L'Oreal Q2 below forecasts, takes hit in East Europe

French cosmetics maker L'Oreal reported second-quarter sales below market expectations, hit by a slowdown in trading in North America and eastern Europe.

The maker of Lancome lipstick, Biotherm creams and Garnier shampoos saw its second-quarter sales rise 4.6 per cent, while analysts had expected an increase of between 5.5 and 6 per cent.

"This is below my forecasts," said one London-based analyst, who had expected a 6.2 per cent rise in comparable second-quarter sales and who expressed concern regarding the major drop in sales in eastern Europe.

"This is a significant emerging market for the group," he added.

Revenue from eastern Europe, which rose 0.7 per cent in the first quarter, was down 8.2 per cent in the second quarter to €325.3 million ($463.6 million) on a reported basis.

"It is the first time in many years that we are seeing difficulties in eastern Europe," L'Oreal Chief Executive Jean-Paul Agon told analysts in a conference call. He partly blamed the region's problems on its economic woes.

Revenue in North America, L'Oreal's biggest market, fell 4.9 per cent on a reported basis, having grown 12 per cent in the first quarter.

Agon declined to give a forecast for the year and would only say the group was confident it could improve sales and profits and beat the market's average growth rate.

"We think the growth of the market will be around 4 percent in the second half as it was in the first half and we are confident that we will outpace the market in the second half as well," he said.

On a reported basis, L'Oreal's luxury division which includes brands such as Yves Saint Laurent and Giorgio Armani was the only one to generate growth in the second quarter, with sales up 3.8 per cent on a reported basis.

Revenues from professional products and consumer products were down 0.7 per cent and 0.3 per cent respectively.

By comparison, during the previous quarter, L'Oreal's luxury sales were up 10.3 per cent, revenue from professional products was up 9.6 per cent and from consumer products, it was up 9.4 per cent.

L'Oreal's revenue overall reached €4.99bn in the quarter to June 30, up 0.9 per cent on a reported basis.