Beauty and the Beat

Research evidence excerpt

Beauty and the Beat

Barclays | L'Oréal SA

• The China recovery is becoming more interesting again for the portfolio. Management

said the China market has stabilised around c.+2%, but the mix has shifted back towards

premium, with luxury and dermatological beauty markets closer to +7%. This is where L’Oréal

is structurally strongest: Luxe China grew +10% in H1, 6.18 was estimated to be up c.+10% for

the market, and L’Oréal slightly beat that growth while retaining leading positions across key

beauty universes.

• SAPMENA is moving from “nice to have” to a more material growth leg. SAPMENA-SSA

grew +13.8% in H1, with Vietnam up over +50% and India up +17%. Management framed the

region as a strategic growth priority, with lower-than-group market share, strong e-commerce

momentum, and a portfolio skewed towards mass and dermatological beauty, where

affordability and recruitment are key.

• Margin delivery remains disciplined despite higher reinvestment. A&P rose 70bps to

32.6% of sales, funded by 70bps of SG&A leverage and supported by a gross margin of 74.8%,

up 10bps. Management reiterated that the group can improve margins by around 20-30bps in

a normal year, while flexing A&P up when new launches and brand momentum justify the

investment.

By Geography

Europe

Europe remains a high-quality growth market. H1 adjusted LFL growth was +6.1%, with

management highlighting broad-based growth across countries and divisions, despite L’Oréal

already having a market share above 20% in the region. Management attributed the sustained

outperformance to category mix, especially haircare and fragrance, e-commerce acceleration

led by platforms such as Amazon, and a structural reorganisation of European clusters which

has lowered SG&A and freed up resources to reinvest behind brands.