L'OREAL (OR) Q1 2026 Earnings Call Transcript

evening to you all thank you for joining us on this call for our first quarter 2026 sales as always i'm here with nicola ironimus our ceo good afternoon christophe babul our cfo hello good afternoon and laurent schmidt our head of corporate finance and financial communication good afternoon nicola will make some brief opening remarks and we will then go straight to q a over to you nicola okay thank you ever so good evening to you all um as you could see in our numbers, we're off to a good start.

Our like-for-like growth adjusted of all IT transformation impacts between last year and this year, which we estimate to be have been gaining share in all regions and divisions. It was driven by the further acceleration in our innovation rates as we launched several new products. This allowed us to phrase hair care and makeup, strongly outperforming e-commerce, particularly in emerging markets. Even if we are wary of the potential impacts of the Middle East conflict, we are optimistic about the outlook for the global beauty market, which has shown no sign of slowdown to date. And we are confident in our ability to outperform it, because most of our 25 and 26 innovations...

Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Please use your handset before asking your question and set your microphone on mute once you have asked your questions. The first question comes from Celine Panouti with JP Morgan. Please go ahead. Sorry, sorry. The next question is from Guillaume Delma of UBS. Please go ahead. Sorry, Miss Celine Panouti, JP Morgan is now on the podium. Please go ahead.

Good evening. Can you hear me?

Yes. Good afternoon, Philippe.

All right. Great. So thank you for taking my question. So clearly a very strong start to the year. You said that the market has continued to show a good progress at 4%. Can you talk about what you see? You said you were potentially wary about the impact of the geopolitics, what you could see in terms of potential impact in travel retail as well as maybe you mentioned, I mean, Middle East seems to have been a small weakness. And, yeah, that would be my first question. My second question on emerging markets, clearly it was a strong beat. SAP mean accelerated and we also see that China did very well if you could give us you know like still on you know the durability of that growth and maybe maybe a colary to my first question that I should have asked is whether you know what you see in terms of the momentum having started so well I mean you were talking about acceleration at the end of last year how would you characterize the rest of the year for L'Oreal Okay, thank you.

First thing, because...

Worry, yes. That's what I said, but maybe my pronunciation, same.

I'm conscious about the incontenties that lie around this country.

Apparently, no one can hear the webcast. Only the people on the line can hear you, so you know no one can hear the webcast.

I will make sure we fix the intermediary. Let's wait.

I think they're putting a line that people can call on the website now. I think we answer the questions. People will have access to the webcast, so I think we can go ahead.

All right, so we continue with the momentum because I'll talk about the emerging. As the momentum is concerned, I would say two things. The first thing is that Q1 was from last year to account, as well as the upside is that all the news we have today from our sell-out are very positive. So we remain confident. And for emerging, you mentioned China in the emerging. So it has emerged a while ago.

But it's true that the market has continued to have been driving the growth.

As far as the market was, as I said, somewhere between plus one and two, and we were in mid-single digits. As far as SatMina is concerned, the market that is no inventory building, with some markets that are very dynamic, like Vietnam, India is doing America, which was a Q1 was our issue.

Super. Thank you so much. And it seems the webcast is on, so yes, thank you.

The next question is from Warren Ekeman of Barclays Bank. Please go ahead.

Hi, Nicola, Christophe, Eva, it's Warren here at Barclays. Can you hear me?

Yes, and we do apologize to all the people connected that couldn't hear the beginning of the call. There was apparently a technical glitch, which I sincerely apologize for.

Okay, thank you. So I've got one housekeeping question and then two main questions. The housekeeping for Christophe. Can you just clarify the phasing issues? There's been a little bit of confusion just on the 6.7 and the 4.3. Just what is the actual real underlying underlying? That would be great. And then my main question is, Nicola, can you talk about the skincare market? At Cagney, you said it was one of your biggest priorities to improve performance around brands like Longcombe. It seems like there are some green shoots. what's happening to the skin care market and you know how happy are you with your innovations and attraction and what can we maybe expect for skin care overall this year given it's your single biggest category and then the second one really is could you maybe just outline the strength in europe it was very strong at the end of q4 and that strength seems to be confirmed in the first quarter what are you seeing is that is it your market share your innovations driving that continued outperformance and do you feel good that that can be sustained for the balance of the year thank you of course what's happening on

the IT transformation as you know it's very important to create this common backbone so we are going forward with this big project and we have noted that But in the press release in the page 2, we have put a new column that gives you the adjusted growth. So the adjusted growth takes into account all the transformations that we had last year and this year. So that's why from the reported LIFOLI growth of 7.6 percent, there is a negative adjustment of 19 basis points, 9-0, and therefore the underlying or adjusted LIFOLI growth is 6.7 And this is linked to a minus 340 basis points from the IT transformation in Q1 because we started Australia, UK, and we are starting with the U.S. And last year, a plus 250 basis points from the IT transformation of Q1 of last year. Net is minus 90, and you have it on the page two of the press release.

Yes, it's clear. Thank you.

A number of the launches that we've either put on the markets at the end of last year, like Garnier Stokes Eco, which was a Brazil success and now is being rolled out in Latin America and Mexico, but also in Southeast Asia, is showing promising starts. We have new launches on L'Oréal Paris, which are starting well, too. The market, the energy cream, the new keel. Add to that the fact that the mixa divisions, which have not, you know, materialized right now in the . Europe is concerned. CeraVe has become the number three in our consumer studies, that they may cut on high expense, high value items, but full climate and a psychological buffer, and we see it in several categories. So good performance in Europe. It's driven, as previously, by a star in Europe. So our DAH business is Germany, Australia. It's pretty solid, the market to continue.

That's super. Thank you, both.

The next question is from Jeremy Fialco of HSBC. Please go ahead.

Yeah, hi there, Jeremy, HSBC here. thanks for taking the question. So a couple from me. So the first one is maybe we could just go into professionals. So that was just a massive pickup from where you were, I guess, over the last sort of six, seven, six quarters or so. So perhaps you could just talk about what was going particularly well within that division. And again, any elements that you think might not be sustainable or whether you just think you've got a template that's working really well at the moment and can be sustained second thing is on caring so you've now got that in the portfolio perhaps you could talk a bit about your sort of first steps with that portfolio and whether there's any chance of getting your hands on the Gucci license a bit earlier than 2028 thanks okay well unprofessional indeed it's been a very strong performance of the division now for I would say more than 18 months, given by really a structural transformation of the division that has happened

profoundly over the last couple of years, where the market, we're using that channel, but the big step change is that healthcare, so you have the combination of brands that have the science and the offer and the desirability that are now available to consumers even though they are premium, and a strong consumer-desired backbone, so the combination of these three factors is the perfect equation for the growth of the professional division. And I think it is sustainable because the underlying demand, we are, of course, we have I've met the teams, we will be hosting them in our offices, and of course number one will be Creed, which is already a significant business, and looking at the two beautiful brands that are Balenciaga and Bottega Veneta, and as far as the Gucci license anticipation is concern. I assume they are happening, but I have no news to have results.

Okay, thanks. Thanks very much.

The next question comes from Guillaume Delmar of UBS. Please go ahead.

Good evening, all. I've got one quick housekeeping question. I mean, for the people that were not on the webcast, and also because I missed the number, could you maybe repeat what is your initial assessment of the beauty market growth in the first quarter? And then my two questions. I mean, firstly on North America, because I think Q1 is your best quarterly performance in nearly two years. So could you maybe shed some light on this? I mean, particularly what kind of market growth are you seeing? any particular discrepancy between sell-in and sell-out in the quarter? And then looking at the four divisions, I mean, where are you seeing the most significant outperformance? And then my second question, probably a question for Christophe. I mean, early days, but to what extent your commodity and logistics cost outlook has already changed? I appreciate you've got high gross margin, productivity savings, So historically, you've been really good at rapidly mitigating these headwinds. But could you also consider some pricing actions in the back half of the year, should these higher prices persist? Thank you very much.

Market growth. And again, apologies. The markets in the first quarter to be shy of 4.6. So it's reason why, on one hand...

On the impact, first, let me give you also a flavor on the structure of the growth because I think it's important. So, we have both for the values there also, as you can imagine, the first part of the half we have a negative impact linked to the tariffs, we have a negative impact on the gross margin for the first half, but we are trying of course to mitigate, to mitigate the impact with different aspects. As you can imagine, we have on one side the negative cost, additional cost on the logistics and also indirect additional costs potentially on the sourcing of some materials, mainly on plastics. And when we add both of them, if the oil stays at around 90 to 100 US dollars a barrel, then the additional impact could be in the range of 90 to 100 million euros. Of course, all this is being calculated based on the evolution of the prices and we will see because the biggest risk at the end will be the inflation that may come from this whole increase and if inflation of course goes up on the long term of course we may have to take some action on the pricing Later this year.

But as you know, we have this capacity to take prices up, and we have a lot of revenue growth manipulation of formats.

Very clear. Thank you.

The next question comes from Sarah Simon of Morgan Stanley. Please go ahead.

Oh, yes. Thanks for taking my questions. I have two. First one is, just can you remind us, like for like, is that assuming that what you own now you owned last year, or is it excluding the contribution of everything that's been acquired until you get to a year afterwards I'm just thinking because obviously you've got some bigger M&A coming in and then the second question it includes it includes so so if Medicaid is growing at 100% you would benefit from that in your like-for-like like-for-like we would have if they are going at a hundred percent yeah I mean Medicaid yeah well I can see it it's everywhere in the shops over here now so um second question was on mixer and the rollout can you talk about how where that's been rolled out from a from a geographic perspective and how much further there is to go thanks well mix size mostly today's motorways Great, thank you.

The question comes from Olivier Nicolai of Goldman Sachs. Please go ahead.

Hi, good afternoon, Nicola, Christophe, Eva. I might have missed this at the beginning on your remarks at the beginning, but Submeda was up 15.4%. Have you made any comments on the impact from the issue in the Middle East and if, like some of your peers in luxury, expect any impact in Q2? And then just one question, going back to Derma and the growth of CRV, which continues and a nice turnaround there. You mentioned the growth of hair care in North America for CRV. Have you reached the full distribution for your hair care range compared to your skin care offer, and how much of CRV in the U.S. is hair care today? Thank you.

I have all the details. very recent, it's growing month after month, and what's interesting is that in this line you've got both anti-dandruff and I would say normal shampoo, and both are working very well, so it's totally additional for both for TheraVe and for us. It's still a minor part of the business in the U.S. but growing, and for us, what's skin care, we've got the back end of last two everywhere, and we are just launching on TheraVe, which which is not a U.S. thing, we're just launching Suncare, would complement an impact on Q3, but I would say because the second is that Arabia assumption that e-commerce is really more and the travel retail, so it's going to impact more our L'Oreal Lux business than any other division. So, I would say it will have an impact, conflict lasts, and whether particularly tourists and and travelers are confident to go back to this region. But as far as local consumption, mid-term or long-term, it remains very strong. The women that are more and more empowered, it's pretty exciting. So today the impact exists.

Thank you very much.

The question comes from Charles-Louis Couty of Kepler-Chevreux. Please go ahead.

Yes, good evening. Thank you for taking my questions. I have two. The first one on North Asia, the market is finally rebounding in China and you are outperforming it. I'm just curious to hear your outlook for the year and to what extent you believe this rebound is sustainable. And does the fact that the luxury beauty segment is driving the recovery confirm that Chinese consumers are more inclined to engage in discretionary spendings and trade-up, in your view? And second question, on the fragrance category, there are some of your competitors, beauty in general and fragrances that are facing difficulties, and it seems to be fueling a new wave of consolidation or at least rumors of potential mergers for some. Are you still on the lookout to acquire some additional fragrance licenses or do you consider your portfolio sufficiently broad after the Caring Beauty deal? Thank you.

So first, on massive rebound, we said it's somewhere between plus one and two, but it is positive. And indeed, it's more driven by a luxury brand, but it's also true for Karastan, it's considered very positive. And I would attribute it to, we are confident on the fact that China will grow. We are conquering new consumers. That's interesting because 100 million consumers in China and we've increased it to 105 and growing 108 in tier 3, 4, 5 cities which are driving the growth and that's the combination of a couple of door openings but a penetration allowed by e-commerce and Duying in particular. So overall, we don't want to get carried away, and it remains a market which has not its old growth rhythm, but it's positive, and our brands are really good, are doing good. We are launching culture brands like France. ESOP is doing good in China, so I would say that it is positive news for us. It's a very competitive market, of course, to be ever more innovative, confident on that. On fragrance, first of all, it's true that the market, as some of the players said, has slowed down a bit. It remains positive. It's a meeting of digits. But we are really growing much faster than the market. I'm very happy that Libre has become, at the end of last year, from Saint Laurent's number one feminine fragrance in the world. We have had a lot of initiatives earlier in the year, whether it's the extensions of where you said Libre, Berry Crush, or the new female fragrance from Armani and for the Armani Power And female fragrances on Armani were always a bit of a challenge, and this one is off to a great start. So we are really firing on all cylinders on fragrances. And frankly, to your question, we are just, if I may use that term, got the keys of Caring Beauty a couple of weeks ago. And we have to, of course, integrate the team. We are not on the lookout for more brands in the fragrance.

Next question comes from Jeff Stand of BNP Paribas Exxon. Please go ahead.

Good evening everyone. Just one question, you know, we, in the earlier question, referenced that potentially we're going to see meaningful consolidation in the industry. And my questions are, A, what do you think that says about the industry, if anything? And secondly, would Would you expect this to be the sort of first move and potentially a chain of consolidation? Or is it your expectation this is a sort of one-off event? Thank you.

Well, you know, the second is that one of the winning factors, so not the only ones. You have to have the innovation power, you have to have the agility, the culture, doing things is also a success factor. So I don't know whether there's going to be more.

The question is from Robert Ottenstein of Evercore ISI. Please go ahead.

Terrific. Thank you very much. I'd like to drill into the China market a little bit more and parts of your business there. I think you said that in the quarter, China was up 1% to 2% and continues to show rebound, sequential rebound. Can you maybe just give us a little bit more detail in terms now of how that market splits between online and offline and how each of those channels is doing? You also then mentioned that Prestige or what you're I think now calling Selective was doing much better. Perhaps maybe just tell us how much better, or at least how the market is doing in terms of prestige growth versus mass, which we think is down. And then my last question, again, related to China, I'd like to understand better the development of the Helena Rubinstein brand there. From the data that we've seen, I think there was an initial Helena Rubinstein brand that started off very high-priced and then came down, but then you've, I think, launched another very high-priced, very premium Helena Rubinstein brand. I think that's the PX50. So maybe if you could talk a little bit about the strategy around Helena Rubinstein in China and how that's doing. Thank you.

You're right to say that the mass market is slightly negative and that the other, whether it's luxury or dermatology, are growing more in the mid-single So that's what we see today on the market, and we've had really a strong momentum in luxury. And when I was referring to selective or prestige brands, I was including, you know, in some of our other divisions like dermatological beauty or professional, we have brands that are more premium, Kerastase or SkinCeuticals, and they are doing particularly well in China. As far as Helena Rubinstein, there's absolutely no change in strategy. There was one a decade ago when we decided to reposition that brand, which was a brand that was multi-category, doing makeup and even fragrance into a brand focused on, of Of course, the night cream, which had 30% proxylane, was the number one in China in value before, and what we did there, you're right, we launched a more premium one on top, which was called PX50, that has got 50% proxylane, which we launched in the fall of last year, and that cream is indeed on the most half-launches, there are no equivalent, and I was talking about offline help the desirability so so no change in strategy just a confirmation that on brands such as Helena Rubinstein you have to go with superior quality superior service and demanding Chinese and affluent consumers are creating for it and can I just say that we are again apologizing for this technical issue and the webcast will be available in 15 minutes so you will all have access to the full call in 15 minutes thank you very much thank you