L'Oreal sales rise slightly, but US challenging

By Dominique Patton

PARIS (Reuters) - L'Oreal reported a rise in first-quarter sales on Thursday, beating expectations for slower growth, as strong demand for its creams and perfume in Europe helped counter challenging conditions in the United States.

The French group, which makes Maybelline mascara and Kiehl's skincare, posted like-for-like sales up 3.5%, though they were inflated 2 percentage points by advance shipments to China ahead of a change in IT systems.

Growth of 1.5% still beat a Visible Alpha consensus of 1.1% cited by analysts at Jefferies.

"This is a decent update in the context of anxieties," the analysts said in a note, pointing to concerns after luxury group LVMH reported slower growth at its beauty retailer Sephora in the quarter.

L'Oreal's U.S.-listed shares gained 6% in New York trading, while shares in U.S. rival Estee Lauder were up 3.4%.

L'Oreal has outperformed the global cosmetics market in recent years with products that span mass-market makeup to high-end perfume and doctor-recommended lotions.

But after weathering a protracted slowdown in number two beauty market China in recent years, it is facing weakening consumption in the largest U.S. market too, one it had targetted for growth this year.

"The market did not exactly start as we were hoping," CEO Nicolas Hieronimus told analysts on a call, though added it was too early to adjust his forecast of 4 to 4.5% global market growth.

L'Oreal's North America sales fell 3.8% in the quarter, compared with growth of 1.4% in the prior three months, dragged down by sluggish makeup demand.

With growing unease over escalating trade tensions, U.S. consumer sentiment deteriorated sharply in April, which typically hurts spending in any category, said Hieronimus.

L'Oreal, which imports 30% of its product in the U.S. from Europe and elsewhere, will also need to raise prices to mitigate the impact of President Donald Trump's tariffs, though the company has built up some stocks, delaying any impact until the second half, said the CEO.

He also flagged "slightly better than expected" performance in China, which was "flattish" compared with negative at the end of last year.

All other regions grew, with Europe, accounting for a third of revenues, the largest contributor to sales that reached 11.7 billion euros ($13.30 billion) for the three months to the end of March.

($1 = 0.8795 euros)

(Reporting by Dominique Patton. Additional reporting by Chuck Mikolajczak; Editing by Kirsten Donovan, Chizu Nomiyama and Anna Driver)