By Dominique Patton PARIS (Reuters) -L'Oreal <OREP.PA> reported a 2.4% rise in second-quarter sales on Tuesday, missing forecasts as growth in Europe slowed more than expected and demand at travel
L'Oreal Advocates for Tariff Exemptions Amid US Market Recovery
L'Oreal's Strategy in Response to Tariffs
By Dominique Patton
Sales Performance Overview
PARIS (Reuters) -L'Oreal <OREP.PA> warned on Tuesday that the EU's trade deal with the U.S. would be costly and that the cosmetics maker would push for tariff exemptions, even as it reported improving demand for its makeup and hair products in the key U.S. market.
Impact of US Market Recovery
The French group, whose brands include Maybelline makeup and CeraVe skincare, posted a 2.4% rise in second-quarter sales, missing forecasts as growth in Europe slowed more than expected and demand at travel outlets in Asia was subdued.
Challenges in China
However, a recovery in the United States, a small rebound in China, and double-digit growth in emerging markets helped to offset the slower rise in Europe, which accounts for a third of sales but is benefiting less as inflation eases.
Future Sales Projections
Sales in April-June totalled 10.74 billion euros ($12.38 billion), up 2.4% on a like-for-like basis from a year earlier, but undershooting the 2.9% growth seen in a Visible Alpha consensus estimate cited by Jefferies.
Underlying growth, after stripping out the impact of phasing in a new IT system, was 3.7%, the company said.
"I don't think it's a good deal," CEO Nicolas Hieronimus told Reuters of Sunday's framework deal imposing a 15% tariff on U.S. imports of a range of EU goods, including cosmetics.
"We're going to be writing to all the European leaders and negotiators to see whether there's a loophole we could benefit from, because in the end it's going to be costly," he said.
L'Oreal, which imports around 30% of its U.S. sales, could raise prices and move more production to the country where it has four factories, but is waiting for further negotiations between U.S. President Donald Trump and other nations to be finalised before making decisions, he added.
The company expects a 35 to 40 basis points hit to 2025 sales growth, he said.
Jefferies analysts expect perfume sales in the U.S. to slow in the second half after tariffs are implemented, though Hieronimus said L'Oreal's fragrance sales were currently growing by double-digits, compared to 7% for the broader market.
There is "some pricing power on fragrances, but we have to also consider the elasticity of the demand," he added.
Growth in the U.S. picked up in the second quarter, thanks to "a bit less uncertainty", as well as new makeup and haircare launches, Hieronimus said.
China, however, is "not really rebounding", although L'Oreal recorded sales growth there for the first time in a year.
($1 = 0.8674 euros)
(Reporting by Dominique PattonEditing by Mark Potter)
