Jun 19, 2014
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L'Oréal CEO says US market not improving

Jun 19, 2014

PARIS - French cosmetics giant L'Oréal said on Wednesday the U.S. market for mass beauty consumer goods remained flat, dashing hopes of an improvement this quarter, but pointed to continued recovery in Europe, notably in southern countries.

Last April, the maker of Garnier shampoo and Essie nail polish said it had seen for the first time a flat market in the United States, its biggest market.

"The U.S. market has not really improved in recent months," L'Oreal Chief Executive and Chairman Jean-Paul Agon told Reuters in an interview on the fringes of a consumer goods conference in Paris. "The flat trends we had seen before confirmed themselves."

Source: AFP.

Agon said he was not worried by the trend which would eventually reverse itself but noted it was surprising in light of the positive data emerging from other industries and sectors in the United States such as real estate and cars.

Highlighting the split between those with high earnings who continued to spend and "middle America who is suffering," Agon estimated the annual sales growth of the U.S. luxury cosmetics market at around 4 percent.

His comments came just after L'Oreal announced the acquisition of Los Angeles-based make-up brand NYX Cosmetics which made sales in the year to the end of May of $93 million (£54.8 million), up 57 percent on the previous period on a comparable basis. No financial terms were disclosed.

On the other side of the Atlantic, Agon said trading conditions continued to improve in southern Europe, particularly in countries such as Spain and Portugal. They were stabilising in Greece and Italy and remained "positive" in France.

He added that the escalating crisis in Ukraine had not impacted on the group's sales in Russia.

Looking forward, he predicted that the group's active cosmetics division, which produced dermatological products such as La Roche Posay, would remain L'Oreal's fastest growing division in the medium term.

In the first quarter, the unit which also includes brands such as Vichy and Roger & Gallet, posted like-for-like growth of 8.7 percent against 1.2 percent for its mass consumer products and 7.2 percent for its luxury products such as Lancome creams and Yves Saint Laurent perfume.

During his speech at the consumer goods conference, Agon highlighted the world's ageing population which for L'Oreal represented a "new and gigantic opportunity".

Agon, L'Oreal's chief executive and chairman since 2011, said Internet revenue remained tiny, "less than 2 percent of sales" but were growing at a very rapid pace, especially in China and for the group's mass consumer products.

He estimated that soon - without giving a precise timing - 10 percent of sales of the group's mass consumer products in China would be done on the Internet.

Separately, Agon maintained his 2014 forecast for the global cosmetics market at 3.5-4 percent and his expectation the group would outperform it.

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