By Jack Denton
Once the COVID-19 pandemic subsides, there will be a “roaring 20s” boom with a huge upside for the beauty industry, predicted the leaders of cosmetics giant L’Oréal on Friday.
“Social distancing, widespread use of masks and its impact on makeup, in addition to lockdowns and store closures, did not help beauty,” said Nicolas Hieronimus, the group’s deputy chief executive and incoming CEO. “But like a flower after winter, beauty is ready to blossom as soon as the COVID goes away.”
Hieronimus and Jean-Paul Agnon, the chair and current chief executive of L’Oréal /zigman2/quotes/204720038/delayed FR:OR +2.19% , spoke of a coming boom similar to the “Roaring 20s” — the period of economic and cultural prosperity following World War I.
“We’ve already seen it in China where all categories returned back to normal, placing the beauty market at positive double-digit growth,” Hieronimus said, speaking with Agnon after the world’s largest cosmetics company reported its full-year earnings.
Agnon said “this will be like the famous Roaring 20s,” and “the fiesta of makeup and fragrances.”
A push into e-commerce and focus on the Chinese market helped carry L’Oréal through a tough 2020, with the group posting strong earnings for the final quarter of the year, showing that sales are accelerating.
Shares in the world’s largest cosmetics company jumped 2.5% in Paris trading on Friday, adding buoyancy to the CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +0.61% index, which was hovering around flat.
The cosmetics industry has felt the blow of the COVID-19 pandemic through long-lasting retail closures, as well as a decline in some makeup sales that came with a reduction in social calendars.
After a 4.8% sales drop in the first quarter and near 20% decline in the second, L’Oréal’s sales rose by 1.6% in the third quarter of the year as the group began to recover.
L’Oréal reported sales of €27.9 billion across 2020, a 4% decline from 2019 on a like-for-like basis. Like-for-like figures are adjusted for currency effects and acquisitions. Operating profit, an adjusted measure closely watched by analysts, was €5.2 billion across the year, 6.1% lower than in 2019. Both headline figures came in firmly ahead of analyst expectations.
Sales accelerated in the final three months of the year, building momentum from the third quarter to rise 4.8% from the same period in 2019 to €7.9 billion.
Much of L’Oréal’s success has been put down to its ability to shift online amid the pandemic, and the company’s resilience in the key Chinese market. E-commerce sales rose by 62% in 2020 to make up a record 26.6% of all sales. In China, the group’s sales growth of 27% far outpaced the 4% growth across the wider market.
China has long been a battleground for L’Oréal and its yuan-based sales accounted for 50% of all sales gains in 2018 and 2019 together. Much of the Chinese success was driven by e-commerce, which became essential to all parts of L’Oréal’s business during the pandemic.
“The performance of China is spectacular and its contribution to the performance of the group is important,” said Agnon.
The group is headed for a change in leadership in May, when Agon retires as CEO, to be succeeded by Hieronimus.