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Key Takeaways From L'Oreal's 2016 Annual Earnings

L'Oreal released its 2016 annual results on February 9th. The year ended on a strong note for the company having been boosted by positive growth (~4%) in the global beauty market. The company outperformed the performance of the global beauty market . In Q4, most of its markets including North America, Western Europe (except France), and some of its New Markets such as Eastern Europe, Hispanic Latin America, Japan, and Korea performed well. However, markets such as France showed a decline in all the channels, and the company faced challenges in Hong Kong, China, and India. L'Oreal's luxury segment, L'Oreal Luxe, still remained its best performer with its innovative products and iconic line of products, while the mass markets recovery continued due to the adaptation of the segment to the contemporary market demands. Though the Active Cosmetics slowed down a bit, it was still a growth driver. With L'Oreal's recent acquisitions of three brands under this category, its strong leadership position in this segment might continue to flourish. L'Oreal's Professional segment continued on its weak note but it is expected to show signs of improvement as the hair color market starts gaining momentum and the new product launches by the company last year starts picking up sales. Along with this, there has been management restructurings for further boosting the performance of the Professional division. L'Oreal's e-commerce sales impressive growth continued like the previous quarters in both its mature and New markets. The year 2016 was one where L'Oreal boosted its market dominance and growth with the help of organic and inorganic growth along with its digital initiatives. L'Oreal is the most advanced beauty company when it comes to digital progress.

The Body Shop Might Be Sold Off Soon

However, one of the biggest highlight of the earnings call was that L'Oreal has started looking for strategic alternatives for its The Body Shop brand. With over 3,000 stores across 66 countries, The Body Shop, which was once a celebrated brand, has been suffering in its performance lately. In 2016, The Body Shop witnessed a 5% decline in its top line to reach €920.8 million. The slowdown in sales in strategically important regions such as Saudi Arabia and Hong Kong were attributed to its weak performance.

L'Oreal Maintained Its Dominance In Most Of Its Important Markets

The company gained market share in each of its three strategic areas: namely its growth accelerated in North America due to the recovery of its Consumer Products division, L'Oreal Luxe's stellar line of products such as Lancôme, Urban Decay, Yves Saint Laurent, and now the newly acquired IT Cosmetics contributed to its impressive performance, and its Active Cosmetics revenues nearly doubled as a result of its new acquisitions towards the end of 2016. L'Oreal is currently the market leader in the U.S. and the Western European beauty markets with around twice and thrice the market shares of its closest competitors in the respective regions.

Additionally, the company gained market shares in regions of Eastern Europe including Russia, Ukraine, and Poland. In Asia, countries like Indonesia, Thailand, and Australia, South Korea, and Taiwan performed impressively.

In China, the second largest beauty market globally, L'Oreal's Luxe segment grew by double digits though the Consumer Product division was a bit slow owing to the glitches faced by its 2014 acquisition, Magic Holdings. However, it still maintained its leadership position in the e-commerce channel in China.

2016 annual lrlcy

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Have more questions on L'Oreal? See the links below.

  • What Is L'Oreal's Fundamental Value On The Basis Of Its Forecasted 2015 Results?
  • How Has L'Oreal's Revenue And EBITDA Composition Changed Over 2012-2016E?
  • L'Oreal: Year 2015 In Review
  • What Is L'Oreal's Fundamental Value Based On 2016 Estimated Numbers?
  • L'Oreal's Q1 2016 Earnings Results
  • How Did The Top Two Beauty Companies Perform In The Fragrance Segment Over The Last Five Years?
  • How Can L'Oreal's Digital Investments Help The Company?
  • Who Relies More On Debt: L'Oreal Or Estee Lauder?
  • What Are Some Of The Trends Expected To Drive The Future Of The Beauty Market?
  • Why Might L'Oréal Be Acquiring Luxury Perfume Brand Atelier Cologne?
  • How Is L'Oreal's Revenue Composition Expected To Trend?
  • How Is L'Oreal's Skincare Business Expected To Trend?
  • Why Does L'Oreal Want To Acquire The Skincare Brand, Société des Thermes de Saint-Gervais-les-Bains?
  • Here's Why L'Oreal's Digital Progress Places It Way Ahead Of Its Peers
  • How L'Oreal Stands To Gain From The Growth Of The Global Hair Care Market
  • Here's How L'Oreal Is Gaining Competitive Advantage With Its 'Beauty Squad'
  • L'Oreal Makes Haircare Go Digital With Its Latest Launch
  • Why Did L'Oreal Decide To Acquire Three Active Cosmetics Brands From Valeant For $1.3 Billion?
  • Here's How L'Oreal And Founders Factory Are Taking Their Partnership Forward
  • What To Watch For In L'Oreal's Q4 2016 Earnings

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for L'Oreal

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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