‘Lipstick effect’ and China’s love of luxury fuels L’Oreal’s strongest growth in a decade

Strong Chinese demand for luxury products helped French cosmetics maker L’Oreal post its strongest sales growth in a decade during 2018.

Speaking to CNBC’s Julianna Tatelbaum on Friday, CEO Jean-Paul Agon said there was no reason why this level of growth would not be sustainable.

“The market accelerated and could stay strong in 2019. We have many reasons for this strong growth like Asia, eCommerce, travel retail, skin care, and all these reasons will stay here in 2019, so we are pretty optimistic for this new year,” he said.

Downturns in sectors such as autos and technology could also help to fuel L’Oreal’s growth this year, Agon added, with people setting less of their income aside for more extravagant purchases.

“It’s the famous ‘lipstick effect’ — sometimes when people spend less on expensive items like cars or buying apartments, they have more available income and they like to indulge themselves with beautiful products. It could be absolutely positive for us,” he said.

A key growth driver for L’Oreal in 2018 was new markets, including the Asia-Pacific region — where ongoing Chinese demand for luxury products saw like-for-like sales grow by 24.1 percent. However, Agon told CNBC he was not concerned about the possibility of a slowdown in the world’s second-largest economy.

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