highlights of L'Oréal's financial report:
Main financial data:
Sales revenue: L'Oréal’s fourth-quarter sales were €11.25 billion, while analysts expected €11.34 billion.
Comparable sales: Fourth-quarter comparable sales grew by 6%, with analysts expecting 6.46% growth.
Operating profit: Fourth-quarter operating profit was €8.89 billion, while analysts expected €8.94 billion.
By business segment:
Professional products: Sales of €1.38 billion, market expectation €1.37 billion; comparable sales growth of 7.6%, market expectation 7.74%
Mass consumer products: Sales of €3.91 billion, market expectation €3.99 billion; comparable sales growth of 4.8%, market expectation 4.84%
L’Oréal Luxe premium cosmetics LFL: Sales of €4.22 billion, market expectation €4.34 billion; comparable sales growth of 4.5%, market expectation 7.82%
Derm Beauty LFL dermatology beauty segment: Sales of €1.73 billion, market expectation €1.64 billion; comparable sales growth of 11.5%, market expectation 5.78%
By region:
North American market: North America comparable sales growth of 8.6%, market expectation 7.51%
North Asia market: North Asia comparable sales growth of 0.6%, market expectation 5.44%
European market: Europe comparable sales growth of 6.6%, market expectation 4.19%
South Asia Pacific, Middle East, North Africa, and Sub-Saharan Africa: Comparable sales growth of 10.7%, market expectation 11.6%
Latin American market: Comparable sales growth of 8.2%, market expectation 7.72%
Full-year 2025 performance
Operating profit: Operating profit of €8.89 billion, up 2.4% year-on-year, market expectation €8.94 billion
Operating profit margin: Operating profit margin 20.2%, last year 20%, market expectation 20.2%
Operating profit: Operating profit increased 2.4% year-on-year to €8.89 billion, slightly higher than analysts’ expectation of €8.88 billion
Net profit: Net profit of €6.13 billion, down 4.4% year-on-year, market expectation €6.49 billion
Earnings per share: Adjusted earnings per share €12.71, last year €12.66, market expectation €12.86
Comparable sales: Comparable sales growth of 4%, market expectation 4.12%
Dividend: Annual dividend per share €7.20, analysts’ expectation €7.19.
L'Oréal stated that as the company seeks to consolidate its dominant position in the beauty market, it is confident of continuing to achieve growth in revenue and profit in the future.
CEO Nicolas Hieronimus said in Thursday’s performance update:
"We remain optimistic about the outlook for the global beauty market and confident in continuing to outperform the market."
"As previously promised, with the accelerated rollout of new products and the gradual improvement in the beauty market, the company’s organic revenue growth is increasing quarter by quarter."
Due to several key fourth-quarter metrics falling short of analysts’ expectations, L'Oréal's US-listed ADR shares dropped as much as 8.9%. RBC Capital Markets analysts said in a report after the earnings update that investors will be watching for more detailed guidance on beauty market growth prospects at the company’s briefing on Friday.
North American market rebound
According to a report released by McKinsey last year, the skincare, haircare, makeup, and fragrance sectors are expected to grow by about 5% annually in the coming years, reaching a total industry scale of about $590 billion by the end of the decade. L'Oréal is the leader in this market, with annual sales far exceeding US competitors such as Estée Lauder and Johnson & Johnson's beauty business.
The media noted that growth has slowed in recent quarters: in China, consumers are shifting towards more affordable local brands; in the US, spending is more cautious; meanwhile, some independent brands are capturing market share.
However, in recent months, purchases of creams and makeup in the US—the world’s largest cosmetics market—have picked up. L'Oréal executives previously noted strong sales during Black Friday. L'Oréal stated that North American sales in the fourth quarter grew by 8.6%, exceeding market expectations, thanks to the launch of new products including L'Oréal Paris Plump Ambition lip oil.
Last year, L'Oréal launched a "Beauty Stimulus Plan" to accelerate the pace of new product launches and boost sales growth. JPMorgan analysts cited NielsenIQ data earlier this month, showing L'Oréal increased its market share in categories such as hair conditioner, shampoo, and face cream.
However, in North Asia, sales grew only 0.6%, much lower than the market expectation of 5.6%. L'Oréal stated that the travel retail business remains "challenging," but the mainland China market is "gradually stabilizing."
Continued acquisitions and investment
In recent months, L'Oréal has continued to consolidate its leading position in the beauty industry through acquisitions and investments. The company said global demand for cosmetics and fragrances is growing. In October last year, L'Oréal agreed to acquire Kering Group's beauty business for about $4.7 billion, including the fragrance brand House of Creed, as well as rights to develop fragrances and beauty products for Kering brands such as Balenciaga, Saint Laurent, and eventually Gucci after Coty's current license expires.
At the end of last year, L'Oréal continued to expand in the field, increasing its stake in Swiss dermatology company Galderma to about 20%, valued at about $4.9 billion at the time. Last June, the company also acquired control of UK skincare brand Medik8.
Hieronimus said: "We are ready to further accelerate growth."
Since the beginning of this year, L'Oréal's share price has risen about 7%; meanwhile, beauty and personal care product manufacturer Unilever has risen about 10%, and smaller competitor Beiersdorf is up 12%.
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