PARIS – Shares in the world’s largest beauty company, L’Oréal, declined on Friday, a day after its chief executive officer Nicolas Hieronimus reportedly told investors he foresees the worldwide beauty market’s sales increasing this year between 4.5 percent and 5 percent, rather than 5 percent as earlier forecast.
The guidance’s downgrade from the maker of Lancôme, Kiehl’s and Garnier products came following ongoing market volatility in China and a slightly negative 6.18 shopping festival there.
At 12:30 p.m. CET Friday, L’Oréal stock was trading down 2.7 percent at 411.25 euros. Since the start of the year, the company’s share price has declined 8.6 percent.
“We see a need for a rethink of lofty market growth expectations, not just in the short-term, with resultant downside risk to OR consensus growth and its premium valuation,” wrote Molly Wylenzek, equity analyst at Jefferies, in a note.
She added it is undisputable that the beauty market growth is set to slow.
Lancôme Génifique
Courtesy of Lancome
“As pricing growth begins to roll off, the industry is also dealing with anaemic growth in China, a realignment of Diagou trade in Korea and Hainan, and a clear volume-led slowdown in U.S. mass scanner data,” she continued. “The real debate is by how much and for how long.”
“Our expectation has been for China’s beauty sales to pull back in June given timing and consumer sentiment issues, as it seems to be the case,” Javier Escalante, an analyst at Evercore ISI, said in a note.
Other beauty behemoths have been impacted by the issues in China. In early May, analysts cautioned The Estée Lauder Cos.’ recovery will not be linear, with the company needing to jumpstart sales in mainland China, as well as in its home market, for instance.
