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Wide-Moat L’Oréal Continues to Outpace the Global Beauty Market, but Valuation Is Not Pretty

Analyst Note

| Rebecca Scheuneman, CFA |

In its first quarter of fiscal 2021, L’Oreal reported 10.2% like-for-like sales growth and 5.4% total sales growth when accounting for currency headwinds. L’Oreal’s double-digit growth was boosted by the lapping of last year’s 4.8% like-for-like sales drop, when the beauty market was impaired by initial closures of beauty salons, department stores, perfumeries, and travel retail outlets across the globe. Given the company’s strong brands (which underpins its wide moat rating), L’Oreal significantly outperformed the global beauty market, which continues to be hindered by store closures in several regions, most notably in Europe, Latin America, Japan, and other regions throughout Asia. But L’Oreal’s significant online presence (with 27% of the quarter’s sales stemming from e-commerce) helped overcome these barriers, with online sales growing 47% year over year during the quarter.

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Company Profile

Business Description

L'Oréal, founded in 1909 by Eugene Schueller when he developed the first harmless hair colorant, is the world's largest beauty company. It participates primarily in skincare (39% of 2020 revenue), makeup (21%), haircare (26%), and fragrance (9%). L'Oréal is a global firm, with 27% of its revenue sourced from Western Europe, 25% from North America, and 48% from emerging markets (35% Asia-Pacific, 5% Latin America, 6% Eastern Europe, and 2% Africa/Middle East). The firm sells its products in many channels, including mass retail, drugstores/pharmacies, department stores/perfumeries, hair salons, medi-spas, branded freestanding stores, travel retail, and e-commerce. The firm's top selling brands are Lancôme, Yves Saint Laurent, Maybelline, Kiehl's, L'Oréal Paris, Garnier, and Armani.

41, rue Martre, Clichy Cedex
Paris, 92117, France
T +33 147567000
Sector Consumer Defensive
Industry Household & Personal Products
Most Recent Earnings
Fiscal Year End Dec 31, 2020
Stock Type
Employees 85,392