How is the beauty market developing around the world? – WWD

PARIS — The beauty market proved itself once again in the first half of 2022, despite a very difficult socio-economic and geopolitical context.

Nicolas Hieronimus, chief executive of L’Oréal, hailed the beauty market’s resilience during a conference call with financial analysts and journalists on Friday morning, a day after the company released its second-quarter and half-year results for 2022.

L’Oréal estimates its beauty market’s worldwide sales rose more than 6 percent in the six months ended June 30, compared with the same period last year.

“However, the pace of the market recovery remains in contrast,” Hieronimus said.

Europe’s beauty market recorded an estimated growth of 14 percent, and had a favorable first half compared to 2019, before the coronavirus pandemic hit. “The market has fully recovered, by plus 8 percent,” Hieronimus said. “North America keeps pace with brick-and-mortar rebuttal.”

The beauty sales gain on that continent was about 8 percent over the six months.

“China has experienced a complicated first half due to shutdowns,” he said. “In some cities, such as Shanghai, the market was negative in April and May, but returned in June compared to 2019. Growth is still high, at plus 9 percent, in the half year.”

Hieronimus called emerging markets “quite dynamic,” with their reopenings and the acceleration of e-commerce.

According to L’Oréal’s estimates, the beauty market in the first half of 2022 grew by around 11 percent in South Asia-Pacific, the Middle East, North Africa and Sub-Saharan Africa [or SAPMENA-SSA] zone, while sales fell by approximately 2 percent in North Asia.

“Each category grows,” Hieronimus continued. “But let me highlight the strong recovery of makeup at plus 8 percent, with lipstick in the double digits [growth]and the continuous acceleration of fragrance, by plus 21 percent.”

Sales of skin care increased by approx. 3 per cent, while sales for hair care rose by approx. 5 percent.

“In this context, L’Oréal shows another [half] of spectacular outperformance, growing at more than double the pace of the market,” he continued, referring to the company’s sales which rose 13.5 percent on a like-for-like basis and 20.9 percent in reported terms, to 18, 37 billion euros. “Compared to 2019, L’Oréal is growing at a steady pace of 20 percent.”

Hieronimus said: “L’Oréal is flying at cruising speed over a very uneven landscape, with wildly varying comparisons,” explaining that it is therefore important to use 2019 as a benchmark to monitor pace.

In the first half of 2022, L’Oréal’s e-commerce sales increased by 10.6 percent, at a slower pace than the last couple of years of rapid growth.

“Distribution is rebalanced by the acceleration of bricks and mortar, at plus 14.6 percent,” he explained.

In the same time frame, four geographic regions – Europe, China, North America and emerging markets – contributed almost equally to L’Oréal’s gains.

“This is the ultimate proof of the success of our rebalancing or ‘de-risking’ strategy,” Hieronimus said. “Europe is number one in growth contribution with plus 14.3 per cent [like-for-like]and plus 8 per cent against 2019.”

He noted stock gains in all of the company’s divisions in Europe outside of Russia, where L’Oréal suspended almost all operations.

Despite prolonged supply chain disruptions, North America delivered a strong first half, with sales up 11.6 percent. “L’Oréal USA continues to be ahead of the market,” said Hieronimus.

Sales of L’Oréal in emerging countries rose by around 24 percent, including 23 percent in SAPMENA-SSA and 22.3 percent in Latin America, driven by the Consumer Products division. In the Gulf countries, sales increased by 68.7 percent, 4.5 percent in India, 42.5 percent in Malaysia and 32.2 percent in Mexico.

“Travel trade shows strong growth [of 30.1 percent] with the great upturn in air traffic in the triple digits in Europe, where we are benefiting from our fragrance strength,” Hieronimus said, referring to a 425 percent flight growth.

Business on the duty-free Chinese island of Hainan accelerated again in June, after a lull in April and May.

Hieronimus noted “the spectacular outperformance” of L’Oréal’s business in North Asia, where there were sales gains of 10.5 percent versus the first half of 2021, and 40.5 percent versus 2019.

“Korea and Japan have both been dynamic and L’Oréal is gaining share, especially in luxury,” he said. “But since China was everyone’s preoccupation, and even a source of concern, I want to emphasize the capacity of our local teams to deliver.

“In mainland China, which has been affected by COVID[-19] restrictions, and in particular the shutdown in Shanghai which led to a negative market in the 2nd quarter, at minus 7 [percent]L’Oréal China has delivered net sales of plus 6 per cent in [the second quarter]. In sold out, if you take China plus Hainan, we delivered growth of plus 13 percent in the first half of the year.”

At the same time, L’Oréal has for the first time lassoed more than a 30 percent share of the luxury beauty market in China.

“Now looking at the second half, we are both prepared and positive,” said Hieronimus, of L’Oréal’s business overall. “Prepared, because we are aware of the high level of uncertainty and volatility in the current economic outlook, the fear of recession, the potential impact of inflation on consumption and on the continuation of tensions in the supply chain.

“We have shown during COVID[-19] that in the event of a downturn, we know how to outperform the market and maintain our profitability, he added. “We remain confident about the second half of the year and, of course, about the future of the beauty industry and L’Oréal’s outlook.”

First, there is constant growth. “Over the past decade, the global beauty market has grown by 4.5 percent per year,” Hieronimus said. “The beauty market also has long experience of enduring periods of economic difficulty.”

L’Oréal targets upper-middle and upper-class consumers, who are generally less affected by economic turmoil and continue to grow in numbers, particularly in emerging markets and China.

“By 2030, experts estimate that the middle and upper classes will grow by another billion in the world, including 250 million in China and 200 million in India,” Hieronimus said.

Nevertheless, L’Oréal remains focused on accelerating in all emerging markets, increasing its strength in the US and solidity in Europe.

“Finally, we are confident in our ability to overcome the inflationary context,” he said. “We will take further price increases in the second half of the year.”

Hieronimus continued: “In the current context, we are prepared for the worst, but we plan for the best – as we know full well that playing offense is what drives consumption, increases in market share and growth.”

He characterized L’Oréal as stronger today than before the health crisis, saying the group’s balanced business model is “the best vaccine in a VUCA world”.

“L’Oréal has what it takes to deal with the short-term difficulties associated with the microeconomic context, and although the second half will not look as good as the first, due to comparisons and one-offs, we are very confident in our ability to beat the market and deliver another year of growth in sales and profits in the medium and long term,” said Hieronimus.

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