L’Oreal says North American makeup sales are slowing

Bloomberg

L’Oreal SA shares tumbled as a drop in North American sales raised concerns that a makeup boom fuelled by beauty bloggers and selfies has lost steam.
The stock fell as much as 4.9 percent in Paris trading, the most in three years.
The sales decline in a crucial region came even as demand from China lifted the world’s biggest maker of beauty products to its highest first-half growth in more than 10 years.
Chief Executive Officer Jean-Paul Agon kindled anxiety by saying that both luxury makeup brands and mass-market ones experienced a slowdown in North America, resulting in a market that was “flat at best.” He said not to expect the trend to improve before next year.
“We are really over-relying on makeup,” Agon said on a conference call, adding that the company lost some market share in the category, which makes up more than half of its US sales. “We really intend to bounce back in the US, but it may take some time.”
Second-quarter sales rose 6.8 percent on a comparable basis, L’Oreal said. But North America — where its brands like Maybelline makeup dominate drugstore shelves — recorded a 1.1 percent decline.
Makeup has driven growth for the cosmetics industry as online influencers inspired a generation of consumers to make trying new makeup looks a hobby and as the selfie craze gave them a reason to stay camera-ready.
A recent change toward more minimalist looks will challenge L’Oreal’s return to growth in the US, according to Agon, though it may also bring some unexpected benefits as skincare sales boom.
“The makeup looks that were really in fashion four or five years ago changed, and now it’s more a kind of natural look,” Agon said. “The good thing is that we are also the number-one skincare manufacturer in the world.”

China Boost
L’Oreal also faces mounting competition from younger upstarts: the rise of social media-savvy start-ups like Glossier, celebrity-fronted brands like LVMH’s Fenty Beauty by Rihanna, and organic products like Juice Beauty mean fewer American consumers are headed for the retail outlets where L’Oreal has dominated shelves for decades.
Growth last quarter slowed at the consumer-products division, even as the company took steps like re-branding its Garnier product line with a focus on organic and natural products.
High-end products fared much better. Sales in the luxury division selling Lancome Absolue moisturiser and Yves Saint Laurent concealer grew 12 percent last quarter, with the company citing China as driving demand. Chinese clients also boosted sales of luxury companies LVMH and Burberry Group Plc in the latest quarter, even as the country reported its slowest economic growth in nearly three decades.
The shares declined even though L’Oreal said it plans to buy back and cancel as much as 750 million euros ($836 million) worth of stock during the second half.