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L’Oréal shares fall 5% on lower-than-expected sales and slowdown in Asia

by SuperiorInvest

Balint Porneczi/Bloomberg | fake images

LONDON — The real Shares fell more than 7.3% in early trading on Friday, before paring losses slightly as the company reported lower-than-expected sales and flagged slowing demand in Asia.

The shares had recovered slightly to trade down 5% as of 10:40 a.m. London time.

The world’s largest beauty brand reported Thursday that its fourth-quarter sales fell short of estimates, rising 2.8% to 10.6 billion euros ($11.4 billion). Barclays analysts had forecast a figure close to €10.9 billion, according to Reuters.

The company, which owns brands such as Lancôme and Kiehl’s, also posted a 7.6% increase in sales for the full year 2023, to €41.18 billion ($44.37 billion).

The quarterly deficit was led by activity in North Asia, including China, where sales fell 6.2% over the three-month period. Elsewhere, sales increased in Europe and North America.

CEO Nicolas Hieronimus said on Friday that the company remains very ambitious in China, adding that it has strong growth plans for the country in 2024 and beyond, according to Reuters.

The luxury sector has been under pressure since late 2023 as difficult macroeconomic and geopolitical conditions have weighed on consumer spending, especially in the United States and China.

Hermes jumps

Still, certain high-end brands appear to have bucked the trend and continue to attract increasingly selective shoppers.

Actions of Hermes rose 4.5% on Friday morning after reporting an increase in sales as wealthy consumers continue to seek out their signature silk Birkin bags and scarves despite rising prices.

Fourth-quarter revenue rose 18% at constant exchange rates to €3.36 billion, while full-year revenue rose 21% to €13.42 billion. The company also announced plans for an exceptional dividend of 10 euros per share.

On Friday, Chief Executive Axel Dumas said product prices were likely to rise by an average of 8% to 9% in 2024, according to Bloomberg, which he said was indicative of the continued appeal of the company in an increasingly “polarized” market.

Hermes shares are currently up more than 13% so far this year, ahead of LVMH, which is up 11%, and Burberry, which is down 8%.

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