The most important three months of the year—retail’s so called “golden quarter” in the lead-in to the holidays—were resilient for beauty powerhouses Estée Lauder and L’Oréal Group. Both delivered respective sales growth of 14% to $5.5 billion, and 15.4% to €9.1 billion ($10.3 billion).
The strongest product segment for the American multinational—whose high-end brands include Jo Malone London, La Mer, Le Labo, and Tom Ford—proved to be fragrance. Scents grew by 29%—double the average pace of the company during the period—to reach $800 million. Increases were seen in every region, driven by sales of luxury fragrances.
France’s L’Oréal breaks down its sales differently: by business division. While the smaller (relatively speaking) specialist Active Cosmetics and Professional Products segments grew fastest at 28% and 18.5% to €990 million and €1,060 million respectively, it was L’Oréal Luxe that garnered the most attention. Its increase of 16.5% in the three months to December 2021 pushed sales to a whopping €3.75 billion. The division also delivered the highest operating profit over the full year of €2.8 billion.
A luxury and fragrance sweet spot
Commenting on the segment’s performance across 2021 as a whole, Nicolas Hieronimus, L’Oréal Group’s CEO, said: “L’Oréal Luxe became the group’s largest division, with remarkable success in fragrances.” L’Oréal Luxe has consolidated its leadership in fragrances, helped by established icons like Libre by Yves Saint Laurent, launches like Alien Goddess from Thierry Mugler, who recently died, and Prada’s Luna Rossa Ocean Prada.
At the end of 2021, the division also finalized the acquisition of Youth To The People, bolstering its skincare component, which is likely to see a comeback in 2022 as COVID restrictions continue to be lifted and actual sampling and testing becomes normalized again.
Despite a sharp increase in fragrance sales for Estée Lauder in 2021’s final quarter, skincare’s solid growth of 12% pushed its sales past $3 billion (to $3.16 billion), driven by La Mer and Clinique. The surges for both brands reflected increases in hero products such as The Treatment Lotion, Crème de la Mer, Genaissance, and Clinique’s Even Better Clinical Radical Dark Spot Corrector and Take The Day Off Balm, as well as new launches.
Lauder is banking on China for skincare to perform ahead of beauty overall. In an investor call, Fabrizio Freda, President and CEO of The Estée Lauder Companies, told analysts: “Mainland China delivered high single-digit sales growth, an impressive result given the regional restrictions in the quarter that pressured brick-and-mortar and make-up. However, skincare and fragrance grew double-digits in Mainland China.”
An American dream
Regionally, it was the Americas that registered the highest growth for both companies. Lauder saw a 19% hike across the whole region, while L’Oréal saw the same pace set in North America.
According to NPD data, prestige was where it was at in the US market last year, with a 30% year-over-year increase in dollar sales to $22 billion, led by fragrance growth of 49%. The weakest segment was skincare, up 18%.
Looking ahead to 2022, both companies are bullish, even though COVID remains a threat. L’Oréal’s Hieronimus maintains that L’Oréal “gained market share in all zones, divisions and categories” last year, which puts it in a strong position. “We are confident in our ability to outperform the market in 2022 and achieve another year of growth in both sales and profits,” he added.
Freda said: “Our business is far bigger and more profitable than pre-pandemic, with every region larger. This reinforces our confidence to navigate the impacts of the prolonged pandemic. We are raising our fiscal 2022 full year outlook.” Lauder’s fiscal year ends in June.
In the markets, neither Paris-listed L’Oréal nor Estée Lauder’s share prices have fared well this year, both down about 14-15% in the past three months. However, over the past 12 months, Lauder is up by 6% and L’Oréal by 14%.
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