Last week, L'Oreal ($OR (+0.92%) ) held its analyst conference on its latest annual results. L'Oréal is presented as the world's leading beauty company, outperforming the market with its broad portfolio of 37 global brands.
Nicolas Hieronimus presented L'Oréal as the world leader in beauty with sales of over sales of over 43 billion euros and a profit of 6.4 billion euros. The company sells more than 7 billion products in 150 countries and employs over 90,000 people. Its current market capitalization is 180 billion euros. L'Oréal focuses exclusively on the beauty sector, particularly on value-adding categories.
The largest category in the portfolio is skin care, followed by hair care, make-up and fragrances. L'Oréal is continuously expanding its brand portfolio, for example through the acquisition of Aesop and Dr. G as well as new license agreements with Miu Miu and Jacquemus. Among the 37 brands are 18 American brands, including Maybelline, Ralph Lauren Fragrances and Kiehl's. Several of the company's brands, the so-called "Billionaire Brands", generate sales of over one billion euros.
L'Oréal is divided into four divisions: Consumer Products, Luxury, Professional Products and Dermatological Beauty. Each division addresses consumers in a different way.
The Consumer Products Division has sales of 16 billion euros and an operating margin of 21 %. Its aim is to reach as many people as possible while creating added value5. This division reaches 1.1 billion consumers.
L'Oréal Luxe is the world's leading provider of luxury cosmetics with sales of 15.6 billion euros5. This division has the largest number of brands to meet the specific expectations of luxury. L'Oréal Luxe is the number one in fragrances and has also overtaken Estée Lauder in North America.
The Professional Division has a turnover of 5 billion euros and is the oldest division. It serves 400,000 salons and 3 million independent stylists7 Redken is the number one hair care brand in the USA.
The division Dermatological Beauty division focuses on safe and healthy beauty products and generates sales of 7 billion euros. La Roche-Posay, Vichy and CeraVe are among the most prescribed brands by dermatologists worldwide. La Roche-Posay is the number three and CeraVe the number five skincare brand worldwide. CeraVe was acquired in the USA a few years ago for 140 million euros and is now the number one skincare brand on Amazon.
L'Oréal pays attention to a balanced regional distribution. Europe is the largest market with 32%, followed by North America, North Asia (of which China accounts for 17%) and the emerging markets with 17%.
In 2024, L'Oréal outperformed the market with growth of 5.1 %. The main growth drivers were Fragrances and hair care. The company outperformed the market in three out of four divisions, with the Consumer Products Division falling short of expectations. The market was outperformed in most regions, with the exception of North Asia, where growth was impacted by the situation in China. China's share of sales fell from 23% in 2022 to 17%. The emerging markets contributed 36% to growth and now account for 16% of sales.
Despite the challenges, L'Oréal was able to increase its profitability. The gross margin improved to 74.2 % and operating costs were controlled. Investments in the brand were increased and the operating margin reached 20 %. The dividend is set to rise to 7 euros per share in 2024, which corresponds to an increase of 6.1 %.
For 2025, L'Oréal expects the beauty market to grow by 4 % to 5.5 % and plans to outperform this market again. The company is focusing on a "beauty stimulus plan" with additional product launches and innovations. One important instrument is BETiq, an AI-supported tool for optimizing media allocation.
L'Oréal continues to invest in research and development (R&D) and spent 1.4 billion euros last year. The company is increasingly focusing on partnerships with start-ups and universities and is using AI to support research.
Further investments are being made in the harmonization of IT systems and operational resilience.
L'Oréal wants to conquer new territories, including the USA, emerging markets and new consumer groups. The company sees great growth potential in the USA due to demographic change and the multiracial population. The emerging markets also offer opportunities as more and more people can afford L'Oréal products.
Particular attention is being paid to new consumer groups, including Generation Z, men and the 60-plus generation. Men already account for a quarter of global beauty consumption and the older generation represents a significant proportion of demand in developed markets.
Important questions were also addressed in the subsequent Q&A session:
When asked about the most exciting developments in the beauty market, Nicolas Hieronimus replied that he was particularly excited about the growth of the middle class in emerging markets. He also mentioned the opportunities presented by men and the older generation, as well as the new possibilities offered by technology, particularly in the field of research.
David Greenberg commented on the US market and emphasized the importance of the omnichannel approach. He pointed out that L'Oréal was one of the first to adapt to the change in consumption. Despite the competition, he was optimistic as L'Oréal has a strong innovation pipeline and a broad brand portfolio.
Robert Ottenstein from Evercore ISI asked about China and travel retail in North Asia. He wanted to know which changes are cyclical and which are structural. Nicolas Hieronimus replied that the lack of confidence among Chinese consumers is currently a cyclical problem. Structurally, however, the increasing local competition had to be taken into account.
To summarize, L'Oréal had a successful year in 2024 and is well positioned to grow in the future. The company is focusing on scientific innovation, AI and tapping into new markets and consumer groups
