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Highlights:
- L’Oréal reports disappointing sales, with a 6.5% decline in North Asia driven by weak Chinese demand.
- Shares fall 3.8%, adding to year-to-date losses now exceeding 20%.
- The luxury sector as a whole is facing significant struggles, with brands like Burberry, LVMH, and Kering all experiencing sharp declines.
L’Oréal, the French cosmetics giant, has reported weaker-than-expected sales for the first nine months of the year, largely due to declining demand in China. Total sales reached €32.4 billion, up 6% year-on-year, but still falling short of analysts' expectations. The company’s chief executive, Nicholas Hieronimus, highlighted robust performance in Europe and North America but pointed to the increasingly challenging conditions in China as a major concern.
L’Oréal’s North Asia segment, which includes China, saw sales drop 6.5% on a like-for-like basis in the third quarter, a sharper decline than the 3% average drop across the nine-month period. Hieronimus noted that the Chinese beauty market continued to deteriorate in the third quarter, further impacted by low consumer confidence. This ongoing slump in China has been a common theme in the global luxury sector, with many companies struggling to regain momentum in the market.
Investment bank Morgan Stanley called L’Oréal’s results “clearly disappointing,” though it acknowledged that the weak Chinese demand is now a familiar story. Despite this, markets remain unforgiving, with L’Oréal’s shares falling 3.8% today, pushing year-to-date losses above 20% and bringing the stock closer to two-year lows.
L’Oréal is not alone in facing these challenges. Other major luxury brands have also felt the impact of declining Chinese demand. In the UK, Burberry Group PLC has seen its valuation cut in half this year, leading to its removal from the FTSE 100 index. Meanwhile, on the French stock market, luxury powerhouses like LVMH, Dior, and Gucci-owner Kering have all suffered substantial losses, with Kering down a dramatic 40% this year.
The slowdown in China continues to weigh heavily on the luxury sector, as brands grapple with shifting consumer sentiment and economic uncertainty in one of their largest markets.
