Welcome to the conference call regarding L'Oréal's sales at September 30 2022. If you need some help, please press star zero on your telephone keypad. The conference is about to begin. I now hand over to Mrs. Françoise Lauvin. Mrs. Lauvin, please go ahead.
Thank you, Jen. Good evening to all. Welcome to this conference call for the release of L'Oréal sales at the end of September 2022. On behalf of L'Oréal, I'm pleased to welcome today Chief Executive Officer Nicolas Hieronimus.
Good afternoon.
Chief Financial Officer Christophe Babule.
Good afternoon.
Global Head of Corporate Finance and Financial Communication, Laurent Schmitt.
Good afternoon.
We hope you received and read our press release, which was sent out a while ago. Let me briefly share with you the highlights of this release before we move to the Q&A session. At the end of September, sales increased 20.5% to EUR 27.94 billion. The change in the scope of consolidation was positive by 0.4%. It consists mainly of the first time consolidation of the California-based skincare brand Youth to the People from January of this year. Foreign exchange had a very positive impact of +8.1% as the euro was weak against major currencies, but for the Japanese yen.
Note that extrapolating the end-of-September currency rates against the euro or one euro at around $0.98 until year-end would lead to the same positive impact of +8.1% on full year sales. On a like-for-like basis, growth came to a sustained 12%. Turning to third quarter figures, sales jumped 19.7% to EUR 9.575 billion. After taking account of a + 0.6 impact of changes in the scope of consolidation and of a huge 10% positive Forex impact, like-for-like growth came to +9.1%.
Hence, over three years versus 2019, on a comparable basis, growth accelerated quarter after quarter since the beginning of the year, with +19.1% in Q1, +23% in Q2, and +25.3% in Q3, leading to +22.5% over the first nine months. Note that anticipated invoicing of EUR 90 million booked in the second quarter in our Asian travel retail was reversed in Q3, which had a -100 basis points impact on our third quarter growth, mostly on L'Oréal Luxe and North Asia's region. The third quarter sales also take into account an insurance benefit of EUR 94.7 million to offset the estimated corresponding loss of income following the natural disaster that disrupted operations at the L'Oréal factory in Vichy.
By division, at the end of September, on a like-for-like basis, sales of the Professional Products Division advanced 10.9%. L'Oréal Luxe posted 12.2% growth. The Active Cosmetics Division sales rose a strong 22.6%, and the Consumer Products Division accelerated to +8.7% growth after a remarkable 10% increase in the third quarter. By region, the progress in all regions provides evidence of the rebalancing strategy in terms of geographic footprint. In Europe, the group continued its swift momentum during the summer and posted strong 13% growth. In North America, sales increased by 10.8%. North Asia achieved growth of +7.4% in challenging market conditions, especially in China, where the market was still negative as a consequence of the sanitary restrictions.
The emerging markets regions continued on an extremely dynamic pace of 25.4% in SAPMENA- SSA and +20% in Latin America. All in all, a very good third quarter performance, which gives us confidence in our ability in 2022 to outperform the market and achieve another year of growth in sales and profits. I thank you for your attention, and we are now ready to take your questions.
Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. Please mute your handset before asking your question and set your microphone on mute once you ask your questions. We have the first question from Guillaume Delmas from UBS.
Good evening, Nicolas, Christophe, and Françoise. First, I've got one point of clarification. Did you include the EUR 94.7 million insurance benefit in the calculation of your Q3 like-for-like sales growth of 9.1%?
Yes. Yes.
Okay, perfect. Just wanted to clear that up. So my first, my two questions, firstly on potential areas of slowdown or maybe sources of concern. I remember at the first half results stage, Nicolas, you were flagging a soft July in the U.S. Turned out it was a bit of a false alarm. Wondering if you have seen whether it's in September or more recently in early October, some early signs of weakness. My second question is on China. Market continues to prove challenging this year, probably more than you anticipated at the end of July. How should we think about the implications from this for your upcoming 11/11 festival performance?
Also appreciate it's still early days, but do you look forward to 2023 when it comes to China because the beauty market should, in theory, be rebounding quite strongly, or would you be more cautious and maybe, you know, you're anticipating a bit of demand destruction in China? Thank you.
Okay. Well, thank you for this first question. I will answer the two questions about the concerns in China. Before answering about the concern, I would want to insist on what is a very good news for me, is that all in all, the beauty market has grown in Q3 at the same pace as it had done in the first half of the year. You know, despite all the perturbation, of course, the continuous difficulties in China with lockdown, but as you rightfully pointed out, we had not anticipated, although more as they were simultaneously happening in Hainan and mainland China.
Despite inflation in Europe, despite the false alarm in July in the U.S., actually, the false alarm was that what we saw was that many Americans were on what my team's called the great vacation. They had left the U.S. to enjoy the favorable exchange rates, which is not only helping L'Oréal, but also helping tourists come and visit Europe. When they came back to the U.S. in August and September, it was back to school, stylists, and derms. That was very positive. All in all included, we have a beauty market that's at +6%.
Probably, even though we don't have the full panels rebalancing a bit between volume and value, but volumes remain positive, again, globally. We are very happy about that. On a market that's at +6% year to date in value, L'Oréal is at +12%, so we remain at twice the market speed. That's for the positive. As far as concerns today, I have globally a lot of positive and a few, of course, a few points of attention. Some of the positives I already mentioned is the global dynamism of the markets, strong dynamism of demand in emerging markets. I mean, the markets are very dynamic, and we are clearly accelerating there.
In the U.S., I was looking at, you know, a consumer mood research that we do. Of course, we follow the panels, but we try to anticipate. What we're seeing is that overall, consumers are kind of getting used to this inflation situation, and they are considering, you know, spending money on beauty very favorably. Some categories more than others. They are very eager to spend on hair care, on skin care. Makeup, it really depends on the age groups, but it's a bit less seen as fully necessary. There's globally people getting used to inflation and intending to spend. If we look at Europe, we globally, first of all, the summer was very good.
Great summer season, both with tourism, good sun care market over the summer with the return of people going to beaches. As far as the slowdown in consumption or trading down globally, we don't see any major changes, with a few exceptions. We see that in the U.K. market, in the U.K. where, you know, the inflation is the highest since I don't know when actually.
The inflation is at 10.1% now in the U.K., which is the highest inflation for the last 40 years, and the biggest also around among the big countries.
Here we see a little bit of trading down, people spacing their visits to the hairdresser, buying a bit less premium skincare. For example, it doesn't affect the haircare category, which is continuing to grow in premiumizing. We see our overall shares are doing pretty good in the U.K. because I think the consumers we are selling our products to in most countries are not the most vulnerable to inflation, and therefore that allows us to continue to gain share. We are of course paying attention to this, to what's happening in the U.K.
If I look at France, if I look at Spain where I just come back from, we continue to see a good dynamism. What we see also is that, you know, that's the power of our brand portfolio because when the salon visits are being spaced out, home hair color goes up. When hair care is premiumizing, it benefits both the Consumer Products Division, which has launched more premium shampoos, and Professional Products Division. as far as skincare is concerned, we typically have now a very successful Garnier with the Vitamin C serum. All in all, we are able to cater to every consumer purchasing power.
I must highlight, as I was talking about skincare, the continuous super performance of ACD, which is, you know, growing at a pace which is almost three times the market and getting impressive share. We remain cautious, we remain attentive. All this is always, you know, changing. The global message is that beauty remains a category where people can indulge. There is still this appetite to socialize, to go out, and I see the fragrance market, for example, continuing to be dynamic. That's overall positive, even though we have to be more agile than ever. I must say, I'm very happy to have this price piano and these four divisions and all categories.
As far as China is concerned, you're right to say we did not expect to have a negative market again in Q3, and it's true that both the lockdowns we experienced both in Hainan and domestic market were not expected. We managed to grow. I think it's important to remind that even on a negative market, L'Oréal China manages to grow. If I take the domestic market plus Hainan in sell-out, so in sell-through consumer purchases, the market was -3% in Q3, and we were at +8%. That's +7.8% precisely. It was indeed not what we expected.
As you rightfully pointed out, we are now building up for Double 11. Unfortunately, it's too early to give you an indication because the pre-sales are starting in a couple of days, I think on the 24th. We have what we call the pre-heat, so it's pre-pre-sales, which is starting, I would say, pretty well, with one good, you know, factor that that leads us to be still ambitious on Double 11. At least two, first of all, the platforms and the Chinese economy needs this event to be dynamic. You know, I see our friends from Tmall, Alibaba, JD, they're all putting all their resources to generate traffic and, of course, consumer conversion.
There's another factor is that, you know, the KOLs that were absent for a couple of periods are back in the game, at least the main one, Austin Li. We see that consumers are very eager to listen to him and to purchase products recommended by this KOLs. If you have, you know, strong brands, strong innovation plan, and both the platforms and the influencers that are on it, I hope without having a crystal ball, that Double 11 will be a good vintage in a market that remains, right now, pretty chilly because of the lockdowns.
Long answer, sorry, but I think there were lots of hidden question in your question, so I try to be as complete as possible.
Thank you very much.
Thank you. The next question comes from Celine Pannuti from Deutsche Bank.
Go ahead, Celine.
Good evening. Bonjour, Nicolas, Christophe, Laurent and Françoise. I think I've not forgotten anyone. Well, my first question, probably, well, where to start, maybe, in the U.S. Possible to have, an idea, I mean, quite a strong market, as you alluded, the growth by division. Actually given Professional has slowed, and one of your competitors as well mentioned a slowdown in Professional. Just if you could give us, a view of what, has happened in the U.S. Maybe a second on, China. Can you give us, so was China negative, in sell-in in Q3? Because you said the sell-out was 8%. That's just because-
No, China was positive in sell-in.
Sell-in, okay.
Mainland China was positive in sell-in.
China. Okay. If you could give us the data for Hainan. I understand there was as well a EUR 90 million hit, but how was Hainan in the quarter in China? Maybe just to clarify this point that you made at the beginning about this Vichy close to EUR 94 million. This is for missed sales that you didn't do in the third quarter. How do we look at that for the fourth quarter? What's happening with this plan? Back on track? Can you explain exactly how we should look at this?
I think there is just one general comment that I need to make in analyzing, you know, performances by division compared to last year. Because as I said in a previous call, there has been so much variation in comparatives because of lockdowns, reopening, reclosing. If you want to have a, you know, a real proper assessment of the performance of the group's all divisions, you have to compare ourselves to 2019. I will just first give you the group's growth by quarter at total level versus 2019. In Q1, we grew at +19%. In Q2 at +23% and in Q3 at +25% versus 2019.
It's I would say that's what we called in the press release a steady growth. It's above 20% versus 2019. That's I think one of the reasons why we are particularly happy with the performance. Of course that applies to division even more because of course if you typically if you take the Professional Products Division that's one of the divisions that was most affected by lockdowns because when you know when salons are closed it of course affects this business. If I take Professional Products Division in America in North America it grew in the first half +29% versus 2019 and in Q3 it grew +31% versus 2019. As you can see I would not qualify this as a slowdown.
It's just there's a very strong base effect. Now, if we look at what's happening now, today, as I said, we see, as I mentioned around probably the theme of inflation, we see consumers spacing out their visits to salons. We are planning that professional hair color will probably slow down in the quarter to come. On the other hand, we do not see any slowdown in the sales, in the e-commerce sales of hair care. You know, hair care is sold now, of course, in salons, but it's sold both on Amazon for some brands, on Sephora or D2C for others. This is not slowing down.
If you look at the total performance of PPD, growth is half driven by online and half driven by offline at the global level. Online is pretty strong. In a nutshell, the professional division keeps on working at a good pace versus 2019. We are seeing now a reduction in salon visits but a good performance of premium skincare. Is that clear enough for you, Celine? Then I'll move, of course, to the other questions. We are now going to move to Hainan and to Mainland China. I will hand over to Christophe who has been looking at the numbers.
Yes. Quickly to answer your question regarding the sales in Hainan. We estimate the market grew at around 9% in the Q3 in Hainan, and we grew by 14% in the Q3. Quite slightly above the market growth in Hainan. Despite, of course, the closing of the business for a while.
I don't understand the number then. If the North Asia number is close to flat and everything is growing, can you tell us what was overall China, or was there something else in North Asia that was negative?
I can tell you it's very simple. Overall, we have on the Q3, Mainland China +2%. Okay? Hainan, I just give you the growth. Overall, we are nearly on par with the sell-out that Nicolas was mentioning. Sell-out in the Q3 is on both accumulating Mainland China and duty-free at 7.8%. Our sell-in is a bit lower, but-
Yeah. I think probably one of the reasons why it's hard to reconcile the numbers is that in Q2 we had a bit more sell-in than sell-out, and in Q3 we have a bit more sell-out than sell-in. This evens out at the end of Q3. That's probably why you have these little difficulties to understand the numbers.
On Vichy please.
Yes, to answer your question regarding Vichy, so in fact, we had a problem with our factory that was hit by the-
A hail storm.
Yes.
Natural catastrophe.
Unfortunately, we have not been able to produce for a bit more than two months. Therefore, we've been receiving this EUR 94 million to compensate for the loss of sales. It's neutral, of course, in our sales. Depending on the final results of the calculations that are made today with the insurance company, we may expect between EUR 10 million to max EUR 30 million in Q4, but it's not yet confirmed. The impact on Q4 will be very small.
Any more questions, Celine?
No more.
Next one.
Okay. Thank you. The next question comes from Bruno Monteyne from Bernstein.
Hi. Good evening. Could you please co-
Hello.
Can you hear me?
Yeah, yeah.
Yeah.
Could you
We don't have a great sound, but we can hear you, Bruno.
Let me try like this. Hopefully, this works a bit better.
Sounds better.
Fantastic.
Thank you. Could you comment on the growth on those new markets of India, Brazil and Mexico that you highlighted a few times? Are they still outgrowing the rest of the group, this year, really? And my second question is, given the time it's taking in China for things to normalize, are you starting to plan on a scenario where there isn't any real normalization? Are you starting to think about different operating models for China or different levels of growth expectations for the medium term? Thank you.
Christophe, first of all, as you pointed out, our growth in emerging markets in total, and I'll let Christophe tell you about the specifics of the three markets you've requested. The growth remains extremely dynamic. If I take our SAPMENA zone, SAPMENA, which is Southeast Asia, Middle East, North Africa and Australia, we are growing at 30% in Q3. Accelerating versus the first half and with a year to date at almost +26%. We are year to date also at +20% in Latin America.
That overall our performance in emerging markets is very strong. It's led by Consumer Products Division and ACD, which is also making very strong inroads with a brand like CeraVe in the emerging market. Now, as it relates to the three markets you've asked about, Christophe?
Yes. To give you some flavor about those strategic markets. India is growing at 36%, and this growth is really on all the divisions. Probably our Professional Products Division is even stronger, of course, than those figures. Brazil is still very dynamic at +14%. We've seen very high growth on also Professional Products consumer in the range of above 15% both, and luxury even higher. I could go ahead with countries like Mexico at +31%. Frankly speaking, all those emerging country are all in the same direction. Keep going strong, both in terms of volume and of course now with in addition, in terms of valorization because of high inflation in those countries.
As it relates to your second question on China, I must say we remain, you know, in the long term and medium term, very bullish about China. For the very same reasons we've shared with you several times. The demographics, the rise of the middle class, the shared prosperity that is wished by the government. Therefore, we are, of course, as always, ready to adapt to any situation. We believe that the Chinese market will remain a source of growth. We've just inaugurated this quarter an extension of our factory in Suzhou, and laid the first stone of a new fulfillment center in China.
We continue to invest behind China and to believe in China. What's interesting, if you look at our press release, if you look at the size of our regions, at the end of September, and that's why I was talking about the rebalancing of our footprint in my quote in the press release. You have three regions that are exactly the same size. You've got EUR 8 billion at nine months, EUR 8.4 billion for Europe, EUR 7.4 billion, so slightly lower for North America, and EUR 8 billion for North Asia. Of course, the sum of the two emerging markets are still smaller at the sum of the two is EUR 4 billion, but accelerating.
We do believe in China, and we do want to invest in China, and we are launching new brands in China. We just opened our first Carita counters over there. We have a much more balanced footprint today, with different zones that can drive the growth of the group. This year, Europe is a very strong growth driver, as is North America. Emerging are contributing. We have a year with low growth in North Asia, but I'm pretty confident that next year, just for, you know, say because of comparatives, but also because like everybody, I hope that things even progressively will normalize.
We should have a good growth next year in China and in North Asia, by the way, because one of the things that's interesting in our, and also in the work I was a couple of weeks ago in Japan and Korea, and the market life there has a return to almost normal, even though people are wearing masks, but they can go out and live an approximately normal life. The markets are dynamic, and we are gaining share in these two markets where our market share is still relatively small. So we are much more balanced, and we have, you know, all engines can contribute to the growth of L'Oréal. By the way, you see the same effect on divisions.
We are very. It's interesting when you look at the numbers, they're very, very close to one another.
Thank you.
Thank you. The next question comes from Tom Sykes from Deutsche Bank.
Yeah, thanks. Good evening, everybody. Firstly, just on fragrances, you mentioned it an awful lot in the press release. So what's the scale of your ambition in fragrances? What is the strength of the secular trends that you would perceive in that category, please? Could you maybe say something about the growth of skincare ex-active? I mean, I know that's gonna be affected by China and the issues in Luxe, but could you maybe just say what you're seeing in terms of sort of growth trends there and maybe particularly picking out Kiehl's perhaps as well, please.
Well, that's very specific. You're not going down to the SKU level, but still a very specific question. I'll start with fragrances. On fragrance, the market continues to grow at +20% year to date, so very dynamic. We are at +35%, and I think it's a trend that's going to last. It's a category that you know, men, women all over the world have really fallen for post-COVID, both because for the ones that were using it, but there's also this kind of self-indulgence trend on fragrances. We're seeing the Chinese market, although small, continuing to grow.
You know, when you say what's the size of your ambition, it's true that today it's a small category. We are the worldwide leaders, but it's only 10%-11% of our growth, and we are sorry growing at +28% on the market at +16%. I was quoting the number as 21%. The market at 16%, and we are +28%. We are number one. We still have the world to conquer, and frankly, the only limitation right now to our growth is the availability of glass.
I must say that I know that we would have had an even better performance for the Q3 and even for L'Oréal Luxe, had we had all the glass bottles we needed because clearly, after COVID, many of the glass manufacturers had you know shut down some ovens or had slowed down their activity. It takes time to reignite. As the market has bounced back much stronger than anybody expected, and as we really overperform the market in fragrance, we've been struggling to have everything we needed. But you know, La Vie est Belle is flying.
Libre from YSL has entered the worldwide top five. I've heard recently that it was becoming number one in France, which was kind of a big achievement. The latest launch, Prada Paradoxe, is not only a great success, but I have to say greater than even our wildest expectations. We have to admit that we are today limited by capacity, and unfortunately, this is an area where you know you can't create capacity very fast. It takes time. It's just a question of good forecasting, good negotiation, and hopefully, considering our size, we can get good allocations from the glass manufacturers.
I would add also the very strong growth that we are still seeing in North Asia. With a growth that is above 60%. Now North Asia, by the way, is more than 10% of the sales of our total fragrances. Meaning that this market will surely keep growing in the future.
No, as it relates to skincare, I can't give you the breakdown of skincare sales per division, per brand. I can give you know, the broad numbers, or at least the trends. As you rightfully pointed out, Active Cosmetics is really flying, and all the brands are growing double digits from Skinceuticals to Vichy, okay, La Roche-Posay. I was looking, La Roche-Posay has become the number six skincare brand worldwide, all channels and categories included. It's, you know, from a brand that was a small European pharmacy brand 10 years ago. It's a major achievement. CeraVe, of course, continues to build. If I look at other divisions, we have different fates.
Clearly our Luxe Division is overperforming the market, but Q3 was impacted by China because China is the part of the world where skincare is the biggest and where we have our biggest share in skincare. The brands Lancôme Absolue, Helena Rubinstein are really doing great. Kiehl's is in a good momentum. We had a bit of a slowdown in America at some point, but our new launch, we have a retinol product that has really allowed Kiehl's to accelerate again. If I take our mass market division, it's also growing in skincare with something I'm really happy about is the performance of Garnier. L'Oréal Paris is always doing.
Done a great job in skincare, but Garnier was, to be honest, not a success story. We're very strong in cleansing, success of micellar water. Now we have, thanks to the launch of the vitamin C serum, which started in the emerging market and is now being rolled out all around the world, a phenomenal success. It's really putting Garnier on the map in skincare, that they are now launching a new serum for acne skin with BHA and AHA. We have the beginning of a good story on Garnier skincare. On this score, year to date, we are growing over 10% in skincare on the market at 4%.
Gaining share really led by ACD, a bit more, slowing down a bit in Luxe because of Asia and a new acceleration with Garnier in the Consumer Products Division.
That's great. Thank you very much indeed.
The next question comes from Fulvio Cazzol from Berenberg.
Yes. Good evening, everyone, and thank you for taking my questions. My first one is on sun care. I was wondering if you'd be able to disclose what this category grew for you and how much it contributes to the overall Consumer Products Division, please. My second question is on China skincare. Just following up on your just comment just now, how the Chinese market for skincare is weak. Can you just maybe highlight what's really kind of behind that? Because I always thought skincare is less consumption occasion-based product, i.e., people will apply it as part of their daily beauty routines. So again, what am I missing here? Why is it so weak in China despite all the travel restrictions?
Are people still using it, but you know, depleting their inventories? Or am I missing something?
No, I think I probably.
on some of the dynamics.
I'll start with the second question because I was probably.
Sure
Misunderstood. Skincare is not weak in China. The global Chinese market, as we said, was negative in Q3 because of lockdowns. As China is the number one category by far in China is skincare. It's 60% of the market. By definition, it impacted the skincare market as it did impact other categories. Actually, if we look within between makeup and skincare today in China, skincare remains the better performing category because as you rightfully mentioned it's less impacted by the wearing of masks than makeup.
It's just that, you know, because L'Oréal Luxe is strong in China and China is a big skincare market, the slowdown of China had an impact on our overall skincare performance in Q3. We are gaining share in skincare. Helena Rubinstein is doing fantastic, and I think it's well on the way to become a billion-euro brand. The Lancôme Absolue is doing great. Our L'Oréal Luxe performance, even during a slow quarter in China, was very positive. When we discussed our Q2, our first half results, we said that we had hit a record 30% market share for L'Oréal Luxe in China, in Q2.
Well, we hit over 31% market share in Q3 with strong performance of Lancôme and Helena Rubinstein in skincare. I think I was not clear. It's just that the market has slowed down and it weighs on the overall average of our skincare performance. We keep on being strong and gaining share on that market. Is that clearer on that point?
Yeah, definitely. Thank you for that one.
Okay. On sun care, I think is at +30%, Christophe?
Yes, it's +30%. Now, you know, this is a category that is quite small in comparison to the total skincare. It's what? 6% of the sales. Yes, growing very fast this year. The weather was good, but still a small category within our big skincare.
What I might add to that is that it's when you think about sun care, you probably think about you know, the creams you put on the beach. The reality is that the biggest part of the market in UV protection is actually accounted for in facial skincare. It's you know, daily UV protection, which is, in reality, probably the most effective anti-aging. This is one of the categories where technology is really making a difference. This year we had a fantastic season, but also, we've continued to have very good sales in our La Roche-Posay as well as our Vichy daily UV protection products.
We also have in Asia on L'Oréal Paris and Garnier daily UV protection products, which are really more and more used by consumers of all ages on top of their skincare routine because this is what protects them from everyday, more harmful UV rays that create spots on the skin. We've just launched with La Roche-Posay UVMune 400, which is a new filter that protects against the, what we call the most insidious, UVA rays that penetrate deep inside the skin. Beyond the small number that Christophe mentioned. There's the other part of the iceberg, which is the daily UV protection, where our science gives us a strong edge.
I'm predicting that this category of UV protection will be one of the important growth drivers in the future because, you know, the weather out there is not going to get nicer for our skin and for our consumers.
Great. Thank you so much for that.
The next question comes from Iain Simpson from Barclays.
Good afternoon, thanks very much. Just wondered if you could talk a little bit about CeraVe rollout, please. That's clearly been a phenomenal success for you. I wondered if you could just remind us where it's at in terms of geographic rollout, which countries it's launched in recently, and which kind of major countries CeraVe is currently not present in. Any help with that would be very much appreciated. Then, in professional haircare, you've clearly had sort of significant success moving that business rather more online during the U.S. in the last couple of years. Can you just remind us where that's at in terms of moving Professional to a more online-driven model elsewhere in the world, please? Thank you very much.
On CeraVe, the brand. First of all, as you rightfully say, the brand you said the brand has been very dynamic. I would say the brand remains very dynamic because it's at + 40%, year to date. What's very important, as always, is that it continues to grow in its home market in the U.S.A. The U.S.A. represent more than half of the growth of CeraVe.
Yes, we are expanding in many countries, but it remains. I think we are in most countries now, but we are still small in many because it's a business that we want to build according to, you know, the recipes that make the success of Active Cosmetics. Which means that it all starts with doctors and derms prescriptions. In every country, we start by visiting doctors, sampling the brand, explaining its difference versus other brands on the market. Because it's a mass medical brand, we expand the distribution to more, I would say self-service, whether pharmacies, drugstores or sometimes perfumeries. I was in Spain, where the brand is in some perfumeries and really flying. We are still at the beginning of the history of CeraVe around the globe.
There's no market where it has, you know, taken a leadership position as it has in the U.S., yet. Maybe a bit more in the U.K. The good thing is that it's doing great everywhere. You know, we even launched it in South Africa with special formats and, you know, at a price which is not like super affordable, but the product, the texture is so great that it's become instantly a hit. The good thing that helps also us roll the brand out is that thanks to, you know, social networks that are global, instead of starting really from scratch when we launch in a country, there's already a base of awareness, both from the derms as well as from consumers.
It's still the beginning, but it's very promising. The rest of the world, when I say CeraVe is at +40%, outside the U.S.A., it's almost at +60%. Very good prospect for CeraVe.
Thank you very much. On professional?
Oh, sorry. I got enthusiastic about CeraVe, so I was about to forget Professional. No, I think, you know, first of all, for me, the big important message on haircare is that, and that's new, that's kind of new, we mentioned it in first half, is that people are spending more on haircare than they ever did. It's true in mass, and it's true in professional. That's probably one of the categories that has most benefited from I don't know if it's the lockdowns of, you know, tempering and maybe using less makeup, or the hair being the most visible part of you when you wear a mask. I don't know what's the explanation, but it's true that the market is premiumizing.
It's true in mass with the success of Elvive, Hyaluron Plump or more premium versions of Fructis. Of course, it benefits the professional market. Brands like Kérastase, L'Oréal Professionnel is back in the game with products like Metal Detox, which are very successful. As far as the distribution strategy is concerned, of course it's different in different parts of the world depending on the selective distribution agreements. Overall, we want our professional haircare products to be available online. They are available online on Tmall in China, and that's frankly the dominant part of the growth is online in China. They are online in America with different channels, depending on the selectivity of the brand.
As I said, Kérastase is on Sephora, and other brands are more available on Amazon. It's also available online in Europe through some sites like LOOKFANTASTIC, NOTINO, but also the e-commerce sites of stylists themselves. Clearly in today's world, consumers expect to find these products online, and this, they will become more and more available online.
Thank you so much.
Thank you. The next question comes from Pinar Ergun from Morgan Stanley.
Thanks for taking my questions. Could you please talk a little bit more about the strong acceleration in consumer? What's driving that, and do you expect continued momentum in this division in the quarters ahead? Two follow-ups. In the Luxe Division, you've called out some sourcing difficulties in addition to the impact of lockdowns in China. What's your outlook for the sourcing challenges, and are you seeing any signs of consumer demand slowdown or down trading? Finally, what gives you confidence that North America and Europe growth will continue over the coming quarters in light of the more challenging backdrop in the consumer space? Thank you.
The acceleration in consumer, I think, is. I would use three. There are many, you know, reasons behind it because this division has been really, you know, reorganized in many ways. The three keywords for me would be innovation, valorization, and emerging. Innovation, because frankly, we've had, and we have a great vintage of innovations for CPD this year, whether it's in hair with Hyaluron Plump from Elseve, whether it's in skin with the Vitamin C serum from Garnier, whether it's in makeup with the Vinyl Ink lip gloss from Maybelline.
It is really a lot of very successful innovation, which by the way, were all launched at a very premium price compared or higher gross margin versus the, I would say, catalog. That's one important factor. The second one is valorization because, you know, as we discussed in previous calls, just, you know, it took us some time to adapt to the news regarding inflation inputs. Most of the tariff increases were happened. The first wave happened in March, and the second wave happened over summer. It's only kicking in now. If I take the consumer division performance, the +10 we had in Q3, it's very driven by value. I think it's close to 9% in value.
Yes. YTD we are half. If we focus on Q3, we see 90% is driven by value and 10% by volume.
Clearly the third element is clearly the acceleration in emerging. We have a strong comeback in the USA, where the brand is gaining share in Q3. We managed to grow in Europe and gain share in several countries despite having there our biggest market share. Really the game changer is really our performance in emerging market, be it Southeast Asia, Indonesia, India, but also Latin America with great performance. Mexico is doing a fantastic year in CPD, so is Brazil. Yeah, I would say these are the three elements. I don't see any reason for this to change because innovation is what we do.
Valorization is something that we've accelerated, and I think now it's in the machine, and it's gonna be drifting and probably continuing in the quarters to come. The emerging market is really an opportunity for us because we are still small in market share. So the question on luxury was, it's true that, I mean, the difficulties are real in fragrance bottles. There's also a bit of tension in carton. So, you know, we have several brands. We are allocating our capacities to the best performing ones. As I told you, glass is not an industry that has a huge flexibility as it relates to production capacities.
I guess we will remain with tensions in the forex for the periods to come. It's up to us to get as much as we can of what's available and, of course, to put our capacity on to bet on the best horses. The problem is that we have many fast running horses, including in male fragrance, but we have the capacity to make choices. We don't see right now a slowdown in fragrances. Actually, we're entering the holiday period, and that's, I'm sure that's gonna be once again, fragrance is gonna be both a very desirable and affordable gift.
I don't see any slowdown or down trading. The only area where going back to the comment I was making on U.K., we've seen a little bit of slowdown on selective makeup, a little bit. That's a point of attention. As we said, the good thing is that we have many brands. We have YSL that continues to fly in makeup, and we have also Maybelline and L'Oréal Paris, for those who can't afford an expensive mascara, even though and that's what we always say, and that's been always proven by the lipstick effect.
You know, a luxury lipstick or mascara is only EUR 30, so it's a very affordable treat. There was the U.S., was the third question. We remain confident in the U.S. Frankly, we are doing great in the PPD, and we talked about the acceleration or the option to reach more consumers online with professional haircare. We have a consumer division that has accelerated versus the market. As I said, we seem to see that consumers are getting used to inflation. Volumes are reducing a bit, but not too much. ACD continues to fly.
I think on Luxe, that's probably the division if I had one area where I'd like to do better, where I'm not totally happy with our performance is on the luxury U.S. market, excluding fragrance, where I think we can do a bit better, and we have a good inspiration with Asia.
Thank you.
Thank you. The next question comes from Emma Litherland from RBC.
Hi, thank you for taking my question. Firstly, could you give an update on your price increases in Europe, whether you've seen any delistings in retail negotiations and whether, you know, you have more price increases to come and the timings of those? And secondly, looking more longer term, skincare has seen obviously amazing growth for a long time now. Just wondering how you think about the relative importance of the various growth drivers of that category between, you know, trading up and premiumization, versus, you know, bringing consumers into the category for the first time and getting into white spaces. Thank you.
Price increases, Christophe?
Maybe we take the first one. Regarding Europe, I will give you the broad picture, and you will see that we've been constantly driving the prices up. We started with the Q1 with price increase at around 2.7%. In the last quarter, I see value going up by 5.7%. You see it has been progressive, but now most of the countries have put the prices on the shelves, so that's why we see a strong valorization in the Q3.
To answer your question, we've had no delisting. I'm not saying decisions are always easy. Some countries are harder than others. We live in a country which is renowned for its challenging discussions. I think when we are very transparent with retailers about our input costs and that we are not trying to use the global context to pass unjustified price increases, we manage to lead to an agreement. Sometimes it takes time, but no delisting or sanctions.
On top of the price increase, as you know, of course, all our launches since we bring innovation are at a higher price than the current catalog. That helps to even so the valorization. What we see is still a favorable mix, so driving even up the total value in our business. In all regions, by the way.
Now as it relates to skincare, I think this, you know, I think this category will continue to grow. It will continue to grow, and it will be driven by many different factors. Of course, demographics, population is aging, so this is the category you never stop using because you need to moisturize your skin until the day you die. Teenagers are using more and more skincare because they've, you know, that's one of the categories that maybe is discovered under lockdowns where they were using less makeup. There are younger consumers using skincare.
I think the diversity of the planet, the fact that populations are more and more mixed, gives also more and more skin differences, which creates new expectations, more expectations, and also need for, you know, more tailor-made offers. You have more demanding consumers take care of their skin. Some have more oily skin, some have mixed skins. That's something we of course, when you invest in research is, something we can really satisfy. Clearly also we see, and that's also explained the success of our Active Cosmetics division, the fact that there are more and more skin pathologies, either created by the environment, by stress. You've got more acne, you've got more oil, you've got more age spots.
Of course, these can be addressed by aesthetic medicine. You know, using daily UV protection products with niacinamide to erase spots, fighting acne with products like Effaclar is really something that's concerning a larger number of people. Because there is also more and more information online that helps consumers choose, understand their what their problems are and what are the products that it would need to satisfy these to answer this problem. I see the penetration of skincare increasing and I'm not totally despairing yet or you know, I've not lost hope that Western men will follow the path of Asian men and use skincare on a daily basis. I'm not there yet.
I'm trying to show the way, but I'm not yet an influencer. So I hope that as the younger generations are more gender fluid and more at ease with beauty products grow older, we'll also have this growth relay of men's skincare, even though I have to admit that today in the Western world, it's negligible in size.
Very interesting. Thank you very much.
The next question comes from Robert Ottenstein from Evercore.
Great. Thank you very much. Three questions, please. First, just to follow up on China, can you confirm the organic sell-in and sell-out numbers, on an organic basis? And to what extent there was any sell-in for the Haikou Mall that is coming on soon? That's the first question. Second question, you mentioned that you've seen some weakness more recently in salons, and less frequency going to salons in the US and Europe. What does that tell you about the consumer? You know, historically, when salon sales slow, is that a leading indicator? You know, what is the read-through in terms of the health of the consumer and the business from that?
Along with that, just in terms of how the business is looking over the next quarter, you know, we're hearing that promotions are picking up in the industry and that retailers, at least in the U.S., are looking to rebalance inventories going into the end of the year. Just wondered if you could comment on that as well. Thank you.
The first question was a very detailed question, so I'll pass it to Christophe, who I guess will not answer.
No, I think for you, what is important is to understand what is the dynamic of the market. I will say again, clearly, that when we look at the Chinese mainland market, the market in Q3 was at -4.7% and L'Oréal sell-out. Actually all the product that went into the hands of our consumers was growing at +6.7%. More or less exactly the same way we did in S1. Meaning that, for the time being, of course, there are always some discrepancies with the sell-in depending on some level of stocks, but we are flying at the same speed. This despite the up and down in e-commerce or offline because of the lockdowns.
I think you had a question also regarding the opening of the famous new mall in
Xinghai Gang.
Xinghai Gang.
It was a new mall, new harbor.
They have delayed the opening, but they confirmed to us that they will be opening on October twenty-eighth.
There was no invoicing for this opening in Q3. I think it was around EUR 30 million invoiced in Q2. It was not in our Q3 numbers. It was part of what we had forecast because of the Singapore move that happened first of July. It was nothing in Q3. As far as, you know, the Professional Division is concerned, as I said, we see a bit of a slowdown of the salon traffic and people spacing out a little bit their hair color.
This is typically the kind of behavior we see when people are, you know, under purchasing power stress or under inflation, so they want to continue to go to the salon and therefore they just space these visits out a little bit. The only thing it says is that we will probably sell more home hair color. I can tell you, for example, we have a product in L'Oréal Paris, which is this little spray called Root Touch Up, which helps hide your gray roots between two salon visits. This brand, which has just a very new funny advertising campaign with Eva Longoria, is going through the roof right now.
It's probably a sign that in between two professional hair color that people want to stay loyal to, they are using this type of product to retouch. As we see, you know, I think what we see is that consumers are always trying to find beauty solutions, so they balance between their most professional, sometimes expensive spends, and they use every now and then more affordable product that they can find in mass or in self-service. That's why, once again, it's great to be a group that covers all channels and price points.
Just related to that in terms of the U.S. consumer, you mentioned that you were a little disappointed in your Luxe sales in the U.S. Is that a function of the market outside of fragrances, or is there, you know, competitive activity, or maybe you could have done more on the innovation side? Just trying to get a sense of where possibly you could improve.
No, the answer is not the market, it's the latter, is that I think we could have done more on the innovation side. We have a few brands that are doing great. I mean, YSL is doing great, but still quite small in the U.S. We have Urban Decay that has just launched a new lipsticks called Lip Bond that's doing phenomenal. I'm very happy because Urban Decay had a few soft periods last year. We could have done a bit better in terms of innovation on some of our other brands like Lancôme or IT Cosmetics. So it's in our hands, so just we have to do it. I prefer when it's in our hands than it's in the market hands.
Absolutely. Well, thank you very much, and congratulations on the terrific results.
Thank you very much.
Thank you, Robert. I think we will now take the last question.
Yes. The last question comes from Pierre Tegnér from ODDO.
Good evening, everyone.
Hello.
Thank you. Bonjour, Nicolas. Bonjour, Christophe. Bonjour, Laurent, et bonjour, Françoise. Thank you for taking my question. I have three, if I may. First of all, you said earlier that U.S. volume PPD is reducing. Is it a decline in volumes or just a slowdown in volume? That's the first question. The second one, coming back to China, if I understand well, you had a positive organic sales growth in Q3. Is it positive both in consumer and in lux, and is it quite well-balanced or are there some discrepancies between these two divisions?
The last one is about the value effect, because we and the investors are paying more and more attention to the balance between volume and value in this inflation context. We understand fully that you are clearly a gross margin model, so that's a competitive advantage for L'Oréal. Could you give us some insight on the pricing action you have taken, maybe on some divisions and some geographies? Are we to expect further pricing actions in the coming quarters? Thank you.
Okay. You will take the two value, volume value questions with Christophe and ask a word about the balance of our performance in China.
Okay. There was first a question regarding the U.S., right? For PPD. Q3, we had a positive growth in sales, but probably a slight, very slight decline in volume. That's for the first answer. Regarding China, on the Q3, we had positive growth in all division except a very slight decline of 3% in the sell-out of consumer division. Luxe was at strong growth and of course, ACD and PPD, very strong growth. That's to answer the first two questions. You wanted also to have a slight insight, right? On the volume and value by division.
What I have to say is that when I look at the figures on the Q3 and YTD on the volume, it's. Well, first, as we said before, acceleration in the value is for sure in the Q3 because we have now price increases that are in our figures in the Q3 for all divisions. In terms of volume, it's, I would say, flat on Luxe, a little bit less than flat, but all the remaining divisions are growing. When I look by region, what we see is in volume, except North Asia, it's growing everywhere.
Of course, in terms of value, we, as I said before, we see very good price increase in Europe at nearly 6% in Q3. The same in North America, also a little bit less but more than 4% in the value. Latin America, of course, because of inflation, is above double-digit. Of course, the same in North Asia. And that's it. You see that, besides the price increase, we see that in most of our business, whether by region or by division, we are still in positive territory in terms of volume.
To answer your question around China, our sales were very positive in luxury and slightly negative in mass for one very simple reason is that in luxury even when you know offline is shut down, e-commerce is both a higher weight and also you know the platform is also pushing higher value products. More importantly, we can activate our consumer through CRM. And that's what we did for example with Lancôme. Our teams did what we call a VVIP event in the month of August where our beauty advisors call every single high-value consumers to propose them to discover the new products and get treated. That allows even in periods of lockdown to generate some business.
It's much harder to do on the mass market business. Our performance in China was more driven by Luxe and by, as I said, professional hair care. Still, CPD was in the online festivals that had the number one brand with L'Oréal Paris and number one makeup brand with Stylenanda. We are ambitious for this division for Double Eleven. Clearly the Q3 context was not favorable in terms of channel mix for CPD.
Thanks a lot. That's very clear and congrats for this nice Q3. Thank you.
Thank you.
Thank you.
Thank you, Pierre.
Thank you. I think this ends our conference call. Thank you very much and we will see you at the beginning of next year.
Thank you very much.
Thank you.
Thank you. Bye.
Goodbye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.