Welcome to the conference call regarding L'Oreal's sales at September 30, 2021. The conference is about to begin. I will now hand over to Ms. Francois Doulan. Madame Doulan, please go ahead.
Thank you, Philippe. Good evening to all. Thank you for joining this conference call for the release of L'Oreal sales at the end of September 2021. On behalf of L'Oreal, I'm pleased to welcome our Chief Executive Officer, Nicolas Hieronimus.
Good afternoon.
And our Chief Financial Officer, Christophe Babule.
Hello.
We hope you received and read our press release, which was sent out a short while ago. Let me briefly share with you the highlights of this release before we move to the Q and A session. At the end of September, sales 15.3 percent to EUR 23,200,000,000. The change in the scope of consolidation was positive by 0.8%. It.
It consists mainly of the first time consolidation in 2020 of Mugler and Azaro Perfumes of the U. S. Skincare brand, Tayo's Natural Remedies and in 2021 of the Prada Beauty license and of the Japanese premium skincare brand, Takami, Marginally offset by the termination of Clarisonic brand in 2020. Foreign exchange Had a negative minus 3.5 percent impact, mostly linked with the decline of the U. S.
Dollar, of the Russian ruble, the Brazilian real and the Japanese yen. Note that extrapolating the end of September currency rates against the euro, I. E. With the euro at around USD 1.16 until year end would lead to a negative currency impact Of minus 1.9 percent over full year sales. On a like for like basis, growth came to a strong 18% at the end of September.
Turning to the 3rd quarter figures. Sales advanced 13.6 percent on a reported basis to EUR 7,996,000,000 after taking account Of a positive 0.3% impact of the changes in the scope of consolidation and of a positive 0.2% currency impact, like for like growth came out at +13.1percent over the Q3 of 2020, which was marked by L'Oreal's return to growth. Hence, over 2 years versus 2019 on a comparable basis, Growth accelerated quarter after quarter since the beginning of the year with plus 5% in the 1st quarter, plus 8.4% in the 2nd quarter and plus 14.9% in the 3rd quarter, Leading to plus 9.3 percent over the 1st 9 months. All divisions recorded like for like growth, both in the Q3 and at the end of September. The Professional Products division posted another quarter of double digit growth and ended the period at +28.7 percent.
The Consumer Products division recorded 5.2% growth over 9 months. The division is almost back to its pre pandemic level on a comparable basis after 2 year comparable growth of plus 4% in the 3rd quarter despite its heavy makeup footprint. L'Oreal Luxe remains ahead of the race at +30 4.5 percent. All regions contributed to growth. Europe grew by 10 point 3%.
North America achieved an excellent third quarter and ended the period at +23.1%. North Asia posted Strong growth of +22.6 percent. In a challenging public health environment, L'Oreal China continued double digit growth in the 3rd quarter, sustaining a high comparable 42.8% growth over 2 years. SAP MENA SSR increased 13.6% with the 3rd quarter affected by COVID resurgence in some Southeast Asian and Pacific countries, while India showed a sharp recovery. Latin America Sustained its rapid pace at +25.8 percent.
E Commerce posted once again strong growth, up 29 point 7% like for like at the end of September to 26.6% of total sales, while in store sales also recovered. Meanwhile, we pursued on our sustainability journey. We are proud to announce that in September, L'Oreal has been confirmed as a United Nations Global Compact Lead Company for the 7th consecutive year and that L'Oreal USA, our largest subsidiary, has reached carbon neutrality for scopes 12 emissions for all its 25 manufacturing, distribution, administrative and research and innovation sites. Thanks to relevant strategic choices, strong investments in our brands, offensive launches Cutting edge innovations and agility of our teams, L'Oreal continues to significantly outperform And all regions contributed to a well balanced growth and a strengthened dynamic. In an environment that is still marked by some Our Q3 performance reinforces our confidence and leads us to confirm that in 2021, we will achieve growth in sales and profits.
I thank you for your attention, and we are now ready for your questions.
Thank you. We have a first question from Bruno Montane from Bernstein. Please go ahead.
Hi. Good evening, Nicolas. It's very hard to come up with scrutinizing questions After such a release, I'm almost tempted to congratulate on the numbers. Now in terms of trying to ask some questions, First of all, there's been a lot of discussion about the slowdown in beauty in China, particularly online. That is hard to see in the numbers you've published, But is there any element of the exit rate in China starting to slow down, particularly online?
And the second one, U. S. Growth was clearly exceptional. Do you really think that America can be equal partner in growth as China has been for the last few years, so you would have 2 big engines on growth? Or is that too much to aspire to?
Thank you.
Thank you, Bruno, for your question and your quasi congratulation. I do take it with great pleasure, and I will obviously answer your questions. Just maybe a quick overall overview, and I'm going to dig into your specific Chinese and Americas questions. But The good thing is that I think we continue to see the recovery of the beauty market. We do not have accurate numbers, but we estimate the beauty market growth to be at plus 10% after 9 months, getting closer and closer to its 2019 results, which we think will happen by year end, and we are at +18%, significantly beating the growth of the market.
And as we said after FirstStaff, it's still a grand slam, all divisions, all regions and all categories as it relates to over performance. Considering China, it's clear and it's been said and commented that there has been turbulences over the summer, which are mainly related to COVID cases resurgence, which has led to the lockdown of over 40 cities, 45 cities in China, store closures, limited travel. And that has slowed the market down, which has not prevented us from achieving a double digit growth, as Francois said, and having a Q3 over 2 years at over 40% growth. It's mainly a brick and mortar slowdown. E commerce has remained dynamic in China.
It's fair also to say that the beauty market is the weight of this Q3 in China is significantly lower than other quarters. And as you know, Chinese consumers tend to more and more wait for the big festival. So there was 618 just before that quarter, and now they're gearing up to Double 11. So it was mainly a brick and mortar slowdown. The market size is now huge, and we continue over 2 years to see tGrow.
So overall, I'm not worried about China. All the more as all the long term fundamentals of that market are extremely positive. As we've discussed before, the projections in terms of middle classes and upper middle classes are Quite spectacular. I was looking at the number. Today, there's around 850,000,000 upper classes people in upper in the middle classes, sorry, in China.
There's going to be another EUR 300,000,000 more by 2,030. So that's a third more and that's spectacular. And if I take the upper classes, Which are smaller in numbers, from EUR 5,000,000 to EUR 16,000,000, they're going to be developing. So it's a huge market potential. Spend per capita will increase.
And as we discussed in some of the roadshows that we did over the summer, the vision of the Chinese Premier of Common Prosperity, which aims making the middle classes wealthier and bigger is very positive for us and for beauty, which is a category that contributes to these consumers' well-being. So we remain very confident for China despite the summer turbulences. And as far as the U. S. Are concerned, you're right to assume it is the 2nd growth engine.
For many years, it was a big growth engine for the group. We had a couple of years where we're not super happy with our results. So we did the transformations that needed to be done, which were mainly rebalancing in terms of channels, categories. And now we have our 4 divisions really beating the market and growing when if we take a year ago or 2 years ago, it was mainly professional and active cosmetics. So and the U.
S. Economy is very dynamic. So our intention is really to have these 2 engines, which are about similar in size to really drive the growth of the group for the years to come. So overall, pretty positive and confident for the future of China as well as for the U. S.
A.
Congratulations and thank you.
3.
Our next question is from Celine Pannuti from JPMorgan. Please go ahead.
Yes. Good afternoon, everyone. My first question maybe, if we stay in the U. S, The number was really amazing, 22%. Could you say whether there was Sell in, sell out differences.
I remember that in Q1, you had issues with the supply of the materials. So has there been a catch up or have you been maybe some of your customers eager to build inventory when There is a bit of a supply constraint overall. So that will be helpful. And yes, if you could give us a bit of a steer, that 22%, what which categories did better and which did well, still very well, but maybe less well than the average. Maybe coming back to China, could you talk about, Enen, what kind of growth have you seen in the quarter and effectively you've seen the improvement through the end of that quarter or maybe as well as putting that in the context of Travel Retail.
And just to finish on China, thank you for giving us this middle class number and clearly the opportunity. What is your thought about the impact of the changes that the country is going through in terms of confidence, consumer confidence in the very short term and as well go to market and the ability to use celebrity or fandom culture that seems to have been cracked down. Thank you.
That's a lot of questions, and I hope I can remember them all.
4. U. S. And China. Yes.
Yes. But then there's other sub questions are pretty detailed. So let's Take them 1 by 1, and I will speak under the control of Christophe. Overall, there's no sell in, sell out difference in the USA. In the actually, in there are several divisions where sellout is superior to sell in.
It's the case of CPD, where there was some destocking plus some, as you said, some supply shortages, same for Active Cosmetics, where we have we still are trying to running after the demand of CeraVe, which is again over plus 68%, I think, year to date. So there's no restocking. Professional, The market has reopened for a while. There might have been a couple of salons taking some extra inventory, but I don't think so. The only division where traditionally Q3 sees restocking, but it's the same every year.
It's luxury Because most retailers are buying their fragrance inventory to be ready for the holiday season. So there's probably on L'Oreal Luxe a slight extra sell in versus sell out, but nothing material and nothing unusual. So It's really the acceleration of all four divisions. They're all gaining shares above 2019 level for most cases. We keep on having the Professional division NACD, extremely strong Active Cosmetics, extremely strong in the U.
S. A. In the U. S, spectacular. And what's new this year is that we both have L'Oreal Luxe, which is benefiting from its reorganization, The cutting the long tail of our stores in the U.
S. And focusing our resources both on online and on the best performing stores. So that That's really productive. You have makeup starting strongly more on CPD side, and we have a fantastic performance in fragrance in the U. S.
The fragrance market overall is bouncing back pretty strongly globally. It's a market that's close to plus 20, And we are growing at the group level over 40%. So that's global. And the U. S.
Is the part of the world where this Market share gain and performance in fragrance is the highest. And we have, as I said, CPD It's really accelerating, gaining share in skincare, in progressing seriously in haircare. And we have We're benefiting on makeup, both from the rebound of the market. And the makeup market in mass in the U. S.
A. It's above 2019 levels over the last period, and we are gaining share in a very spectacular manner with many innovations from the brands, from Maybelline and NYX. NYX is doing great. If I On top of my mind, 3 of the top 10 launches in the USA are CPD makeup. And by the way, I just come back from the UK, and it's out of the 10 new makeup products launched in the UK market are for CPD.
So great innovation plan. So we have all 4 engines roaring, and it's, of course, boosted by the quality of the and the dynamism of the U. S. Economy. So It's really positive on the U.
S. On China. On China, so your question was around the climate that may be generated by a number of decisions that have been taken or 1st on the Chinese market. I'm talking about I've mentioned turbulences over the summer. COVID clusters were the main ones, but we can't eliminate the idea that a number of measures that were announced.
They have created some uncertainty for within Chinese consumers. But I think this is going to not going to last for the reasons that were mentioned before. And we have absolutely as far as we are concerned, we see no issue in doing our business. You were mentioning influencers or celebrities being challenged in China. We have many brands.
We have Lancome, L'Oreal, Paris, We use influencers like everybody, but we do not rely on the one big star that's under contract or that makes or breaks our brands. So we are today, we are our go to market in China is exactly as it is. Our teams are in the presale period of Double 11, which is off to a good start. So we can't predict what's going to happen, but we are carefully optimistic for that. And there's no reason to be worried about the measures of China.
And as I said as I told Bruno, I think the desire of the Chinese authorities to share the wealth and to increase the size of middle classes is something that we it should benefit us. And finally, as Hainan is concerned, if I'm correct, it was your last question. Hainan, like China had a bad Q3 in terms of traffic. Traffic was down. The hotels occupancy rates We're down.
So it was not a great summer for Hainan. But since then, we've had the Golden Week. And Golden Week in Hainan was very buoyant. It's slightly outside Q3, but We see that the total duty free sales in Hainan increased by, I think, over 60% with number of shoppers that more than doubled. So it seems that the appetite as soon as the COVID restrictions I ended the appetite both for traveling where they can.
Right now, it's only Hainan. And to shop beauty remains intact at least for part of Travel Retail Asia. I hope I did not forget anything.
I forgot to tell you congrats for this quarter. Thank you.
Thank you very much.
We have a next question from Guillaume Delmas from UBS. Please go ahead.
Good evening all. So two questions for you, please. But before my two questions, just a housekeeping one. If you could provide us with your like for like sales growth by product category. That would be very helpful.
And then my two questions. So the first one on value growth. Could you give us a feel for what value growth was in Q3? And what I'm more interested in is, Have you seen an increasing contribution from pricing and mix since the Q1 of the year? Because I mean historically at L'Oreal, my understanding is that mix is the main driver of value growth.
But are you also now implementing maybe more proactively some pricing actions as well to mitigate the cost headwinds? And then my second question is on the makeup category. Could you shed some light on where sales are in the makeup Category versus 2019. Nicolas, you said that it was ahead in the U. S, but on a global basis, are you ahead as well or slightly below 2019 levels still.
And I guess the big question, does the recent development of the makeup category make you more confident about an imminent makeup boom? Thank you.
Okay. So I will we'll start with the valorization question, which I'll happily hand over to Christophe Babule, and I may add a little bit of icing on the cake if necessary. But Christophe, I'll let you
So as you know, we've been valorizing, in fact, thanks to different components, different elements. And first, I want to reassure you that we are using all the levers when it concerns valorization. So End of September, we have both equally Valorization, both in terms of mix within divisions, but also Valorization in terms of by product. So within the division, we have also been selling a more valorized product. And we don't forget also to price.
So close to 1.5% as of today and even a More in the Q3. So we are above 2% on pure pricing regarding the validation or the rest is the mix. So as you can see, all elements are going into the right direction.
And maybe as far as offsetting the inflationary pressure that you were referring to, We can say 2 things. First of all, in our considering the structure of our P and L with over 73 And the relatively low weight of this of the most inflationary components today such as palm oil or even plastic. We do not see at the global level a material impact. However, it is true that The inflation in cost of some of these materials, plastic, palm oil, etcetera, will impact a bit more our Consumer Products division, Which is the one that has is more concerned by these elements. So they will, for 2022, half to compensate these inflationary pressures with a blend of price increases and what we call revenue growth management, which is a blend of formats and promotional strategy.
And the sum of all these should allow us to offset these elements, these negative elements. As far as categories are concerned, so there are 2 questions. Overall, our if we take our Year to date 2021. As I said earlier, on Fragrance, we had plus 40% over a market that we estimate at plus 15%. On skincare, we are at +20 ish, a bit more on On makeup, and then I'll go back to the comparison with 2019.
But on makeup, We're close to plus 15% on the market at plus 9%. And on hair, which is a blend of hair color and hair care, we are at plus close to plus 12 on the market that we estimate around plus 7. So that's the global picture Where we'll be seeing the market and within hair color, if you want to give a little bit of detail, there's a rebalancing between Professional and Mass Market. Last year, we had great growth in Mass Market when salons were closed. And as women are going back to hair salons, It's finalizing our CPD and helping our Professional division.
As far as makeup is concerned, the makeup market remains overall double negative versus 2019. And we remain also negative versus 2019, better than the market, But still, we are below the levels of 2019, and There are a few exceptions. Like as we said, we are getting progressively positive in mass in CPD, so in the mass market. But overall, the markets remain negative. What we see is that the eye categories are doing great and that Still as long as the masks are worn, lips and even foundation remain a bit more difficult even though we had many great launches in that arena.
As far as the future is concerned, I remain very confident. We saw in China good numbers. We've seen in mass market in the U. S. A.
When we come up with the right innovations, good numbers too. So and in China, the market is significantly positive versus 2019. So when people go back to normal life, they go back to makeup and they go back to lipstick. And we'll have, as we always do, to tempt them with new ideas, new initiatives, and we have a few in the bags for the end of the year And for 2022. So I remained makeup, as I often say, it's a very cyclical category.
We were in a down cycle. We had COVID. And now we hope that with the return, which I wish to be as soon as possible to to normal healthy life mask free. I'm confident that makeup will go back to above 2019 level. Thank you very much.
You're welcome.
Thank you. Our next question is from Tom Sykes from Deutsche Bank. Please go ahead.
Yes. Good evening, everybody. Thank you. Firstly, just on North America. You mentioned before the channel reorganization, but I wondered if you could just talk about the importance of online and particularly offline growth in the recovery and perhaps the importance of Beauty stores, maybe more so department stores and in particular to the categories which have rebounded quite strongly in terms of makeup and fragrance.
Does that at all limit the operational gearing that we may get out of the North American recovery? And then just a question on China, given potentially some of the regulatory changes It may be lending via tech companies. Are you able to say how much of your e commerce business in China Involve some sort of short term credit offered at point of sale, please.
I'm not sure I understand I apologize. I'm not sure I understand the last question. Can you maybe elaborate or?
Yes. It's just whether payment via short term credit Is an important factor in your e commerce sales, particularly in China, and where those may be being looked Be a little bit more limited in terms of their growth by the authorities.
No, we haven't seen any of this. To answer quickly to the last question, we haven't seen any problems around credit On our e commerce sales in China, I don't know if it's too much elaborating. No, I
can tell you that first, it's not a practice in China. Contrary to the U. S, usually, when it comes to that kind of purchase, it's mainly cash. And when I see the growth of e commerce on the Q3, which is in the range of 73 70% over 2 years. So it gives you an idea of the speed at which Online is still flying in China.
So probably a bit slower than Q1 or Q2, but still extremely dynamic.
Okay. Thank you.
And as far as the U. S. A. Is concerned, our growth is driven by, I would say, 2 phenomenon, the reopening and therefore, the acceleration of brick and mortar Without any impact, no negative impact on e commerce sellout. Brick and mortar accelerates year to date Q3 at plus almost plus 27 versus 20 20 and positive versus 2019.
And our e commerce sales continue to grow And have not been slowed down. So it's and we see, of course, different consumer behaviors, people that tend to work from home a bit more on e commerce. It's clear that the brick and mortar doors of mass market Have accelerated a bit more with the return to work, whereas if we take some department stores And specialty stores, they are recovering a bit slower, although they were close to their good comparatives. And as I said in the earlier comments, we also have refocused or sharpened our distribution footprint in the U. S.
A. We closed over 1,000 doors of the long tail of luxury distribution, so many small department stores that were not really productive. So that's also allows us to invest in, I would say, in a more effective manner to drive our brick and mortar. So we have the 2 channels growing in the USA.
Okay. Thank you.
You're welcome.
Our next question is from Olivier Nicolai from Goldman Sachs. Please go ahead.
Good afternoon, Nicolas, Christophe and Francois. I've got two questions, please. First, a follow-up on China and Henan. Could you please give us more details on your typical customers in Henan and if there is a high proportion of taigos among those. And also if you believe that The Henan sales are actually mostly incremental to the rest of your Chinese business or if it's actually there is a bit of cannibalization.
And then secondly, on L'Oreal Luxe, you flagged the exceptional growth of Absolut by Lancome. I think it's one of the first time that you flagged this. So Could you perhaps give us a bit more details on the driver behind the growth of this super premium skincare? Thank you.
Okay. So on Hainan, I will start with the second part of your question, which This is incremental or cannibalizing our business in China. What is clear today is that a lot of the Chinese consumers or Daigus sometimes We are traveling outside China, whether to Hong Kong or to Korea or to other parts of the world to buy products at a more affordable price are now all going to Hainan because it's the only place where they want to go. And it's kind of Hainan is a bit the new Hong Kong as we speak. The good thing is that Hong Kong is accelerating again with the progressive lift of measures, but of Sanitary measures.
But so Hainan is concentrating the Chinese consumers that are that we're buying elsewhere. So So it's not cannibalizing the domestic sales of L'Oreal China. It's replacing sales that were done outside China, Knowing that overall, as the population and the middle classes are increasing and their appetite for beauty is not satisfied, The size of the Chinese cake overall continues to increase regularly. And as far as The proportion of Daigou's is very hard to tell, and I have I would not be able to give you a number. What's important maybe for you to know, I think it's is that we are valorizing strongly our prices in Travel Retail.
It's a strategy that we've embarked upon over the last 2 years to reduce the price the price gap between our Travel Retail prices. So we've increased our net prices for Travel Retail to reduce the gap with China. And if I look at our growth, which is pretty strong in high nine in value, Our volumes are flattish because we precisely want to make sure that this is not spilling over In an uncontrolled manner. So I think it's a pretty strong and effective policy, more value, controlled volume and in the end, consumers that Probably would not have bought our products in the traditional department store of China that are looking for more affordable prices. We see there's a bit more people from Tier 34 cities where our market share is lower than the one we have in Shanghai, Beijing in Tier 1 and Tier 2 cities.
So overall, it's a good recruitment place. And it's not cannibalizing or hurting our Chinese business where we continue to 2.
And by the way, when you look at the growth YTD of Mainland China on one side, Travel Retail Asia on their side and Hong Kong, they are all flying between 25% 25% growth. So there is no negative compensating a very huge growth. They are all growing more or less at the same speed.
Thank you. And on L'Oreal Luxe and
Sorry, I forgot I've forgotten that one. Yes, It's true that skincare is the biggest category In China, it continues to grow and it's the within skincare, the fastest growing category is and it's been for a while, premium skincare. And in that domain, we have 2 brands that we have animated and in which we have innovated strongly. They are Absolue from Lancome and Helena Rubinstein, Which is a brand that we have discreetly over the years repositioned as a pure skincare premium skincare player, going out of makeup and launching high value products. And both brands are doing very well in Mainland China and obviously also in Hainan because as we all know in Travel Retail, the higher the price positioning of the product, the more interesting the savings.
So these two brands are doing well. And we have probably commented in the past on Absolut, but it's true that this year. It's a particularly good performance in the wake of a couple of interesting launches.
Thank you very much.
You're welcome.
Our next question is from Rogerio Fujimori from Stifel. Please go ahead.
Hi. Good evening, everyone. I have two questions. The first one is on Asia. What's the current situation at the start of Q4 In markets like China, Japan, Korea, which were all penalized during the quarter by COVID related restrictions.
What I mean is how the store opening rate In this case, in markets at the start of the quarter compared to the Q3 average brick and mortar opening rate. And then my Second question is more generic on the promotion environment for the consumer division. Was there any change in trend in Q3 versus the first half? So do you see any of your key markets experiencing becoming a bit less promotional to offset the industry cost pressures? Or have you seen any of your key Western markets getting a bit more promotion as life gradually normalizes?
Just trying to get a sense of competitive spending trends for CPG. Thank you.
On so as far as Asia is concerned, It's a bit early to say much about Q4. What I can say is that Korea and Japan, which were under very strict lockdowns over Q3, are progressively reopening their stores. So we see we have I mean, the news are positive, but I have no numbers to to give you and what we the only thing we can say is that in other countries, we've seen that when stores reopen, we don't see a slowdown or a major slowdown of e commerce. So pretty positive. I think Korea, Japan can only get better in Q4 versus Q3.
3. And as I said earlier in China, that China It's really in the preparation of Double 11. Presales are okay, and we'll We'll see what's coming. Hong Kong is doing good too, and I have no news on Taiwan. So the overall Greater China Plus North Asia is doing is seems to be correctly oriented.
Yes, if I may, I think it's very early to say today. As you know, Japan was in a lockdown till October 1. So it's a bit too early to comment on the recovery. And of course, the big, big thing will be the 11.11 operation in China for which We have good confidence on the first elements that we have on hand. So
And as far as the mass market is concerned, I mean, most of the changes in dynamics between Q3 and first half were more related to the situation of the pandemic in countries, India reopening, Indonesia and the rest of Southeast Asia remaining quite difficult, as I mentioned already the slowdown In China over the summer. So these are the and the very good health of the North American market. The European market remains pretty flat, But we are gaining significant shares in Europe. And as far as pricing or valorization is concerned, We see valorization of the mass market. We don't see devalorization.
We see premium hair care growing faster than the basic products, both because I mean it's the retailer's interest, but also because e commerce, And our innovations also are a source of innovation. If I take a product like the Elsevier, Dream Length, Wounds of Water. It's a valorized care product. We've launched a hyaluronic shampoo line in Asia. In China, it's doing great and now Being replicated in other parts of the world.
So overall, both through innovation and through E commerce impact, we see more valorization than overpromotionality, which doesn't change the fact that, as I said, our Consumer Products division will have to increase a little bit its prices to offset inflationary pressure in 2022, but not in a major manner.
Thank you very much.
We have a next question from Javier Escalante from Evercore. Please go ahead.
Good evening, Francoise, Nicolas and Christophe. I do need a clarification from Christophe. If you can come back to the commentary with regards to the build of growth between unit growth, price mix and actual price increases. I mean, just to give us a sense of what's happening there. And more structurally with Nicolas, I would love to hear your opinion when it the differences in e commerce in the U.
S. And China, which are the largest e commerce markets. And to what extent This promotional environment in China is detrimental to pricing. And Is that a concern? And also, what is the role of places like Amazon in terms of driving valorization in the portfolio.
Thank you.
Okay. Maybe I will start With the question regarding valorization. So when you take the growth at 18% YTD, 1 third is generated by volume, 2 third is generated by value. So that gives you already a good idea of how much valorization is strong. And within the valorization, we measure 3 components.
So one is pure pricing and then the different mix. And I can tell you, as I said before, that all 3 are positive. But for sure, the mix one is the component that is driving the biggest part in terms of growth in the value. So pretty confident that we'll keep with This pattern in the coming months.
And,
as far as And Nicolas, based on Go ahead. Sorry for that. So in that context of valorization and trade up, how does e commerce play?
Well, e commerce Globally, has always played favorably For the reasons that I mentioned is that for especially when you're dealing with pure players or even new retailers, Their shipping costs are the same, whether they ship a $10 our $20 or $50 item. So their algorithms tend to push the The best innovation and the most valorized items, and that's what's happening in the U. S. A. As it's happening in Asia and in China where the weight of e commerce is the highest for us over 50%.
We have a lot Obviously, of luxury goods that are selling on e commerce. So The e commerce plays globally in favor of valorization. And as far as promotionality, As you mentioned, it's well, it's our role to control the way we animate our brands and try, as always, to find the right balance between image, market share and profitability, and that's what we do in China as well as in the U. S. A.
And to complement on what I was saying, which is important for you to know as well is that this valorization It's positive on all divisions and in all zones. So it's really something that we measure very carefully, and it's positive everywhere.
Thank you very
much. You're welcome.
Thank you. Our next Question is from Jeremy Fianco from HSBC. Please go ahead.
Good evening. Thanks for taking my questions. Just one Quick follow-up on China and then a bigger question. Sorry for kind of laboring this point, but you've had some amazing growth in China in the last to 11.11. So I think over 40% growth each year.
Is that anything we need to bear in mind in terms of the sort of growth rate we might need to expect in 2021. Any reason for, let's say, moderating our expectations for this year? And the second question is one of the themes that we've seen in Nordea's results really kind of going back over the last several quarters Is this remarkable outperformance of the market? So it was historically growing 1%, 2%, 3% better than the market. You're now doing 7%, 8%, 9%, 10% better than the market.
And so the question is, are there elements of this huge market out that you would view as being unsustainable or is this potentially this very, very big outperformance becoming a new aspiration for the company. Thanks.
So we have 2 questions.
Yes. The first one is on the 11.11 this year.
Yes. Well, that's the one I can't comment upon. You our objectives are our objectives, and you will See, and I'll let you do your own extrapolations. But obviously, I will not give you guidance on That's something I cannot comment upon. And the other question was
On the growth relative to the
lower performance. Yes. Now over performance, I think There are several reasons to our overperformance. First of all, and I think it's important to remind this, It's the fact that in the middle of the crisis, when a lot of our competitors were folding their innovation plan, were Sing their spend. If we accept Q3 of 2020, where obviously we because we didn't know what was happening, We cut our both our launches some of our launches and fuel.
But from Q3 and onwards, we've gone full steam both in terms of launches And in terms of fuel, and that's also what we've done in the first half. I mean, when we commented on the first half result, there were a number of comments on the important increase of our A and P. And I think that's one Of the things that we are doing and we will continue to do, that's what we call the L'Oreal Virtuous Circle, is we have High gross margin and growth allows us to generate resources that we can invest In fueling the growth of our brands and their desirability, of course, we continue regularly to improve the level of profitability, but it's really a growth model. And that is a long term strategic commitment to continue to invest regularly behind our brands, behind our innovations. As you know, innovation.
It's always been one of the drivers of L'Oreal, and we'll continue to fuel all of our brands. Then there are things that are it's true that during the crisis, on top of continuing to invest, we have reorganize and rebalanced some of our activities. So I'll give you two examples. We've talked a lot about the distribution in the U. S.
A. And the fact that we've refocused in terms of channels and also categories in the U. S. A. But I could also talk about the way we've reshuffled our P and Ls, moving resources from brick and mortar to digital.
And if I take a good example, it's our Professional division, which is, as you could see, which is flying at plus 28% year to date. It's both a consequence of Becoming most more online plus offline, so having this double distribution strategy, but also reshuffling the resources within our P and L from, I would say, not dead investment, but not super productive investment to training and recruiting stylists online, engaging consumers on the social networks, and that's really transformed the dynamic of the division. And I think that's here to stay. So as it relates to the overall overperformance, It doesn't depend only on us. It's in any competition, you've got several players, and it depends on the quality of the other players.
But I think that we have strong plans, strong teams, P and L. And probably one thing that I'd like to insist upon is the our balance. We have a very balanced both regional, divisional and category portfolio. And in a world that's very unstable, being very balanced is Extremely powerful because we can always compensate, as you know, we discussed about the fact that there was a bit of a Chinese slowdown over the summer and we could accelerate in the USA. Makeup has not totally recovered.
We are accelerating in skincare. And of course, we are now running on both brick and mortar and e commerce leg. So overall, I remain confident in our ability to overperform the market. The level of over performance. Frankly, I can't neither commit to nor extrapolate because I can't predict what my competitors are going to be doing.
Okay. Thanks very much. We have the ambition.
Yes. We want to over perform and we want to over perform as much as possible. But that's not easy to
predict. Thank you very much.
We have the question from Inar Terremen from Morgan Stanley. Please go ahead.
Hello. Thanks for taking my question. How should we think about the different moving parts that feed into your profit margins this year and possibly next? I appreciate input cost inflation is Rising, but you have a very strong top line momentum here and high gross margins. Is it not reasonable to expect a very strong year when we think about profitability?
Thank you.
I'll let Christophe answer that one. As you may understand,
You are right that it's an option, but it's also our decision to decide on what we want to do with this power that we have in our P and L. And as you have seen recently, We are still over investing in growing for more growth. So of course, and Up to now, the strategy has been a winning one because as you can see, the over performance is still there, quarter 1, quarter 2, quarter 3. So if we can maintain and if our investment can still fuel that kind of growth, We'll still keep also investing. So
As we said, We have returned to our what I would call our cruising speed, our pre crisis growth rhythm and strategy. And usually, we've always had A first half profit that was always significantly higher than the second half because The later part of the year, whether it's because of Double 11, Black Friday, Christmas, fragrance, it's money time, and that's where we have to invest behind our brand. And our strategy is always to grow the cake and so that the regular improvements in profitability are, in The EBIT are, in absolute terms, getting bigger and bigger, and that's what we are trying to achieve, and that's what you should expect.
That's great. Thank you. Just a quick follow-up. Would you expect the next few quarters to continue on this path of quarter after quarter acceleration On a 2 year view, I appreciate as we get to next year, maybe that will no longer hold. But as you're looking at the next few months, are you optimistic?
Well,
it's getting a bit more difficult because last year, our Q4 was already the first quarter where we really got back to growth. We are close to plus 5% last year. So I think we are now more trying to maintain our rhythm, then continuing to accelerate it.
Thank you so much.
Thank you. We will take the last question, if there is one.
Yes, absolutely. We have a last question from David Hayes for Societe Generale. Please go ahead.
Thank you. Good evening all. So just 2 questions, please, one on active and one on the U. S. Growth.
So on the active side, you talked about Capacity constraints in the past. Is that still something you're struggling with? Is this growth that you're seeing still being limited by the fact you can't make the product Enough to satisfy the demand. And I guess related to that, the second question is on the U. S.
Growth, which obviously is pretty Stella in the quarter. Can you just give us a sense of how much of that is the active growth still contributing and then versus that With Luxury, are they both growing at similar levels and contributing at similar levels to the North American growth? Or is there still a big delta between those two divisions within the U. Thank you.
So as far as Active Cosmetics is concerned, it's true that our We continue to have a very strong demand on CeraVe. And even though things have increased, the appetite of consumers Seem to be increasing too. Our Cerave branded globally is year to date at plus almost Over plus 85%. And still very, very high growth versus even in Q3. So we are running after it, but we are getting closer and closer.
We are ramping up or we have been ramping up using other factories within the 3 within the group. So we are hopefully getting closer to being able to fulfill all the desire of CeraVe. But it's true that, as we said earlier, there's globally, because I'm talking about CeraVe, but I could Talk about La Roche Posay, who's growing over 20%. And there is this Consumer quest and appetite for products that are safe, effective, prescribed by dermatologists. And it's true that the power of this The division and the brands it carries seems to be to continue to be very strong and will continue to be very strong in the years to come.
And Christophe, you want to say a word on the U. S. Balance so that we don't comment too much in details, but maybe you want to Just to give
a hint, both divisions are growing YTD at more than 40%. So it means that As we said at the very beginning, first, there is no slowdown in the U. S. And what is very visible Is that the rebalancing of this country, whether in terms of growth by channel, growth by category and growth by division is It's really very visible. And it makes also the growth of the U.
S. Very well balance.
And clearly, Active Cosmetics is the fastest growing division in the USA. So still well ahead of the others.
Thank you.
That's as far as we go.
That's great. Thanks so much.
All right. Thank you. Well, thank you very much, everyone. And I let you close, Francoise.
Thank you We wish you a very good autumn and holiday. And for the next conference call and meeting. It will be in February. Thank you.
Thank you very much. Thank you. Good evening.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now