BEAUTY CARE

L’Oreal changes forecast after disappointing third-quarter results

BY Melissa Valliant

CLICHY, France Cosmetics maker L’Oreal reduced sales and profit forecasts for the third time in four months—once in July, once in August—and is preparing for a tough upcoming year. Third-quarter sales rose 3.4 percent to 4.27 billion euros, while Eastern Europe showed a 30 percent; Asia, a 14 percent increase; Latin America, a 6.9 percent increase; and Western Europe a 3.9 increase.

“Since September, we have noted a clear slowdown in some markets in western Europe and North America, and have been confronted with a contraction of purchasing by some distributors in the current economic crisis,” said chief executive officer Jean-Paul Agon in a statement. “[L’Oreal] distributors in the United States and some European countries are being very cautious and are reducing inventories.”

The company predicted in August “close to a 6 percent” rise in organic revenue and are now saying approximately 4 percent for the year. Organic sales are already slowing, showing an increase of 2.7 percent this quarter, compared with a 5.1 percent increase in the second quarter.

L’Oreal is the third major cosmetics to cut its predictions in three days. Estee Lauder Cos. announced their changed forecast Tuesday, and Avon Products Inc. lowered their forecast Thursday.

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L’Oreal may cut 200 jobs at U.K. factory, transfer operations to Fareva

BY Antoinette Alexander

PARIS French beauty company L’Oreal is looking to cut 200 jobs at one of its U.K. factories, according to published reports.

The plant, located in Talbot Green, South Wales, makes shampoos, conditioners and hair styling products. However, L’Oreal is looking to transfer those manufacturing operations to France-based company Fareva around the middle of next year, according to reports.

Production for the U.K. market would remain in Talbot Green to keep some of the jobs at the factory.

A decline in the U.K. supplier base has meant 70 percent of its ingredients were imported. Also, more than two-thirds of its current product is then exported.

“The combination of these two factors means that the factory is no longer sustainable from an economic logistical or environmental perspective within L’Oreal’s manufacturing organization,” a company spokesman was quoted as saying.

According to reports, those employees whose jobs have become redundant will be offered help in finding new positions within the L’Oreal Group or elsewhere.

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P&G reports 9 percent growth for Q1 2009

BY Antoinette Alexander

CINCINNATI Procter & Gamble announced on Oct. 29 that first quarter net sales rose 9 percent $22 billion, while volume grew 2 percent driven in part by double-digit growth of Gillette Fusion, Head & Shoulders and Cover Girl.

“This quarter was yet another example of the strength of P&G’s balanced brand and geographic portfolio,” chairman and chief executive officer A.G. Lafley said. “We continue to focus on delighting consumers with trusted household and personal care products that consumers purchase weekly and use daily gives me continuing confidence P&G will deliver target growth over the long term, even in a challenging economic environment.”

Net sales for the quarter rose 9 percent to $22 billion. Price increases added 3 percent to net sales, according to P&G, and a favorable foreign exchange contributed 5 percent to sales growth. Disproportionate growth in developing regions and product mix shifts drove a negative 1 percent mix impact on sales. Organic sales rose 5 percent for the quarter.

Net earnings increased 9 percent to $3.3 billion and diluted net earnings per share rose 12 percent to $1.03 for the quarter.

In beauty, net sales rose 12 percent during the quarter to $5.1 billion. Globally, all major retail hair care brands contributed to volume growth led by mid-single digit growth of Pantene and double-digit growth of Head & Shoulders and Rejoice. This was partially offset by a low-single digit decline in professional hair care. Cosmetics volume grew double-digits behind continued growth of Cover Girl. Skin care volume grew low-single digits due to double-digit growth of SK-II. Earnings grew 9 percent during the quarter to $754 million.

In grooming, net sales were up 6 percent to $2.1 billion. Blades and razors volume grew low-single digits as double-digit growth of Gillette Fusion and high-single digit growth of Venus were mostly offset by declines in legacy shaving systems. Net earnings increased 6 percent to $478 million during the quarter.

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