CLICHY, France: L'Oréal, the world's largest cosmetics firm, posted a decline in quarterly sales in the final three months of last year, with the 0.6% decrease suggesting the downturn may now be impacting the luxury market.

Milton Pedraza, of the New York-based Luxury Institute, has argued the luxury market is cyclical, and while the downturn may have a dramatic impact, brands taking a long-term view and offering a targeted portfolio in line with consumer preferences should more than survive.

L'Oréal's luxury brands, like Lancôme, and its hair salon products suffered in Q4 2008 as customers traded down to cheaper products, but its mass-market brands like Garnier and Maybelline continued to perform strongly.

While annual profits fell by 27% to €1.9 billion ($2.4bn; £1.7bn), like-for-like sales were up 3.1% to €17.5bn, with an 11.3% decline in America and a 1.9% drop in Europe being offset by 9% growth in the rest of the world mainly driven by Asia.

Jean-Paul Agon, L'Oréal's ceo, revised the company's long-term sales target down from 6–8% to 4% late last year, but has now also scrapped that goal as the market is "totally unpredictable."

Data sourced from Financial Times; additional content by WARC staff