Investors looking for categories that are immune to economic concerns worldwide should consider the beauty market, according to L Oreal Co/ADR (OTC: LRLCY) CEO Jean-Paul Agon.
Millennials and young consumers worldwide, especially in China, have a "strong appetite" for beauty products, including makeup and skincare, Agon told CNBC. In fact, consumption in China continues to rise amid a slowdown in the Chinese economy.
Not only is the beauty market immune to an economic slowdown but it can remain resilient during an economic "crisis," the CEO said. This is evident in the company's third-quarter earnings report which showed a 7.8% revenue growth and represents the best growth seen in more than 12 years.
By segment, travel retail continues to perform "very well," e-commerce growth of 50% is double the size of the overall market while luxury products are "still booming."
Why It's Important
L'Oreal is taking advantage of the industry's strength by "fueling growth" through investing across media, digital channels, and e-commerce to reach more consumers, he said.
"Until now we tapped into a limited reservoir of consumers and the possibilities of expansion are still infinite," he said.
The company remains focused on acquiring new brands to fuel growth but management will remain "picky," he said.
L'Oreal has no intention of leveraging its momentum in luxury goods to fully transition itself away from a consumer staples company towards a luxury company. Moving forward L'Oreal wants to focus on operating multiple categories worldwide and recognizing potential market shifts.
"We are just enjoying and maximizing the opportunity right now [in] luxury and active cosmetics," the CEO said. "But tomorrow it could be different."
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