L’Oréal: Derma Skincare and Mass Market Products Drive Strong Sales, as Luxury Remains a Laggard

Wide-moat L’Oréal posted a strong sales update for the first nine months that reaffirmed our favorable view on the beauty maker’s long-term prospects underpinned by strong brands, innovation, and a balanced exposure to premium and mass segments. Revenue grew 9.4% (12.6% like for like) for the period, on the back of broad-based strength across categories and geographies (excluding travel retail in China), and we view the firm as remaining on track to deliver the 10.6% sales expansion we forecast for 2023. Our 10-year projections for high-single-digit sales growth and low-20s average operating margins also remain in place. Shares trade in a range we’d consider fairly valued.