L'Oréal S.A. (OR) Earnings Call Transcript

Welcome to the conference call regarding L'Oreal sales at the 30th of September 2026. The conference is about to begin. I now hand over to Ms. Eva Quiroga. Ms. Quiroga, please go ahead.

Yes. Thank you very much, Judith, and good evening to you all. Thank you for joining us on this call for our third quarter 2026 sales. As always, I'm here with Nicolas Hieronimus, our CEO.

Good afternoon.

Christophe Babule, our CFO.

Hello. Good afternoon.

And Laurent Schmitt, our Global Head of Corporate Finance and Financial Communications.

Good afternoon.

Nicolas will make some brief opening remarks, and we will then go straight to Q&A. Over to you, Nicolas.

Well, good afternoon again or good evening to you all. As you saw in our press release, we delivered an exceptional third quarter. Our adjusted like-for-like growth accelerated to plus 7.7%. As anticipated, the global beauty market growth in the third quarter stood around plus 5%, confirming the beauty sector's incredible resilience in challenging times. We significantly outperformed the market across the vast majority of our categories, divisions and regions. Thanks to the success of our innovation plan, we continue to win in hair care and fragrances, and we are outperforming in skin care, a category I was not happy with last year, as you know. With the exception of Latin America, sales in all regions grew with a special shout out to Europe and SAPMENA, our #1 and #2 growth contributors in the quarter, and I'm happy to confirm the dynamism of our premium brands in China. Regarding the rest of the year, we expect the beauty market to grow around plus 5%, and we will continue to outperform, albeit at a slightly more moderate rate. So we will deliver on a full year basis, the promised acceleration of our top line growth versus last year significantly. And with that, we are ready to answer your questions.

[Operator Instructions] The first question is from Guillaume Gerard Delmas, UBS.

Two questions for me, please. The first one on the beauty market. Nicolas, I was just wondering if you could give us a little bit of a snapshot of the beauty industry by region at end of September, early October. And I appreciate it's a little bit of a crystal ball exercise at this stage. But what do you anticipate for that very important end of year season? I'm thinking Double 11 in China. I'm also thinking in Europe and France, given we're seeing some social unrest, consumer facing rising energy costs. So what would be your early assessment of this? And then my second question is specifically on North Asia, I mean, where growth accelerated very nicely in the quarter. Could you maybe shed some light on the drivers behind this sequential step-up? Because it doesn't seem it's down to the market. It seems more down to your own performance. So wondering what's driving this. And then you were talking about maybe less outperformance in Q4. But in North Asia, you'll be facing a relatively favorable base of comparison in Asia Travel Retail. So any reason as to why at least North Asia would not accelerate further in the fourth quarter?

Okay. So on the beauty market, overall, the first thing to say is that it's been globally consistent in Q3 versus the first half of the year, slightly -- we said we were shy of 5% at the end of first half. We're at 5% now. So it's more or less in the same ballpark. There's been ups and downs depending on the regions. But overall, if I take a macro point of view, that's why -- and I'm thinking -- of course, I cannot predict. You were talking about the events in France. There are many things that I cannot predict as it relates to the future. But overall, our perception is that the market should grow approximately 5% also in Q4. So there will be differences from one region to another. But I don't see any reason to -- for it to slow down nor to accelerate. The comps on the second part of last year are overall a bit higher. And you mentioned North Asia. First of all, I'll state to -- on North Asia, we had -- as you know, in North Asia, the main constituents of our business there are, first and foremost, China, which is more than 2/3 of our business in North Asia and then Travel Retail. And so in China, even though the market slowed down a tiny bit in Q3, but it remains dynamic at nine months at somewhere between 2% and 3%, we maintain our growth rate, particularly, of course, favored by the fact that in this Chinese market, the most dynamic parts are the premium part. So the -- at nine months, the luxury market is mid-single digit. The dermatological market is a bit higher than that and professional is mid-single digit. The only part that remains flattish is mass. So that's favoring us. And within these markets, the most premium brands like Helena Rubinstein, SkinCeuticals, Kerastase are really driving the growth. So we have been really outperforming the market in sellout. And then, of course, and that's why I was -- there's Travel Retail. And here, the main difference is that we -- in Travel Retail, we had a very positive Hainan. Mainland China remained a bit negative, but -- and that's probably one of the things that you won't see in Q4 the operators of Mainland China, you remember, they were in difficulty. So now they're starting to operate again. So we had to repipe them with a little bit of inventory. So that's something that we won't have in Q4. And the Korean market was stable. And there, we -- I have to say we remain carefully prudent because the acceleration is not totally clean for me, so we didn't push our brands there. And overall, the only part where we had -- we have been building overall when I talk about the Q4 in general, we've been preparing for the holiday season for Q4. So Q4 is sellout time. And therefore, we piped our new launches in fragrances, and we prepared for this moment of the year, on which we are very ambitious in sellout. We have the launches and all the new fragrances are off to a good start. We have the fuel to support them. You were asking about Double 11, which every year starts a bit sooner. So we anticipated a little bit, but it's off to a good start. It's -- we are on track with our objectives. And the other thing you won't find in Q4 is that we had a very good sun season, which obviously is not going to repeat itself in Q4. So we intend in the end to continue to outperform the market. We are ambitious, and we have the plans to do it. So there's a few one-offs in Q4, which doesn't change the outperformance in -- sorry, a few one-offs in Q3, which doesn't change the outperformance versus the market. And that's why we remain confident for the end of the year. Does that answer your question?

It does. Just a very quick follow-up. Would you be able to quantify this one-offs in Q3?

Not really because it's a mixed bag of many things. I think what you have to just take into account that Q3 is a lot the anticipation of Q4. So -- but there is no -- nothing really major to quantify. Just that the comps overall are a bit higher for us in sell-out. And therefore, we are careful with our comments on Q4.

The next question is from Olivier Nicolai, Goldman Sachs.

I've got two questions, please. First, you mentioned Mixa being rolled out to other countries. What's your ambition for these brands? And could you give us more details on this rollout? And how does the distribution compare in Europe versus L'Oreal Paris or CeraVe? And then my second question is more specific about fragrances. It's clearly not about Luxe that you are significantly outperforming the category. So what's your expectation for the key Christmas period, whether it's in the U.S., in China, where it looks like fragrances are really picking up, but also in Europe, which has been accelerating despite a fairly weak consumer environment?

Well, so on Mixa, Mixa is -- frankly, it's really a great success story. It's still a relatively small brands. But over the last couple of years, it's been growing at a compounded growth of around plus 20%. It's mostly exclusively European. France is roughly half of the business, and we've extended to DACH to Poland, to the U.K. And so we are progressively rolling out. We're studying a few other countries, of course. So far, everywhere it's being launched, it is successful. And the good news is that it doesn't cannibalize any of our other brands. It takes more on competition. So it is really the -- one of the tools for our Consumer Products Division to really accelerate in skin care. We have Mixa in Europe. We have Dr.G, which, as you know, is the #1 skin care brand in Korea that we are progressively rolling out. We've just relaunched it in China, launched it in Southeast Asia. And as we speak, we're launching it in the U.S. with the first an online launch and then progressive brick-and-mortar expression expansion. So Dr.G is also going to be a good story. And then we have Garnier and Thayers in skin care. Garnier is really doing good in South Asia and Thayers, which is our small American brand, but growing plus 20%. So our skin care is a bit more regional, except Garnier and L'Oreal Paris, of course. But these three brands, Mixa, Dr.G and Thayers are a good combination to try to win and to win in skin care. We have globally accelerated. I must say a lot, thanks to the great performance of LDB, which is really firing on all its engines. Fragrances, Fragrances are -- the market is globally growing mid-single digits. And indeed, we are really on a run with our fragrances. We are only in luxury fragrances, of course, but we are growing overall year-to-date double -- just close to double digit. And we -- I have to say we are adding blockbusters to blockbusters. So we have the La Vie Belle or Libre or #1 fragrance in the world today. Prada with Paradigme and Paradoxe are doing great. And the new ones we've launched, and I'm thinking about particularly Armani, I Will male fragrances doing phenomenal and the two Valentino, Vendetta are doing good also. So overall, we are, of course, very ambitious for the holiday season. We have sets money to advertise. And I must say that I'm very happy with the performance of Creed, which is also growing double digits. So as I said last time, it fills a gap in our premium end fragrances, which just launched a new fragrance called Iris de Bon, which is doing great, and that's also contributing to our overall fragrance performance, both in male and female. So I will not, of course, give you numbers, but the market is dynamic everywhere. By definition, it slowed down a little bit during summer because of the heat. So we sold a lot of sun care and a bit less fragrance, but we are now ready for a great holiday season.

The next question is from Warren Ackerman from Barclays.

It's Warren here at Barclays. Hopefully, you can hear me. So I've got a couple. Firstly, I guess the only wrinkle this quarter, if we can find any wrinkles is Latin America, where you talk about a commercial issue in Mexico. I think it's in consumer. Can you explain what that was and how we should think about Q4? Because I guess if LatAm was normal, like mid-singles, the organic growth would have been even higher, maybe like a mid-8s. Just wanted to try to get clarity on that. And then secondly, on SAPMENA, it's a really good number this quarter. Last quarter, you told us Vietnam was up 50%. India was up. It looks like the acceleration is becoming more broad-based. Can you maybe just talk about that on the go forward? And then finally, just on the competitive dynamics you're seeing, are you seeing any stronger competition on the premium space, especially from your big U.S. listed peer I'm thinking about as premium skin care kind of recovers?

Okay. So, first, Latin America. So Latin America, I'm obviously very happy with the performance, which is, frankly -- first of all, it's really a tale of two cities because we are flying in Brazil. We're growing in double digit, 2.5x faster than the market, recruiting from door to door, which is frankly, what the role we were on in Mexico the previous years. And it continues in Brazil, great performance in hair care, in particular, in all divisions. Mexico was, frankly, a perfect storm. Not only has the market softened, but that -- it's still softened to mid-single digits. So it's not in the greater scheme of skins. It's not a negative market, but we've had a perfect storm. First of all, we've had major -- and as I mentioned in the previous call, major inventory issues in makeup because, as I said, Mexico was supplied by a North American warehouse, which was in the middle of the preparation of our famous IT transformation NEO. So basically, Mexico didn't get makeup products for some time. And at the same time, we had indeed commercial issues with one of our big customers there that changed its policy back and forth between everyday low price and promotion. And I have to say my teams there didn't handle it properly. So we've had -- we've been performing under our peers on that quarter in the market. I don't foresee a major improvement in Mexico in Q4 because these things take a little bit of time to fix, but it will be, I think, a good momentum for 2027. It will be both a good comparative and a team that hopefully has learned from both their bad luck and for the few mistakes they made. And hopefully, they'll be inspired by what Brazil is doing. And also our Colombia, Ecuador and in region is doing good, too. So it's just really one -- this Mexican wound. I love Mexico because I've been the CEO there. And I'm going there in the beginning of the year to make sure that 2027 is going to be a great year for Mexico despite a slower market. SAPMENA, it's -- I'm indeed very happy because the third quarter was plus overall, which is a great performance. And indeed, I think we've -- first of all, the market has remained very dynamic, contrary to Latin America. It's a market that's up double digits. And we've really gained share there. We are like 1.6x or 1.7x the market, outperforming across all divisions and gaining share in all countries. And it's true that we had Vietnam doing good, but Thailand has accelerated. Indonesia has been for me an important turnaround because this was one of the countries where we were struggling a little bit on the digital space, where a lot of indices were really outcompeting us in on TikTok. And as we do all the time, we went when we're being challenged, we observe, we learn, we put the means and we've structured our content production to be really competitive on the social platforms of Indonesia, and that's allowed us to accelerate very significantly the growth in Indonesia. And as I told you, indeed, India, where I was just a couple of weeks ago, is doing great turnaround them, both in terms of teams quality. We create for India much more than we did before. We are accelerating in commerce with a focus on quick commerce, which is an important part of the e-commerce market there. So I think we have -- and the market has been a bit better than what we hoped in the Middle East despite the crisis. So, Warren, very ambitious to continue on the second -- on the last quarter on SAPMENA and a bit patient, but not for too long as it relates to Mexico for next year. As far as the competition, I'm not going to comment particularly on competition. I would say that most of the -- if you think about premium skin care, really the growth or the acceleration of premium skin care is mainly coming from North Asia. It is really a China phenomenon and part of it is the domestic market where we're doing great. I mean, Helena Rubinstein is growing in high double digits. SkinCeuticals is growing very strongly. There's also Travel Retail, where, as always, we are very careful on what we sell in this channel. And the biggest part of the growth of the skin care market overall is more driven by the dermatological beauty at all price points, whether CeraVe, La Roche-Posay or SkinCeuticals, they're all growing strongly. So I'm not concerned particularly with any specific competitor. They're all valuable competitors, and we like competition.

The next question is from Callum Elliott, Bernstein.

Can I ask you about aesthetics, please? Can you talk a bit about what you've learned so far from your acquisitions of the clinic stakes? How is the category interacting with the topical skin care industry, how are your brands -- are they seeing enhanced benefits from your dominance of that channel? And then my second question is sort of a direct follow-up. It seems like from what we can see you've started offering SkinCeuticals treatments through some Space NK stores. Maybe I would describe it as light aesthetics, if I can call it that. How are you thinking about that? Is that just sort of a small-scale experiment? Or do you think your brands can travel into aesthetics organically?

Well, to start with the aesthetics world, I guess, you've seen the publication of Galderma's results, which were very positive and aesthetics were part of the performance with a double-digit growth. And we -- of course, we're happy about it as a shareholder. But also, we continue to see both through this partnership as well as through the investments we've made in chains of clinics and in China and the U.S. We're seeing and that's very interesting. We are learning from what are the consumers wanting, what type of procedures they are doing and what type of treatments they require and at-home products they require to take with. And a brand like SkinCeuticals which is really doing really great and is one of the brands that is for me, one of the billionaire brands. So it's growing double digit and it's clearly benefiting from both the very tight and close relationship with derms, but also from the, I would say, investments because we are developing specific products that fit, we call that integrative medicine that we -- so we develop products that are designed to work alongside procedures or after procedures or before procedures, and it is indeed very beneficial. So it's a great combination. We know that people that go through aesthetics spend more on skin care, both because they're usually a bit wealthier, but also because they invest more in their skin. We also see, by the way, which is a very important phenomenon for us, the rise of the use of GLP-1 is having an impact on beauty consumption and skin care consumption in particular. So we have products in SkinCeuticals, but also in kills that have been designed to work alongside and complement GLP-1 and its side effects on skin sagging or other things like that. So it is very integrated. As far as the Space NK spas, it's not very new. In every country where we can do it, we have cabins. If you go to China, we have cabins of SkinCeuticals in our stores. We have cabins of Helena Rubinstein in our department stores. And wherever there are spas where people want to have treatments that are not indeed injections, they can use -- they can have treatments with our products that are usually a combination of our formulas with devices, electric tools, et cetera. So it is not specifically new. It's always been part of the model of these premium brands because our most loyal consumers are those who have the experience of the application with -- in the hands of a beautician, not necessarily a dermatologist, and that's the case for SkinCeuticals, but also, as I said, for brands like Helena Rubinstein.

The next question is from Celine Pannuti at JPMorgan.

My first question is on North Asia. Could you talk a bit about -- so you said the Chinese market was 2% to 3%. Does it mean that it has accelerated in the third quarter? And when you say you grew 3x as fast as the market, are you mentioning like something like high single digit in China in Q3? And is that sell-in or sellout that you're mentioning? And just to finalize on North Asia, like I'm getting to around 15% Travel Retail performance. Does that make sense? And are we still expecting nevertheless, I understand that you have had a sell-in into Mainland China Travel Retail, but what are you expecting for the full year on Travel Retail Asia? So that's my first question.

It's the long first question.