North America weakness hits L'Oreal sales growth

Reuters

* Q3 sales 5.48 bln euros

* Q3 like-for-like sales growth 4.1 pct

* N.America hit by retailers cutting inventories-CEO

PARIS, Oct 30 (Reuters) - French cosmetics maker L'Oreal said like-for-like sales growth slowed to 4.1 percentin the third quarter as retailers in North America slashedinventories in response to a market slowdown.

This missed the average analyst estimate for sales growth of5 percent and compared with 5.2 percent growth in the secondquarter and 5.5 percent in the first. L'Oreal had sales of 5.48billion euros ($7.54 billion) in the three months to Sept. 30.

"We started the year 2013 in the U.S. in the consumerdivision really full steam, confident that the market would bevery strong," Chief Executive Jean-Paul Agon said on aconference call on Wednesday.

"In fact, two things happened: The market slowed brutally atthe end of the first quarter due to many different factors. Andthen the retailers overreacted, as they very often do, brutallythis summer by cutting very severely inventories."

Sales growth in North America slowed to 0.6 percentlike-for-like in the third quarter from 5.4 percent in the firsthalf of the year, the maker of Garnier shampoo and Maybellinemake-up said.

However, L'Oreal is gaining share and outpacing the marketin its luxury division in the United States, Agon said. Thegroup's luxury products include Rouge Pur Couture Yves SaintLaurent lipstick and Armani perfumes.

"Overall like-for-like sales growth was well below consensusand was the lowest growth seen for almost three years, since Q42010," Bernstein analyst Andrew Wood wrote.

"We expected a slowdown in North America but nothing as badas what was delivered, which was the lowest growth since thedepths of the recession four years ago."

Growth in Latin America also slowed - to 8.5 percent from13.5 percent in the first six months of 2013 - though L'Orealsaid sales trends were positive despite the impact of a slowdownin Mexico, hit by the same issues as the United States.

Western Europe, meanwhile, achieved its best performancesince the first quarter of 2010, according to Wood, with 2.6percent like-for-like sales growth. This was likely driven bythe impact of good weather on sun care sales, he said.

Figures were good in northern Europe, while southern Europeis still proving difficult, L'Oreal said.

Agon said the economic environment remained uncertain andalso noted the negative impact of exchange rates, but heexpected the fourth quarter to be better than the third,describing the situation in the U.S. as a "blip".

On a reported basis, group third quarter sales fell 0.8percent, with a 6 percent negative impact due to thedepreciation of currencies including the U.S. dollar, theBrazilian real, the Japanese yen, the Indian rupee and theArgentinian peso against the euro, L'Oreal said.

Agon confirmed the group's targets for a further year ofgrowth in sales, results and profitability.

Shares in L'Oreal are up about 22 percent this year,outperforming a 13 percent rise in the sector index.With a market value of 77 billion euros, it is France'sthird-biggest listed company.

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