L’Oréal said it will embark on an “aggressive plan of new product launches” and advertising campaigns in the coming months to spur people to start buying cosmetics again, despite the ongoing coronavirus pandemic.
Jean-Paul Agon, the longtime chief executive of the world’s biggest beauty company, acknowledged that the global health crisis was “unfortunately not over” but expressed confidence that L’Oréal could thrive, with the group’s booming e-commerce operation helping to offset reluctance by some customers to visit shops.
“We want to go on the offensive again,” he told the Financial Times. New luxury perfumes from Giorgio Armani and Valentino and a new solid shampoo from Garnier were being readied for launch he said, as L’Oréal returned to projects previously paused due to Covid-19.
The pledge came as L’Oréal delivered weaker-than-expected sales in the second quarter after lockdowns forced specialist beauty shops as well as hair and nail salons to close. The only bright spot was China, the group’s second-biggest market after the US, where sales rose 30 per cent in the three months to June.
Overall group second-quarter sales were €5.85bn, down 19 per cent on a like-for-like basis and compared to the same period a year earlier. Analysts had been expecting like-for-like sales to fall 13.1-15.1 per cent, according to Refinitiv data.
But L’Oréal was still able to sell its mass-market cosmetics and haircare products through supermarkets and pharmacies, which remained open, and also offset some of the pain via its fast-growing digital arm.
Online sales on its own websites and those of retailers it sells through rose by 67 per cent in the first half and now account for 25 per cent of group revenue.
Mr Agon predicted that the group would come out of the crisis with e-commerce accounting for as much as 30 per cent of sales and that there would be no regression to pre-pandemic levels. “This has been a tipping point for many consumers as many discovered buying online for first time,” he said.
In countries where stores have reopened, such as China and the US, online sales are still rising rapidly he added. “It is unbelievable, this has been the biggest phenomenon for us in the past six months.”
The company behind make-up brands including Lancôme and Maybelline managed to limit the hit to profitability in the first half of the year by cutting costs on everything from travel to hiring. It delivered a first-half operating margin of 18 per cent compared to 19.5 per cent in the same period a year ago.
However first-half operating profit fell 18.4 per cent to €2.36bn, slightly lower than the €2.44bn expected by analysts.
“It’s been a long time since we saw quite so much red from L’Oréal,” RBC analyst James Edwardes Jones wrote in a note.
It may fall to Mr Agon’s successor to pilot the company through the post-pandemic recovery. The board has begun an internal search to replace the CEO who has been at the helm since 2005 and are expected to announce their selection in the autumn. The new candidate would likely start in 2021.
Asked whether he would like to stay on as chairman Mr Agon said it was up to the board to decide. “If they do ask me, I would do so with pleasure and it would be an honour,” he said.