L’Oreal announced a 2.4% increase in second-quarter sales on Tuesday but missed market predictions because European markets remained weak and Asian travel retail outlets showed limited growth. The company generated €10.74 billion ($12.38 billion) in revenue which fell below the Visible Alpha consensus forecast of 2.9% growth.
The company achieved 3.7% underlying growth after removing the effects of its IT system changes. The global cosmetics market shows a significant slowdown from its pandemic-era peak according to the recent financial results. The European production base of perfumes faces increased margin pressure because of rising costs and new U.S. tariffs.
CEO Nicolas Hieronimus expressed his disapproval about the U.S.-EU trade deal which imposes a 15% tariff on European cosmetics. The company will pursue EU-based exemption procedures according to Hieronimus who stated that the new tariffs will be expensive.
The company evaluates additional price increases and factory relocation to its U.S. facilities but maintains a wait-and-see approach until trade negotiations advance. Jefferies analysts predict U.S. fragrance sales will experience a decline during the second half of 2025.
The current fragrance revenue growth at double-digit rates does not deter Hieronimus from acknowledging that price increases will test how customers respond to price changes. The company remains vigilant about market sentiment while dealing with the uncertain economic conditions and trade environment.
