By Mimosa Spencer
PARIS (Reuters) - The world's largest cosmetic group L’Oreal is expected to report brisk fourth-quarter sales on Wednesday after pandemic-weary consumers emerged from lockdowns to splash out on beauty products.
Investors will look for the impact of increased marketing spending on L'Oreal's margin, and tune in to executives' results presentation Thursday for any clues on whether sporadic lockdowns to curb the coronavirus might have weighed on cosmetic sales in China.
The purveyor of Maybelline and Lancome brands does not disclose business targets. It is expected to post like-for-like sales growth of 9.3% for the last three months of the year, according to consensus estimates cited by Credit Suisse (SIX:CSGN).
In common with rival Estee Lauder (NYSE:EL), L’Oreal is likely to have benefited from higher employment and rising wages in the United States, where consumers have been treating themselves to luxury products as socialising resumed.
The trend is expected to boost L’Oreal's second-largest division, L’Oreal Luxe, which sells Yves Saint Laurent lipstick and Kiehl’s face cleansers. Last year, the unit acquired Youth to the People, a California-based label that sells skincare with vegan ingredients. L'Oreal shares have risen 21.5% over the last 12 months.
After cutting advertising and product launches when the pandemic hit in 2020, L’Oreal last year resumed spending on marketing and new products, including a line of Valentino cosmetics.
L'Oreal also redirected its focus from physical stores to online distribution, training and recruiting stylists online and enlisting social-media influencers to plug brands such as its no-frills CeraVe skincare line, on TikTok.
Its operating margin is projected to have grown by 40 basis points over 2021, despite a 165-point margin expansion for the first half, according to Credit Suisse estimates.
"Although the company’s strong topline growth and mix impacts might suggest that margin expansion should be stronger, we do not think L’Oreal will stray too far from its proven model of reinvestment and thus modest margin improvements," Credit Suisse analyst Eamonn Ferry said.
L'Oreal has steadily gained market share in the beauty and personal care market over recent years. Its 9.8% market share puts it ahead of rivals Procter & Gamble, Unilever (LON:ULVR) and Estee Lauder in the category, a position it has held since 2016, data from Euromonitor International shows.
Estee Lauder, which owns La Mer and Clinique brands, last week raised its annual revenue and profit projections after shoppers returned to stores over the holidays to stock up on makeup and skincare, undeterred by price hikes.