L’Oreal stumbles after earnings as China performance lags

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L’Oreal SA (OTCPK: LRLCF) reported like-for-like sales increased 13.5% year-over-year in Q1 to top estimates on strong demand across various product categories. Like-for-like sales were up 13.9% for the quarter and total sales rose 19.0%.

As expected, L’Oreal (LRLCF) warned during the earnings call that inflation will have a negative impact on margins during the first half of the year.

“Despite L’Oreal outperforming across all regions, the Group’s key growth engine, China, continues to face a subdued performance as lockdowns stifle demand. However, longer term this market remains set to shine,” updated Third Bridge senior analyst Ross Hindle on the report.

He added that the Chinese consumer has shown a strong desire for beauty products and demographics remain in the group’s favor with the middle class accelerating.

Third Bridge forecast that L’Oreal’s (LRLCF) Active Cosmetic and Professional divisions will continue to outperform, while the consumer products division is seen lagging. The mass market beauty industry in developed economies is said to have been upended by e-commerce, with large retail store channels now in decline.

Shares of L’Oreal (LRLCF) fell 2.90% in Paris on Tuesday.

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