LRLCF - L'Oreal S.A. (LRLCF) Q4 2023 Earnings Call Transcript
2024-02-09 22:44:04 ET
L’Oreal S.A. (LRLCF)
Q4 2023 Earnings Conference Call
February 9, 2024, 3:00 AM ET
Company Participants
Nicolas Hieronimus - Chief Executive Officer
Christophe Babule - Chief Financial Officer
Alexis Perakis-Valat - President, Consumer Division
Omar Hajeri - President, Professional Products Division
Cyril Chapuy - President, L’Oreal Luxe
Myriam Cohen-Welgryn - President, Dermatological Beauty Division
Conference Call Participants
Celine Pannuti - JPMorgan
Bruno Monteyne - Bernstein
Jean-Olivier Nicolai - Goldman Sachs
Jeremy Fialko - HSBC
Tom Sykes - Deutsche Bank
Iain Simpson - Barclays
Guillaume Delmas - UBS
Emma Letheren - RBC
Rogerio Fujimori - Stifel
Daniela Morosini - Business of Fashion
Presentation
Nicolas Hieronimus
Well, good morning, everyone and welcome to this 2023 Annual Results Presentation. Christophe Babule, our CFO, will kick off with the presentation of the financial statements, some highlights on our corporate responsibility program. Then each Head of Division will summarize the 2023 key points of his or her division, as well as the prospects for 2024.
So we’ll start with Alexis Perakis-Valat, President of the Consumer Division; then Omar Hajeri, President of the Professional Division; Cyril Chapuy, President of L’Oreal Luxe; and Myriam Cohen-Welgryn, President of the Dermatological Beauty division. And I will conclude this first part of the conference and share with you, hopefully, my confidence for the future. We’ll then move to the Q&A session, which we expect to last about 40 minutes. And finally, I draw your attention on the disclaimer that is now on the screen.
Christophe Babule
Ladies and gentlemen, good morning. 2023 was a record year for L’Oreal, a year that demonstrated the power of our multipolar model and the virtue of our P&L. My personal highlights were the double-digit like-for-like growth of 11%; the gross margin of 73.9%, up 150 basis points; the operating profit margin at 19.8%, up 30 basis points; and a 24% increase in cash flow to EUR 6.1 billion.
Consolidated sales increased by 7.6%, crossing the EUR 40 billion mark. On a like-for-like basis, growth amounted to plus 11%, the best growth in over 20 years, excluding 2021. The change in scope of consolidation was a positive 1.6%. It was mainly due to the acquisitions of Skinbetter Science in October 2022 and Aesop in August ‘23 as well as the impact of hyperinflation accounting in Argentina and Turkey. Foreign exchange had a negative impact of minus 5% as the euro strengthened throughout the year. You can find detail in our invoicing currencies in the appendix of the presentation.
Growth was driven by a healthy combination of volume, up plus 4.1%, and value up plus 6.9%, driven by both price, up 5.5%, and mix, up 1.4%. As you can see in the chart on the left, like-for-like growth came in at 6.9% in the fourth quarter, below the level of the first nine months. I see two main reasons for this.
First, Travel Retail in Asia continuing to weigh, sell-out remained soft. That accounted for around one-third of the decline in our sales. The other two-thirds reflect our relentless effort to reduce our inventory in order to be able to start 2024 with normalized levels. With our Travel Retail Asia group, like-for-like growth in Q4 was up double-digits.
Second, Mainland China traditionally over-indexes in the last quarter, which includes 11.11. And we are, therefore, disproportionately impacted when the local markets decline as consumer sentiment remain weak and shoppers show signs of festival fatigue. Reassuringly, we continued to gain market share in this challenging context as our consistent investment in offline channels paid off.
And when we look outside North Asia, we see strong momentum across all regions. And what you can see in the chart on the right is that on a four-year CAGR, we have maintained a pretty even pace throughout the year, including in the fourth quarter and concluded the year at plus 8.2%.
Each division grew on a like-for-like basis. The two standout performers were Consumer Products and L’Oreal Dermatological Beauty. Professional Products posted a 7.6% increase, supported by its omnichannel strategy. The standout performance came from Consumer Products. At plus 12.6%, it reported its best growth in over 30 years as each of the division’s key brands pulled its weight.
L’Oreal Luxe grew plus 4.5%. Double-digit growth in developed and emerging markets was partly offset by the situation in Travel Retail Asia and the market softness in China. Meanwhile, L’Oreal Dermatological Beauty remained on its stellar trajectory. At plus 28.4%, the division delivered a sixth consecutive year of double-digit growth.
From a regional point of view, 2023 was a tale of two cities, and you can see that very clearly in the chart on the left. Three of our regions grew well into double-digits, helping offset the temporary softness in North Asia, allowing us to deliver a third consecutive year of double-digit like-for-like growth.
To me, the most remarkable performance was in Europe, which grew plus 16%, making it the single biggest contributor to our growth. Every country in the region advanced strongly, led by Germany, Spain and UK, all of which were up in double-digits, impressive, given their large size and our significant market share....
L'Oreal S.A. (LRLCF) Q4 2023 Earnings Call Transcript