L'Oréal confident on luxury

25 May 2011

PARIS: L'Oréal, the beauty giant, believes sales of its high-end brands will increase in emerging markets like China this year, but also rise across regions such as the US and Europe.

At the Reuters Global Luxury and Fashion Summit, Nicolas Hieronimus, managing director of L'Oréal's luxury products arm, said the premium cosmetics sector would grow by 6% worldwide in 2011.

"Our ambition is to do better than that and we will do better than that," he added.

Among L'Oréal's leading exclusive beauty brands are Yves Saint Laurent, Lancôme, Biotherm and Shu Uemura, operating alongside fragrances for Giorgio Armani, Cacharel and Ralph Lauren.

Although the trading climate has proved adverse in numerous European nations, including L'Oréal's home country of France, the situation is stronger than previously feared.

"In Europe, economic indicators are a little better than expected ... so we have reasons to be confident," Hieronimus said.

"I don't see any reason for the consumer environment to deteriorate in Europe."

Similarly, while US shoppers often remain in cautious mood due to the on-going financial uncertainty, Hieronimus argued the segment is currently "dynamic".

L'Oréal anticipates beating the predicted 2011 market expansion in America, which should sit within the 5% to 6% range.

Elsewhere, Hieronimus suggested the company's Chinese unit could enjoy a revenue lift in "good double digits" this year.

China is also set to become the second-largest outlet for the firm's luxury lines in 2012, ahead of France, but still behind the US.

More broadly, and even though many brand owners have sought to manufacture goods locally in a bid to woo Chinese customers, such a model does not appeal to L'Oréal at present.

"We are not considering producing in China because the fact that the products come from European countries is a sign of authenticity and quality for Chinese consumers," said Hieronimus.

L'Oréal's luxury division delivers roughly a quarter of the company's sales.

Data sourced from Reuters; additional content by Warc