L'Oreal SA (LRLCF) achieved a record year in 2024 with like-for-like growth of 5.1%, outperforming the market.
The company's gross margin reached an all-time high of 74.2%, and the operating profit margin increased to 20% for the first time.
L'Oreal SA (LRLCF) reported a strong cash flow with operating net cash flow at EUR6.6 billion, up nearly 9%, indicating a cash conversion of over 100%.
The Dermatological Beauty Division reported a 9.8% increase in sales, reaching EUR7 billion for the first time, with a profit margin of 26.1%.
The Professional Products Division grew by 5.3%, driven by premium haircare and a successful omnichannel strategy, achieving a market share of 26%.
Negative Points
Sales in North Asia declined by 3.2% on a like-for-like basis, primarily due to weakness in Mainland China and Travel Retail.
The Chinese beauty market continued to decelerate, with total market growth deteriorating from minus 2% in the first half to minus 4% for the full year.
The Travel Retail business in Asia faced challenges, with sales in Hainan and Korea down 35% from 2022 levels.
CeraVe experienced a slowdown in the US, partly due to the law of big numbers, despite being the second biggest brand in the US.
The Consumer Products Division's growth of 5.4% was slightly below the market, impacted by a slower market in China and a soft makeup market in the US.
Q & A Highlights
Q: What are the key drivers for maintaining growth in the fragrance category in 2025, and can you provide more details on BETiq's progress? A: Fragrances have been dynamic due to increased penetration and valorization. Penetration rates are lower in regions like China and the US compared to Europe, indicating growth potential. Valorization is driven by consumer preference for more selective fragrances. L'Oreal's strong brand portfolio and dedicated R&I in fragrances support continued success. Regarding BETiq, it has been rolled out to six countries, covering 45% of consumer-facing A&P, with plans to expand to eight countries in 2025. BETiq has improved productivity by 10-15%, and while A&P weight may lower, investments will continue for new brands and markets.
Q: How do you see market growth in 2025, particularly in China and the US, and what are the sell-in and sell-out dynamics? A: L'Oreal expects 4% to 4.5% market growth in 2025, driven by dynamic emerging markets and steady Europe. The US is seen as a land of opportunity with potential for premium goods consumption. China remains uncertain, with a flattish market expected. In the US, sell-out remained dynamic, especially in Luxe and Consumer Products divisions, with strong performances in fragrances and haircare. The US market is robust despite a soft makeup market, and L'Oreal is optimistic about future opportunities.
Q: Is the increased innovation pipeline in 2025 a new pace for L'Oreal, and how do you plan to adapt to changes in the Chinese market? A: L'Oreal aims to seduce consumers with more innovative products, increasing the innovation pipeline by 200 basis points compared to last year. This is a concerted effort to compete in a market with more indie brands. In China, the focus is on providing innovative products that justify their price, as the market is more value-focused. L'Oreal plans to strengthen its innovation team in China to better compete and win market share.
Q: How is pricing in Europe shaping up for 2025, and what is the outlook for market growth and L'Oreal's performance? A: Pricing in Europe will see minimal straight pricing increases, but value creation will continue through innovation and mix. L'Oreal expects to outperform the market on a full-year basis, with a progressive acceleration in growth throughout the year. The company remains committed to delivering modest margin expansion while investing in brand growth and new opportunities.
Q: Can you provide more details on L'Oreal's exposure to the travel retail channel and the rationale behind taking minority stakes in some brands? A: L'Oreal's exposure to travel retail has decreased, with Hainan now less than 1% of sales. The company expects a progressive recovery in travel retail, particularly in the West. Regarding minority stakes, L'Oreal takes stakes in promising brands to learn and discover potential stars. This strategy allows L'Oreal to spread risks and potentially acquire successful brands in the future. The stake in Galderma is to understand the aesthetics market and explore scientific partnerships.
