You are here

L'Oreal's Asian sales overtake Europe's for first time

Paris

L'OREAL got more revenue from Asia than from western Europe for the first time last quarter as the region's surging demand for luxury products continued to resist the drag of a slower Chinese economy.

The shift for the maker of products like Maybelline mascara and Acqua di Gio Armani cologne is the latest example of how French companies have become increasingly dependent on Asia - and particularly China - to maintain growth. Ten years ago, L'Oreal's Asian sales were less than a third of those in its home market of western Europe.

Asia's importance to L'Oreal is almost certain to keep growing as many European economies stagnate or even shrink, and as China implements policies to encourage its citizens to shop on the mainland rather than during foreign vacations or through black-market resellers. Chinese growth seems to be recovering somewhat, with 6.4 per cent growth in gross domestic product last quarter, topping economists' estimates.

sentifi.com

Market voices on:

"It's true that the growth is not broad-based," RBC analyst James Edwardes Jones said in a note to clients, "but given L'Oreal's proven ability to identify, stimulate and capitalise on those parts of the business where the most attractive growth is to be had, we struggle to find fault with this."

The results show luxury's resilience, as surging demand from Chinese shoppers fuelled 14 per cent quarterly growth for the division selling brands such as Armani, Kiehl's, and YSL. Meanwhile, some other manufacturers of products such as automobiles and electronics were hurt by a slowing Chinese economy.

"It's a real appetite of the young generation in China to go directly to these luxury brands. It's really positive for us," chief executive officer Jean-Paul Agon said on a call with analysts.

Western Europe showed some signs of improvement and could post a solid year, Mr Agon said, "but nothing that would compete with what we see in Asia."

Paris-based L'Oreal isn't the only company making French business dependent on China for growth. Leaders in the luxury industry - where Chinese shoppers are estimated to make up roughly one-third of global sales - including LVMH Moet Hennessy Louis Vuitton, Gucci owner Kering and Hermes International all figure among France's biggest companies by market value. BLOOMBERG