L'Oreal Co. reported its fourth-quarter financial results on Thursday, revealing that its comparable sales growth fell short of analyst expectations. This led to a significant drop in the company's U.S.-traded ADRs, which declined by as much as 8.9% during the session, marking the largest intraday loss since March 2020.
Key financial figures from the report are as follows:
Sales: Fourth-quarter sales reached 11.25 billion euros, compared to analyst expectations of 11.34 billion euros. Comparable Sales: Comparable sales grew by 6% for the quarter, below the anticipated growth of 6.46%. Operating Profit: Quarterly operating profit was 8.89 billion euros, slightly missing the forecast of 8.94 billion euros.
Performance by business division:
Professional Products: Sales of 1.38 billion euros, exceeding market expectations of 1.37 billion euros; comparable sales grew by 7.6%, slightly below the expected 7.74%. Consumer Products: Sales of 3.91 billion euros, missing the forecast of 3.99 billion euros; comparable sales increased by 4.8%, just under the expected 4.84%. L'Oreal Luxe (LFL): Sales of 4.22 billion euros, below the anticipated 4.34 billion euros; comparable sales rose by 4.5%, significantly lower than the expected 7.82%. Dermatological Beauty (LFL): Sales of 1.73 billion euros, surpassing expectations of 1.64 billion euros; comparable sales for this division surged by 11.5%, well above the forecast of 5.78%.
Performance by geographic region:
North America: Comparable sales increased by 8.6%, exceeding the market forecast of 7.51%. North Asia: Comparable sales grew by a modest 0.6%, far below the expected 5.44%. Europe: Comparable sales rose by 6.6%, beating the anticipated 4.19%. SAPMENA-SSA Region: Comparable sales increased by 10.7%, slightly below the forecast of 11.6%. Latin America: Comparable sales grew by 8.2%, above the expected 7.72%.
Full-year 2025 performance:
Operating Profit: Operating profit reached 8.89 billion euros, a 2.4% year-on-year increase, slightly below the expected 8.94 billion euros. Operating Margin: The operating margin was 20.2%, up from 20% the previous year, matching expectations. Net Profit: Net profit was 6.13 billion euros, a decrease of 4.4% compared to the previous year, below the expected 6.49 billion euros. Earnings Per Share: Adjusted EPS was 12.71 euros, up from 12.66 euros a year earlier but below the forecast of 12.86 euros. Comparable Sales: Full-year comparable sales growth was 4%, slightly missing the expected 4.12%. Dividend: The annual dividend per share was 7.20 euros, slightly above the analyst forecast of 7.19 euros.
L'Oreal expressed confidence in its ability to continue growing both revenue and profit as it seeks to strengthen its dominant position in the beauty market. CEO Nicolas Hieronimus stated in Thursday's earnings update, "We remain optimistic about the prospects of the global beauty market and are confident in our ability to continue outperforming it." He added, "As previously committed, supported by an accelerating pipeline of new product launches and a progressively improving beauty market, our organic sales growth is accelerating from quarter to quarter."
The company's weaker-than-expected fourth-quarter performance caused its U.S.-listed ADRs to drop sharply. Analysts at RBC Capital Markets noted in a report following the earnings release that investors will be focused on more detailed guidance regarding the beauty market's growth prospects during the company's briefing scheduled for Friday.
North American Market Recovery According to a report released last year by McKinsey, the skincare, haircare, color cosmetics, and fragrance industries are projected to grow by approximately 5% annually, reaching a total market size of around $590 billion by the end of the decade. L'Oreal is a dominant player in this market, with annual sales significantly higher than U.S. competitors such as Estée Lauder and Johnson & Johnson's beauty division. Growth has slowed in recent quarters: in China, consumers are shifting towards lower-priced local brands; in the U.S., consumer spending has become more cautious; meanwhile, some independent brands are gaining market share. However, in recent months, purchases of creams and color cosmetics have rebounded in the United States, the world's largest cosmetics market. L'Oreal executives previously highlighted strong sales performance during the Black Friday period. The company reported that fourth-quarter sales in North America grew by 8.6%, exceeding market expectations, aided by the launch of new products such as the L'Oreal Paris Plump Ambition lip oil. L'Oreal launched a "Beauty Stimulus Plan" last year to accelerate new product launches and drive sales growth. Analysts at J.P. Morgan cited NielsenIQ data earlier this month indicating that L'Oreal has gained market share in categories like conditioners, shampoos, and creams. Conversely, in North Asia, sales grew by only 0.6%, significantly below the market expectation of 5.6%. L'Oreal noted that its travel retail business remains "challenging," but the mainland China market is "progressively stabilizing."
Continued M&A and Investment In recent months, L'Oreal has continued to reinforce its leadership in the beauty industry through mergers, acquisitions, and investments. The company stated that global demand for cosmetics and fragrances is growing. Last October, L'Oreal agreed to acquire the beauty business of Kering for approximately $4.7 billion, which includes the fragrance brand House of Creed, as well as rights to develop perfumes and beauty products for Kering brands like Balenciaga and Saint Laurent (and for Gucci in the future, after existing licensing agreements with Coty expire). Late last year, L'Oreal further expanded its presence in the dermatological space by increasing its stake in Swiss dermatology company Galderma to approximately 20%, a transaction valued at about $4.9 billion based on the share price at the time. In June, the company also acquired a controlling stake in the British skincare brand Medik8. Hieronimus stated, "We are ready to further accelerate growth." Year-to-date, L'Oreal's stock has gained approximately 7%. Meanwhile, shares of Unilever, a manufacturer of beauty and personal care products, have risen about 10%, and smaller competitor Beiersdorf has advanced 12%.